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Inside Internal Controls

News and discussion on implementing risk management

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Drache Aptowitzer LLP

Wine(ing) about donations

A recently released decision of the Tax Court of Canada illustrates some of the problems in donating gifts in kind and their valuation.

 

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An ounce of preparation

There is no need to reinvent the wheel in this crisis management initiative. There are many resources online and common-sense articles, checklists and manuals about crisis management.

 

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Function and form

A recent decision of the Tax Court illustrates a concept whose importance is only matched by the universality to which it is ignored. The case of Lichtman involved a number of Orthodox Rabbis teaching at an Orthodox Jewish school in Vancouver. The Rabbis claimed what is known as the “Clergy Residence Deduction” and ultimately lost their case.

 

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CRA guidance: Charitable status for internal divisions

internal divisions

Many larger charities are structured in such a way that there is a head organization with subordinate divisions operating below it. For example, a charity that operates across the country may do so by way of local ‘chapters’ overseen by a main organization, or a religious governing body may have several related parishes.

 

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It’s giving season: Tax credits for charitable donations vs. political contributions

With the holiday season upon us, many Canadians are turning their minds to both good-will and the end of the tax year. The next time you reach for your wallet to make a donation or contribution, think back on this summary of the differences between the two and reflect on what the tax implications will be.

 

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Rules around raffles: Don’t get sent up the river for sending rubber duckies down the river

Raffles (or, properly speaking, raffle lotteries) can be a fun, efficient, and relatively non-labour-intensive means of making moderate amounts of money for a not-for-profit or charity. Did you know, however, that the regulatory framework governing raffles (charitable gaming) ultimately flows from the Criminal Code?

 

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Small change large consequences: Ontario’s regulatory change to the payment of directors

Directors simply cannot benefit from the property of a charity whether registered or not, either directly or indirectly. This article explains why and details recent amendments to Ontario’s rules to allow charities to pay directors for goods and services rendered.

 

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“All or substantially all” – A look at CRA’s political activities test

Given that the Minister of National Revenue is considering the results of the recent Consultation Panel on the Political Activity of Charities which provided suggestions on the political activities test it may be worthwhile to look at a specific aspect of the test which relates it back to the related business rules (and social enterprise). […]

 

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Balancing confidence and flexibility in gift planning

Typically when donors are considering their end of life gift planning they attempt to include a number of strings by which to effectively direct their donations from beyond the grave. Generally speaking when the donation is large or the gift has personal, sentimental value to the donor (such as artwork) the strings attached will be significant.

 

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NQS, GRE and the ITA – Three letters, two concepts, and one complicated issue

Over a year ago then Finance Minister Jim Flaherty announced that there would be major changes in the way Canadians would be taxed at death. The new system created what was called a Graduated Rate Estate which, amongst other things, entitles the estate of a taxpayer to the graduated rates of tax which are applied to living taxpayers. After 36 months the estate, if not wound up by then, would be taxed at the highest marginal rates.

 

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Charities and related businesses

Registered charities, except charities designated as private foundations, may run related businesses; however, the Income Tax Act does not define what a related business is except to state that a volunteer-run business is to be considered a related business even if there is no link between the business and the objects of a charity.

 

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Not-for-profits should be doing some strategic thinking

Typically, because charities are subject to so much regulation and not-for-profits comparatively little, most focus from the sector tends to fall on the former. However, there are changes both recent and expected that not-for-profits should be planning for.

 

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Donor beware: Bolting the barn door after it’s burned to the ground

In a report entitled “Donor Beware”[1] the Tax Ombudsman opined on the CRA’s administrative responsibilities regarding charitable donation tax shelters. Perhaps the most surprising thing about the report is that it is dated March 19th, 2014, after years of legislative implementation of tools for the CRA to crack down on tax shelter promoters, charities, directors of charities and donors connected with such plans. As far as we can tell most offensive tax shelters seem to be shut down albeit leaving several large messes still to be cleaned up.

 

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Not-for-profit report is a call to action

For many years, increasingly stringent regulation of the charity sector pushed oversight of the not-for-profit sector off the list of priorities. There was not even any good data on the number of not-for-profit organizations (NPOs) in existence, because the CRA did not compel them to file basic tax forms. Over the past several years, however, the Department of Finance and the CRA have started taking a closer look at the sector, beginning with a three-year review of over 1000 ostensibly random audits of NPOs. The final Not-for-Profit Report was just issued on February 17, 2014.

 

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Credit-proofing charity assets

Most charities and not-for-profit organizations are incorporated as non share capital corporations. These corporations are considered separate legal entities from their members or directors. This ‘separateness’ protects the members (and to a large extent directors) from being personally liable in the event the organization finds itself liable for damages as a result of a court finding.

 

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