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Inside Internal Controls

News and discussion on implementing risk management

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Corona Virus/COVID-19 charity issues – cancelling events, refunds and the possibility of a charitable donation

The COVID-19 crisis is affecting charities in numerous ways. In this short note, we will discuss cancelling events and refunding money or attempting to turn that into a potential charitable donation. We have received a number of inquiries from clients about how to do this and here are some tentative thoughts.

 

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If your Canadian charity has assets/reserve and you don’t have a reserve fund policy you should stop fundraising

CRA in its Fundraising Guidance explains the importance of having a reserve fund policy. By the way this is not “new”. The guidance has been around since 2012.

 

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First Reference annual holiday donation, season’s greetings and holiday break

From all of us at First Reference, we wish you a safe and happy holidays! At this time of year, we like to support organizations that are helping others.

 

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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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Withholding on foreign workers

Charities spend a great deal of time and energy focusing on audits from the Charities Directorate. While this attention on the Directorate is justifiable it is important to recognize that charity regulation is only one function of the Canada Revenue Agency (the “CRA”) and that charities are answerable to the CRA for many of its activities.

 

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Church and religious organizations: Maybe Adam and Eve could have appealed their sentence

We are often contacted by charities seeking to insulate themselves from potential legal action by disgruntled former members of their organization. This typically results from situations where the individual has been kicked out of the organization for specific misconduct. Although, for the most part, these disputes result in acrimonious name calling from time to time, these matters are litigated. A recent decision of the Alberta Court of Appeal is one circumstance where an irate former member of the Jehovah’s Witnesses took the matter to Court.

 

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Ministry of Finance accepting comments on new Employer Health Tax rules for charities

The Ontario Ministry of Finance is proposing a new regulation under the Employer Health Tax Act, to include special Employer Health Tax rules for registered charities. The new regulation could be effective as early as January 1, 2017.

 

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On modernizing the definition of “charity”

Canadian charity law, being largely based on that of the United Kingdom, traces its roots directly back to the preamble of the English Charitable Uses Act of 1601, known as the “Statute of Elizabeth I”. Although the Statute itself was repealed in the 19th century, the preamble was legally preserved and still forms the basis of the line of case law running right to the modern day that defines what is legally charitable.

 

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Why do we need members? We have a board…

Our incorporated charity and non-profit clients often wonder why they need members. Organizations with few governance participants, either because they are small or because they are controlled by a small group, sometimes wonder if they may operate with only a board. Our US clients looking to set up a Canadian affiliate or interact with existing Canadian charities are often accustomed to non-profit corporate statutes that allow a corporation to have only a self -perpetuating board without any members.

 

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Separate but together: A property tax lesson

Next to the ability to issue charitable donation tax receipts a break in property taxes is likely the next most popular reason for seeking registered status. Of course, the considerations on this issue vary from province to province as the exemption from property tax is a matter of provincial jurisdiction. But the commonalities both of charity operations and of the various property tax regimes make decisions relating to the property tax of a charity in one province germane to those operating in another.

 

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Canada Revenue Agency new T3010 reporting requirements

There is a new reporting requirement for Form T3010, Registered Charity Information Return. The addition is necessary because of changes announced as part of the 2015 Federal Budget.

 

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Charitable gifting: Preparing for the big IF

It is one of the more interesting aspects of practising law that allows lawyers to consider the situation when two laws designed for different purposes intersect. Sometimes these differences can cause difficulties, but when used creatively they can be the key to solving difficult problems. One such intersection involves a gift given with a condition subsequent and the revocation tax.

 

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Charity how to: What to do when faced with an issue of non-compliance

When a charity becomes aware that it has been non-compliant with either the Income Tax Act or the common law, it can cause great anxiety within the organization. According to the CRA, however, most non-compliance issues are “unintentional, accidental, and often of low material consequence,” and they encourage charities to disclose any non-compliance issue to the Charities Directorate. Non-compliance issues that charities might experience include:

 

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Assessing charities: Cause and outcome

Your Estate Planning process is underway. You know that you want to provide for a charity in your Estate Plan, but you have no particular affiliation with any charity. You do, however, have one criteria… you want to make sure that your dollars end up with a charity that uses it in the most efficient manner, making the best use of your hard earned legacy. How do you decipher which charity gets the most dollars to its end beneficiary? Essentially where do you get the most “bang for your buck”?

 

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Stay of execution: A precedential win for a charity at the Federal Court of Appeal

The charities community is well aware that the Canada Revenue Agency (CRA) works to shut down charities it feels are deserving of such a punishment. In some circumstances, notably, but not exclusively, with respect to charities involved in tax shelters, the CRA works to finalize the charity’s revocation within thirty days of its Notice of Intention to do so.

 

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