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February 2020 Charity & NFP Law Update Tax Court of Canada Rejects Charitable Donation Scheme… Again On January 27, 2019, the TCC released its decision in Tudora v The Queen ('Tudora'), another case involving the same charitable donation scheme under the guise of the Global Learning Gifting Initiative (“GLGI”) that the TCC rejected in its 2015 decision in Mariano v The Queen (“Mariano”), as discussed in the October 2015 Charity & NFP Law Update and August 2016 Charity & NFP Law Update. The GLGI program was a charitable donation scheme by which, in general terms, each participant, in exchange for a cash donation to charity A (Millenium Charitable Foundation), as well as an application to become a “capital beneficiary” in a trust (Global Learning Trust 2004), received rights to educational courseware licences with an inflated value that was several times higher than their original cash payment and which the participants subsequently “gifted in kind” to another participating charity; so that each participant would receive two donation receipts, one for their cash donation and another for the “gifted” courseware licenses valued much higher than the participant’s original cash donation. In Tudora, the TCC was asked to determine whether the appellant taxpayer, by participating in the GLGI program, had effectively made a gift which constituted a valid charitable donation. In denying the claimed charitable tax credits pursuant to section 118.1 of the ITA, the CRA asked the TCC to apply the principle of judicial comity, relying on its previous analysis of the GLGI program and that: i) the taxpayer lacked the donative intent which is a requisite element of a gift; ii) the trust involved in the GLGI program was not a valid trust; iii) the donation receipts issued did not represent the fair market value of the alleged gifts in kind; and iv) subsections 248(30) to (32) would reduce the eligible amount of the purported gift to nil. The TCC dismissed the appeal finding that the appellant taxpayer had no donative intent, but had an expectation of receiving a benefit as a result of his participation in the GLGI program. On June 26, 2019, the Ontario Superior Court of Justice certified a class action against the promoters of the GLGI program as well as their professional advisors who participated in developing, structuring and promoting this charitable donation scheme which involved over 30,000 taxpayers claiming combined tax credits in the hundreds of millions of dollars. Competition Bureau’s Role in Digital Advertising: Implications for Charities and Not-for-Profits |
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