by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
On August 29, 2016, Canada Revenue Agency (“CRA”) released a ruling on the applicability of the Goods and Services Tax (“GST”) and Harmonized Sales Tax (“HST”) to the supply of dietetic services by a registered dietitian to a public sector body pursuant to a Service Agreement. In Ruling Document number 165366, CRA ruled that the dietetic services supplied were exempt from GST/HST in accordance with section 7.1 of Part II of Schedule V of the Excise Tax Act (“ETA”).
Part II of Schedule V of the ETA exempts certain supplies of health care services. Section 7.1 specifies that “[a] supply of a dietetic service rendered by a practitioner of the service” will be exempt “if the service is rendered to an individual or the supply is made to a public sector body or to the operator of a health care facility.” In this fact scenario, the individual requesting the ruling met the definition of a practitioner under section 1 of Part II and the recipient organization met the ETA’s definition of a public sector body. Additional factors considered by CRA included the type of services supplied under the Service Agreement, the province where the services were supplied, and whether the supply was a qualifying health care supply under the ETA.
Although a GST/HST ruling such as this one is binding on CRA so long as “none of the issues discussed in the ruling(s) are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretive policy affect its validity; and all relevant facts and transactions have fully and accurately disclosed,” it is also fact specific. As such, organizations that are public sector bodies or health care facilities under the ETA and receive supplies of dietetic services may wish to review whether these services are also exempt in accordance with section 7.1 of Part II of Schedule V.
by admin | Oct 27, 2016 | Charity & Not-for-Profit Law
On October 5, 2016, the Tax Court of Canada (the “Court”) released an edited transcript of the oral reasons given on August 26, 2016 for dismissing the appeal from tax assessments in Perry v R. Perry had appealed assessments made on his charitable donations to PanAfrican Canadian Multicultural Center (the “Charity”) from the 2005 and 2006 tax years. The Charity was deregistered in 2007. Perry testified that “he made donations in cash and kind in each year on the recommendation of a tax accountant.” He also presented two charitable receipts as evidence.
The Court stated Perry “appeared to change his version of events as needed, as the evidence progressed. His version appears to be inconsistent with the receipts in a number of respects.” The Court noted that while receipts for the in kind donations were not attached to the paper tax return filed by Perry, the invoice for accounting services related to preparation of the 2006 tax return, was attached to the return. In this regard, this invoice was for $910, but the amount that Perry claimed for charitable donations that year was $9,130, which appeared in parentheses beside the $910 fee on the invoice. The Court concluded that based on the evidence, on a balance of probabilities Perry purchased his receipts from the tax accountant for 10% of the face value.
The appeal also failed because the receipts were found deficient in multiple respects and did not contain information required under the regulations under the Income Tax Act. In this regard, the receipts contained several errors in the name of the charity, an incorrect address and neither receipts listed a description of the in-kind property donated, nor the name and address of the appraiser, among other deficiencies.
by Dev User | Oct 27, 2016 | Charity & Not-for-Profit Law, Counter Terrorism Law, Expertise
Anti-Terrorism and Charity Law Alert No. 47
The Financial Action Task Force (“FATF”) released a report on September 15, 2016, entitled “Anti-Money Laundering and Counter-Terrorist Financing Measures: Canada – Mutual Evaluation Report September 2016” (the “2016 Mutual Evaluation”). This report examines Canada’s anti-money laundering and anti-terrorist financing measures for compliance with the FATF Recommendations, following an on-site visit which took place from November 3-20, 2015. This is the fourth mutual evaluation the FATF has performed with Canada. The FATF is an inter-governmental body responsible for setting and monitoring international standards for combating money laundering and financing of terrorism and proliferation. The FATF Recommendations are forty international standards that countries are asked to comply with in order to counter money laundering and terrorist financing.
For the balance of this Bulletin, please see Anti-Terrorism and Charity Law Alert No. 47.
by admin | Sep 29, 2016 | Charity & Not-for-Profit Law
Public Consultation on Charities and Political Activities Announced
On September 27, 2016, the Honourable Diane Lebouthillier, Minister of National Revenue (the “Minister”), announced the launching of public consultations to “clarify the rules regarding the involvement of registered charities in political activities.” This announcement comes in light of the January 20, 2016 announcement that Canada Revenue Agency (“CRA”) would be winding down political activities audits and the earlier release of the Minister’s Mandate Letter on November 13, 2015 in which the Prime Minister asked the Minister to clarify the rules concerning political activities by charities.
CRA followed this announcement with its own announcement later the same day detailing the online component of the consultation. The consultation questions are grouped into three categories related to carrying out political activities, CRA’s policy guidance, and future policy development. Specific questions asked by CRA include:
- Are charities generally aware of what the rules are on political activities?
- What issues or challenges do charities encounter with the existing policies on charities’ political activities?
- Do these policies help or hinder charities in advocating for their causes or for the people they serve?
- Is the CRA’s policy guidance on political activities clear, useful, and complete?
- Which formats are the most useful and effective for offering policy guidance on the rules for political activities?; and
- Should changes be made to the rules governing political activities and, if so, what should those changes be?
Comments concerning the online consultation will be received until November 25, 2016. In person consultations will follow at a later date in Halifax, Montréal, Toronto, Winnipeg, Calgary and Vancouver. The Minister also announced the establishment of a consultation panel consisting of five individuals experienced in the regulatory issues facing charities, presumably in the context of political activities.
Appointment of New Director General of Charities Directorate
Tony Manconi assumed the role of Director General of the Charities Directorate with the Canada Revenue Agency (“CRA”) on July 25, 2016. Mr. Manconi began his career in the Public Service in 1988 at the Secretary of State. Prior to joining the Charities Directorate, Mr. Manconi served as the Director General of the Collections Directorate of the CRA. Mr. Manconi holds a Bachelor’s degree from Carleton University with a combined major in Law and Economics.
Finance Canada Reviews Commitment by MasterCard and Visa to Reduce Fees for Charities
A Backgrounder released by the Department of Finance on September 22, 2016 reported on its review of MasterCard and Visa’s voluntary commitments to reduce interchange fees for charities. In November 2014, Visa and MasterCard voluntarily agreed to reduce interchange fees for charities to an average of 1.50% of the transaction value. An interchange fee refers to a charge paid by merchants when they process payments by credit card. These reductions took effect in April 2015 and are to continue for five years following that date.
MasterCard released a report in November 2014 indicating that their new merchant category for charities allows for an almost 40% reduction in interchange fees. This means interchange fees fall to between 1.0% and 1.5%, as compared to previous rates of 1.59% to 2.65%. Visa, rather than creating a completely new merchant category, included charities in its “emerging segments” category according to their report released in November 2014. This means charities’ interchange fees will vary between 0.98% and 1.95%, depending on the Visa card used.
The Department of Finance released its third-party verifications over the 12-month period from May 1, 2015 to April 30, 2016, which verified that both Visa and MasterCard have “met their respective commitments, which include reductions for small and medium-sized enterprises and charities.”
These developments in lower interchange fees significantly benefit charities by lowering administrative costs overall for the charitable sector. For more detailed information concerning the commitments made by both MasterCard and Visa see the November/December 2014 Charity Law Update.
CRA Updates its Website on Charitable Donation Tax Credit Rates
On September 15, 2016, CRA updated its website and charitable donation tax credit rate table to reflect current charitable donation tax credit rates, as well as the related proposed legislation with respect to charitable donation tax credits under subsection 118.1(3) of the Income Tax Act (“ITA”).
In addition to the table, examples are also provided, including examples which incorporate the new top individual income tax rate of 33% under proposed legislation.
For additional information on tax rates and the amendments to the donation tax credit, see our January 2016 Charity Law Update.
