Charitable Donation Programs
On December 10, 2010, the Financial Post published an article about the charitable donation program industry. The article examined the industry in general and specifically discussed the Global Learning Gifting Initiative (GLGI). A charitable donation program is a tax shelter that promises to provide charitable donations receipts in excess of the amount of cash contributed by the taxpayer. The net result of the transaction is that the taxpayer receives a tax refund in excess of their contribution because the charitable donations credit they receive from the charitable receipts exceeds their cash contribution.
The availability of the charitable donations credits for taxpayers who participate in these charitable donation programs are scrutinized by the Canada Revenue Agency (CRA). The end result for most audits performed by CRA has been the denial of the charitable donations credit. However, the article discusses one case where the taxpayer was allowed the charitable donation credit from amounts contributed to a charitable donation program.
In Navato, the taxpayer filed a notice of appeal in regards to a reassessment denying his charitable donation credit. The taxpayer had participated in GLGI and had claimed a charitable donation credit in excess of his cash contribution. The taxpayer’s appeal was granted upon consent of the Department of Justice and the CRA.
It should be noted that this case is of little precedential value as the merits of the program were never put before the Tax Court of Canada. In this case, the Department of Justice decided that it did not wish to oppose the appeal. There could be any number of reasons why they decided to not oppose the appeal; possible reasons could include a lack of manpower to handle the appeal or a failure to complete a related investigation. However, it would be very dangerous to believe that the appeal was not objected to solely on the merits of the case.
Therefore, if you are considering making a contribution to GLGI or a similar charitable donation program, you need to understand the risks involved in participating in these programs. It is suggested that each taxpayer seek independent advice from a tax accountant or tax lawyer who has no association with the program.
TaxChambers LLP is collaborating with Andersen Global® in Canada.