{"id":18756,"date":"2015-06-05T13:00:52","date_gmt":"2015-06-05T17:00:52","guid":{"rendered":"https:\/\/www.cccc.org\/news_blogs\/?p=18756"},"modified":"2015-06-05T13:00:52","modified_gmt":"2015-06-05T17:00:52","slug":"when-cra-knocks-proving-charitable-donations","status":"publish","type":"post","link":"https:\/\/www.cccc.org\/news_blogs\/legal\/2015\/06\/05\/when-cra-knocks-proving-charitable-donations\/","title":{"rendered":"When CRA Knocks: Proving charitable donations"},"content":{"rendered":"

Authored by Nevena Urosevic, Associate Director of Legal Affairs<\/em><\/p>\n

CCCC is aware that some of its members are being asked by donors to assist them in providing proof to the Canada Revenue Agency (\u201cCRA\u201d) for donations made, even though the charity has already provided the donor with an official receipt. Locating such proof can be challenging, especially where the donation made was a cash donation or a gift-in-kind or\u00a0where a donor made multiple donations.<\/p>\n

Two recent cases[i]<\/a> from the Tax Court of Canada (the \u201cCourt\u201d) address this issue and remind both charities and donors that requests for proof are not altogether unusual and that efforts should be made to document donations, above and beyond official receipts.<\/p>\n

Both decisions were rendered by the same judge and both matters deal with the same charity, namely, Revival Time Ministries International (\u201cRevival\u201d), whose charitable status was revoked in 2011 due to fraudulent reporting to CRA.\u00a0 In both decisions, the alleged donors were appealing the Minister of National Revenue\u2019s (the \u201cMinister\u201d) reassessment of their charitable donations tax credits for 2007-2008 for the first appellant (\u201cMapish\u201d) and 2009 for the second appellant (\u201cBope\u201d) for donations allegedly made to Revival.<\/p>\n

In the first case, Mapish claimed to have donated cash and clothing to Revival for a total value of of $9,600 and $11,600 for 2007 and 2008 respectively. These amounts equated to some 25% of Mapish\u2019s income. The Minister initially accepted the charitable donations as declared, but later upon reassessment found that Mapish did not make any donations to Revival in 2007 and 2008. Furthermore, the Minister found that the official tax receipts issued by Revival were incomplete and therefore invalid.<\/p>\n

The Court found that the law requires the existence of:<\/p>\n

    \n
  1. a gift<\/li>\n
  2. a complete donation receipt<\/li>\n<\/ol>\n

    In the case at bar, the judge found that neither of these two elements were proven, thereby upholding the Minister\u2019s Decision.<\/p>\n

    In support of his decision, the judge cited s. 118.1(2) of the Income Tax Act<\/em><\/a>:[ii]<\/strong><\/a><\/em><\/p>\n

    \u201cProof of gift<\/p>\n

    (2)\u00a0An eligible amount of a gift is not to be included in the total charitable gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is evidenced by filing with the Minister<\/p>\n

    (a<\/em>)\u00a0a receipt for the gift that contains prescribed information;\u201d<\/p>\n

    The judge further made reference to s. 3501.(1) of the Income Tax Regulations<\/em><\/a>[iii]<\/a> which sets out all of the information that must<\/u><\/em> be included on an official receipt.[iv]<\/a> Since it is imperative that all the information as set out in section 3501.(1) of the Income Tax Regulations<\/em> be included on the official tax receipt, the absence of any one of these elements is enough for a donor\u2019s tax credit to be denied, without further discussion and regardless of whether a charity was aware of the requirements or not or any other reason. All information must be clearly and meticulously stated on the official receipt.<\/p>\n

    In terms of proving the gift itself, the judge stated that such proof should be established on a balance of probabilities. This means that the alleged donor has to demonstrate that, in all likelihood, he or she made the donations in question. In Mapish, <\/em>the court found Mapish\u2019s testimony and Revival\u2019s receipts were not enough in the circumstances. Mapish kept no record of his donations and his bank statements did not reflect any of Mapish\u2019s alleged donations. He further could not provide any cheques, ATM withdrawal slips, or any envelope relating to the alleged donations.[v]<\/a><\/p>\n

    The second related decision, Bope<\/em>, followed the same reasoning. With very similar factual details, the judge made a very similar decision to that of Mapish. <\/em>The Court essentially found that the receipt that Revival provided to Bope was incomplete, and that this reason was itself enough to uphold the Minister\u2019s reassessment. The judge added, however, that the further fact that Bope was unable to show any objective proof for his donations further affirms the Minister\u2019s decision.[vi]<\/a><\/p>\n

    While these cases involve a charity whose status has been revoked on grounds of fraudulent activity and while the donors in these matters seem clearly to have engaged in such activity themselves, the cases are both informative and helpful to charities and donors in two ways:<\/p>\n

      \n
    1. The sort of egregious behavior demonstrated in these matters help us understand the types of challenges and abusive behavior that CRA is faced with, thus explaining the underlying reason for investigations undertaken by the CRA, whether targeted or at random; and<\/li>\n
    2. The cases alert us of a possible growing trend of CRA verification of donations and provide us with examples of the kinds of documents CRA would be looking for to substantiate claims of donations, e.g.:<\/li>\n<\/ol>\n