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Thousands of people across Canada have been re-assessed as a result of an ongoing investigation by the Canada Revenue Agency (CRA) into inflated charitable donation receipts. While many of the promoters of these organizations are challenging the CRA's decision to disallow the donations, their actions do not seem to offer the individual taxpayer a respite from the immediate problems caused by the re-assessments. I have been trying to push for settlements to help taxpayers cope with these unexpected re-assessments but the CRA are waiting for Court decisions in the key cases and seem to have no real interest in helping the individuals caught up in this.
Across Canada, hundreds of thousands of taxpayers are being reassessed by the CRA to disallow charitable donations made several years ago. A nationwide investigation was been initiated by the CRA to review and basically disallow all charitable donations where a donor was provided with a charitable receipt in excess of their actual cash contribution.
Promoters such as Global Learning Systems (GLGI), iCan, the Canadian Organization for International Philanthropy (COIP), The Canadian Humanitarian Trust (CHT) and The Banyan Tree Foundation have been investigated by the CRA and this has resulted in any associated charitable receipts being disallowed and various Charities have lost their status. Many taxpayers have received reassessments with little personal explanation from the CRA and now face demands for large lump sum payments combined with aggressive collection action being undertaken by the Agency. Most people have filed the template Notice of Objection provided to them by the various promoters and right now, the Objections are apparently being held in abeyance while the CRA Head Office decides what to do with these files. All the time interest continues to accumulate on these debts. GLGI and the Canadian Humanitarian Trust have Tax Court litigation underway but the CRA have not said whether these will be test cases for all taxpayers. In fact, the CRA have said very little at all and are being very aggressive towards participants. You can read the details regarding the GLGI donations on my GLGI Update Page.
For those thousands of taxpayers who don’t want to wait for the Court decisions, I recommend that you speak to the CRA regarding the possibility of a settlement. Unfortunately, the CRA do not seem to be interested in discussing settlement for the cases that have Court action underway but this may change as we near the Court dates in 2012.
Based on the current case law, I find it unlikely that the promoters of some of these charities will be successful in their appeals regarding the inflated portion of the tax receipts and I am not personally assisting taxpayers to claim the inflated portion of the charitable donation. The promoters have big law firms (many of whom provided the original opinion letters about the schemes) working on this for donors. What I am doing is speaking to taxpayers to share information and give a realistic outline of what you can expect over the coming months. I am not being paid by the promoter to tell you anything and I think it is important that anyone who has donated to these programs think carefully about the impartiality of what is being told to you by the promoters and people on their payroll. I firmly believe that many taxpayers have been treated unreasonably by the CRA in these investigations and that the reassessment of these individuals is overly aggressive and unjust. In particular, I urge all taxpayers to dispute any penalties they have been assessed and to challenge the interest that has accumulated over the years since their donations. I will be fighting to protect the rights of those Canadians who have been financially ruined as a result of the decision to disallow these donations and whilst I will not dispute the additional taxes due, I will try to minimize the financial and emotional burden this issue has caused for so many people. It is worth noting the the Banyan Tree case now has a class action law suit against the promoters and the law firm Fraser Milner Casgrain who provided the legal opinion for the scheme. If the CRA win in Court, I would expect to see more of these class action suits appear in 2012 and taxpayers should pursue this as well as challenges to any penalties and interest that could remain in the event of an unfavourable Court decision.
If you have received an offer to settle your objections, you should have your offer from the Canada Revenue Agency checked by a tax lawyer prior to signing your rights away.
With the volume of taxpayer's being reassessed, the CRA may not have thoroughly reviewed your file and could be making an offer to settle that does not accurately reflect your situation. People who have donated to different charities are being given different offers and several of these offers do not clearly inform the taxpayer of the large interest charges and potential penalties that may remain. A waiver can also prevent you from claiming donations at a later date if the Court subsequently approves the Appeals by the promoters. I cannot emphasize enough to all taxpayers that you should not waive your right to appeal unless you have consulted with a professional to determine if it is the right settlement for you.