Canada Launches Compliance Awareness Campaign For Charities

by Mike Godfrey, Tax-News.com, Washington

19 February 2009

Jean-Pierre Blackburn, Canada's Minister of National Revenue, is inviting charities and not-for-profit organizations that serve the charitable sector to submit project proposals for funding consideration under the Charities Partnership and Outreach Program, which is seeking to increase awareness of compliance issues among charitable organizations.

"By providing contribution funding under the Canada Revenue Agency (CRA) Charities Partnership and Outreach Program, we are demonstrating our commitment to helping charities understand their obligations under the law," Blackburn said in launching the program on February 18. "This will enable charities to be more effective in serving the community on the one hand and allow Canadians to continue to donate with confidence on the other hand.”

In the course of fiscal year 2009-2010, the Canadian government will allocate CAD3m (USD2.4m) in contribution funding aimed at supporting sector education and training projects related to compliance. Selected projects can qualify for funding of up to CAD500,000 per year.

The CRA, in consultation with members of the voluntary sector and other government departments, will recommend for funding projects related to one or more of the following priorities: requirements and obligations of charitable registration; gifts to non-qualified donees; safeguards against terrorism; and small and rural charities.

Ultimately, the government hopes that the project will support projects designed to raise awareness among the charitable sector of regulatory obligations under the Income Tax Act and increase the capacity of the charitable sector in meeting regulatory requirements.

Earlier in the year, charitable fraud was one of the "triple threats" identified in its new 'Project Trident' campaign - a nationwide enforcement and awareness project that targets three types of illegal activity, including identity theft and tax preparer fraud.

According to the CRA, there are currently over 70 cases that make up Project Trident in various stages of investigation. In addition, there have already been 13 convictions, resulting in over CAD1.8m in fines and a total of 210 months in mandatory jail time.

"The three types of illegal activity are often used in combination," indicated Blackburn. "Many of the cases involving tax preparer fraud also involve charities-related fraud or identity theft. For example, some unscrupulous tax preparers sell false receipts for charitable donations to their clients. Others commit identity theft by using personal information from legitimate clients to file fraudulent tax returns."

Charities-related fraud can be committed on its own, without involving identity theft or unscrupulous tax preparers. For example, a charity could be set up to sell inflated tax receipts, but perform little to no charity work.

Just this year, the CRA has annulled the charitable status of three charities and an amateur athletic association, mainly for issuing false receipts in the course of participating in illegal tax sheltering activity, and for generally abusing their charitable status under the Income Tax Act.

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