The Canada Revenue Agency’s small list of approved foreign charities has been whittled down to zero, meaning Canadian donors hoping to give money to former U.S. president Bill Clinton’s foundation, for example, are out of luck if they were banking on a tax credit.
The move has some charities and charity regulation experts scratching their heads. In recent years, the government has usually allowed a small, but seemingly arbitrary, list of foreign charities to be treated the same as domestic ones for tax purposes.
But as of Monday, according to the CRA website, no foreign charities remained with this status, which is granted after a department of the federal government itself makes a charitable donation. The exemption lasts two years after the donation is made.
Only a handful of charities has benefited from the provision, which can help channel private donations from Canadians. Among them were two Swiss-based charities related to the Aga Khan Foundation, the William J. Clinton Foundation and the Washington-based Woodrow Wilson International Center for Scholars. (The Aga Khan Foundation also has a Canadian arm that is a registered domestic charity.)
The CRA says the vacant list is the result of changes to the rules brought in by Ottawa in its 2012 budget and enacted last year. Now, the agency says, foreign charities that receive a donation must then apply to the CRA to be registered as a qualified foreign charity, and they must either be involved in disaster relief, humanitarian aid or “activities in the national interest of Canada.”
Philippe Brideau, a spokesman for the tax agency, said in an e-mail that he could not discuss specific cases. But he said several charities have applied for the status and that decisions are pending.
“We can confirm that the CRA has received, and is processing, applications,” he said. “…To date, no organizations have been registered under the new process.”
Malcolm Burrows, the head of philanthropic advisory services at the Bank of Nova Scotia, said the CRA has been reviewing a patchwork list of categories that receives special treatment under Canada’s charity laws. The list includes the foreign charities but also United Nations agencies and foreign universities attended by Canadians.
But Mr. Burrows said he did not expect the review to result in an apparent purge of the foreign charities list, which has left some of the affected groups scrambling to have Ottawa renew their status and has given wealthy donors pause.
He said Canada’s already restrictive rules make it hard for donors to give to charities overseas.
“We are quite insular. It’s very difficult to support international charitable causes. We have much more restrictive rules than the U.S. or the U.K. or the Australians, for that matter,” Mr. Burrows said.
One group that had enjoyed the tax status for years but is now in limbo is the Council for Canadian American Relations in New York, founded in 1972 by then-prime minister Pierre Trudeau and U.S. banker David Rockefeller to fund arts and cultural institutions and foster better relations between Canada and the U.S. Its current board includes Toronto theatre impresario David Mirvish. According to the CRA website, the group had the coveted tax status as far back as 2003, but it lapsed in May.
Mark Blumberg, a Toronto lawyer who advises charities, said the program is useful for international charities that do not have time to set up Canadian affiliates and are trying to deal with a humanitarian or natural disaster, pointing to the status given to the Christchurch Earthquake Appeal Trust in 2011 after the earthquake in New Zealand.
But it is unclear how the charities are selected, he said.
“There’s no rhyme or reason. There’s no transparency about how groups get onto this list,” Mr. Blumberg said.
Plus, he said, the CRA does not even reveal which government department gives the donations to groups or the amounts. It is also not clear what documentation the charities have to provide to show what they do with the money that flows from Canada, he said.
The issue arises amid an apparently unrelated controversy over a CRA review of the environmental charities that critics charge was motivated by their criticism of the Conservative government for its policies on pipelines, the oil sands and climate change. The CRA has denied those audits were politically driven.
JEFF GRAY – LAW REPORTER
The Globe and Mail
Published Monday, Aug. 18 2014, 8:59 PM EDT
Last updated Tuesday, Aug. 19 2014, 7:30 AM EDT