1. Fundraising Across the 49 th Parallel Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Association of Gift Planners 2004 Annual Conference Toronto – April 15, 2004

2. 1 Canadian Cross Border Fundraising Outbound (foreign charities fundraising from Canada) Inbound (Canadian charities fundraising abroad)

3. 2 Outbound Any foreign charity can fundraise in Canada Only donations to “qualified donees” result in a Canadian individual tax credit/corporate tax deduction –exceptions in Canada US tax treaty US college attended by a family member donations to US charities tax- recognized against Canadian taxes on US-source income

4. 3 Outbound - Qualified Donees Registered Charities UN –agencies Federal or provincial Crown –agencies Foreign charities with Crown patronage Prescribed foreign universities customarily attended by Canadians

5. 4 Outbound - Registered Charities ITA “registered charity” must be both –“resident in Canada”; and –“created or established in Canada” Therefore foreign charities cannot become registered charities Most foreign charities cannot fundraise in Canada in a tax effective manner

6. 5 Outbound - Grants by Registered Charities Registered charities –must devote their resources to own charitable activities, or –make grants to qualified donees Registered charities should not make grants (gifts) to foreign charities –explicit grounds for revocation –penalty tax equal to 105-110% of grant to foreign charity

7. 6 Outbound – Direct Foreign Activities Canadian registered charities can operate anywhere in the world –consistent with charitable purposes –consistent with public policy? Direct foreign activities –local or Canadian employees

8. 7 Outbound - Indirect Foreign Activities Indirect foreign activities –agency –joint venture –fee for service –RC 4106 Registered Charities Operating Outside of Canada need binding written agreements complex CRA administrative policy

9. 8 Outbound - Canadian Friends Establish a Canadian registered charity with same purposes as foreign charity Fundraise in Canadian charity Agreement between Canada and foreign charity: –foreign charity does activities for Canadian charity –Canadian charity pays –foreign charity reports to Canadian charity

10. 9 Outbound - CRA Approach Formerly very flexible Now increasingly complex –RC 4106 Registered Charities Operating Outside Canada –T3010A annual return questions –T2050 application for registration questions –audit attention –intermediate sanctions

11. 10 Outbound – Revocation of Registration Tel Aviv revocation appeal –not following agency agreement (care & control) and not getting agent’s reports permitted revocation –prior audit undertakings not followed Canadian Magen David Adom revocation appeal –public policy –charitable property distribution permitted? –revocation upheld based on IDF use of donated ambulances

12. 11 Terrorism Post 9/11/01 Bill C-36 Refuse or revoke charitable registration for: –making any resources available to a terrorist organization (directly or indirectly) secret appeal process CRA initially targeting specific terrorist fundraising charities, not international aid agencies

13. 12 Inbound - Canadians Fundraising in the US Not a Canadian legal issue –I am only a Canadian lawyer What is the local law? –tax law –trust law –exchange controls –fundraising regulations If a gift arrives, be grateful If soliciting or negotiating a gift, get advice

14. 13 Inbound Canada and US have very generous tax recognition for donations Many other countries are less generous

15. 14 US Income Tax Treatment of Donations Deductions from income for donations to US domestic charities –itemizing US planned giving techniques –annuities –charitable remainder trusts

16. 15 US Estate Tax Treatment of Bequests US estate tax applies to testamentary gifts of US assets of non-residents/ non-domiciliaries –$1 million exemption –almost 50% tax rate Deduction for charitable gifts (including to a Canadian registered charity) –Canada/US tax treaty Article XXIXB, par. 1

17. 16 Inbound - US Legal Requirements Private contributions to foreign organizations are generally not deductible –exception in Canada-US Tax Treaty for Canadian colleges/universities attended by family members donations to Canadian charity only deductible against US tax on Canadian source income US “Friends of ” charities –US organization may not serve as a mere conduit for grants to foreign organizations

18. 17 US Legal Requirements US tax-exempt organizations may grant funds to foreign organizations provided the US organization: –exercises control and discretion as to the use of the funds; –maintain records regarding the exempt uses of the funds; and –makes grants only for specific projects that further its exempt purposes.

19. 18 US Legal Requirements US Private foundations are subject to additional “expenditure responsibility” rules: –adequate procedures to ensure grant is spent solely for the purpose for which made

20. 19 Inbound – Foreign 501(c)(3)s Many US foundations only grant to 501(c)(3)s Foreign charities can obtain IRS recognition as 501(c)(3) organization –no additional ability to give tax deductions to individuals –permits hassle-free grants from US charities

21. 20 Inbound - Other US Laws State and municipal registration of fundraisers –applicable to internet presence? views differ registration services

22. 21 Inbound – US Intermediaries US public foundations which will accept donations subject to recommendations that the funds be granted to a foreign charity –less % based “fees” The American Fund for Charities –www.chapel-york.com Charities Aid Foundation America –www.cafonline.org/cafamerica

23. Fundraising Across the 49 th Parallel Robert B. Hayhoe rhayhoe@millerthomson.ca 416.595.8174 Canadian Association of Gift Planners 2004 Annual Conference Toronto – April 15, 2004