Canadian / U.S. Ministry Relationships Robert B. Hayhoe MILLER THOMSON LLP, Toronto [email protected]416.595.8174 Stuart J. Lark HOLME ROBERTS & OWEN LLP, Colorado Springs [email protected]719.473.3800 CMA Annual Conference Dallas, Texas April 27, 2004
Canadian / U.S. Ministry Relationships. Robert B. Hayhoe MILLER THOMSON LLP, Toronto [email protected] 416.595.8174 Stuart J. Lark HOLME ROBERTS & OWEN LLP, Colorado Springs [email protected] 719.473.3800 CMA Annual Conference Dallas, Texas April 27, 2004. - PowerPoint PPT Presentation
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F ie ld M in istry Activ ities by U .S . Em ployees
Africa Asia Europe LatinAm erica
Canada$
Field M inistryActivities
various coun tries
International Ministry Scenarios
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C om bined fie ld m in is try activ ities :-U .S . em ployees-C anad ian em ployees-G erm an em ployees
Africa A s ia E urope LatinA m erica
C anada$ $
$
Multi-Lateral Integrated Ministry(possibly U.S. Centered)
U .S .G erm any
International Ministry Scenarios
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C anada U .S .
F ie ld m inis try activ ities consis ting o f m ateria lsacquired from U .S . and prov ided by C anada andservices rendered on beha lf o f Canada by U .S .
or C anadian em ployees
$
M aterials andServices $
Multi-Lateral Partitioned Ministry
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Canadian Legal Requirements
General Rules • 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
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Canadian Legal Requirements
Qualified Donees• Canadian Registered Charities• UN
− agencies• Crown (Canadian federal or provincial
government)− agencies
• Foreign charities with Canadian government patronage
• Prescribed foreign universities customarily attended by Canadians
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Canadian Legal Requirements
Registered Charity• Income Tax Act “registered charity” must
be both- “resident in Canada”; and- “created or established in Canada”
• Therefore non-Canadian charities are not eligible to become registered charities
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Canadian Legal Requirements
Establishment of Registered Charity• Create Canadian legal entity
− majority Canadian board
• Apply for registration with Canada Customs and Revenue Agency− T2050 form
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Canadian Legal Requirements
Grants by Registered Charities• Canadian registered charities
− must devote their resources to their own charitable activities, or
− make grants to qualified donees
• Canadian registered charities may not make grants (gifts) to foreign charities− explicit grounds for intermediate sanctions
or revocation of registration
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Canadian Legal Requirements
Consequences of Revocation of Charitable Registration
• Loss of tax exempt status• Loss of tax recognition for donors• Imposition of penalty tax equal to 100% of
charity’s assets− capital punishment
• Two recent high profile revocations for foreign activity− Canadian Magen David Adom for Israel
Canadian Background
Intermediate Sanctions• March 23, 2004 Canadian Federal Budget
introduced intermediate sanctions− effective date remains unknown− penalty of 105% of gifts made to foreign
charity• director liability?
− penalty payable to Canada Revenue Agency or to arm’s length charity
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Canadian Legal Requirements
Foreign Activities by Registered Charities• Canadian registered charities can operate
anywhere in the world− consistent with charitable purposes
• mission activities are just as charitable in Nairobi or New York City as in Toronto
• Direct foreign activities− local or Canadian employees
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Canadian Legal Requirements
Canada Revenue Agency Approach• Formerly very flexible
• Now increasingly complex and stringent− RC 4106 “Registered Charities Operating