Recent Tax Developments

Legislative Amendments

The proposed changes relating to political activities carried on by registered charities and gifts of shares and other intangible capital properties as well as works of art by the artist personally to registered charities, put forward in the Federal Budget of May 23, 1985, received Royal Assent on February 13, 1986.

Interpretation Bulletins

Recently, two Interpretation Bulletins on the subject of gifts to registered charities have been issued by Revenue Canada.

Interpretation Bulletin IT-244R2 (Gifts of Life Insurance Policies as Charitable Donations) is a revision of a previous Interpretation Bulletin IT-244R dated April 20, 1979. The only significant change appears to be that insurance premiums donated in connection with a previous gift of a life insurance policy will only qualify for exclusion from the disbursement quota of a registered charity if the payment itself is also subject to the requirement that it, or a substituted property (including proceeds arising on death) are retained for a minimum of 10 years. Accordingly, where a life insurance policy is given to a registered charity subject to the direction that it, or the property substituted therefor (including the proceeds received on death) is retained for a minimum of

10 years, a simple way of insuring that any future premiums are not included in the disbursement quota is to have the donor, at the time of the gift, require the charity to retain the policy, or the property substituted therefor, for at least 10 years after the payment of the last premium by the donor.

Interpretation Bulletin IT-504 outlines Revenue Canada’s position with respect to selected matters affecting artists and writers. Paragraphs 9 to 12 cover gifts of art donated by the artist from his/her inventory, including the election that is available in connection with such art, as well as gifts of both intangible and tangible capital property.

Further to Re Laidlaw

Following the decision in Re Laidlaw*, there has been continuing uncertainty

*See “Recent Tax Developments,” The Philanthropist
, Summer 1983 and Winter 1984 and Donovan Waters, “In the Matter of Laidlaw Foundation,” The Philanthropist
, Spring 1985, p.46.

as to what sports-related organizations qualify for charitable status. (Re Laidlaw established that certain sports-related organizations were charitable for the purpose of that case.) The following letter received from the Office of the Public Trustee of Ontario seems to add to the confusion:

Dear Ms. Dickson:
I thank you foryourletterdated March 5, 1986, and for enclosing therewith a copy of the Letters P-atent for The Commonwealth Games Association of Canada Inc.

An examination of the Letters Patent for this Association reveals that they are registered as an amateur athletic organization and not as a registered charity.It is the position of the Office of the Public Trustee that an organization which meets all the requirements of a charitable organization will still not be a charity unless it decides to become a charity by incorporating accordingly. Some organizations, although they pursue charitable objects, decide not to become charitable because the organization and Directors do not wish to take on the burdens of charitable trusteeship.

In regard to our position, Her Honour Judge Dymond in Re Laidlaw stated at page 556-57 that, “as long as such an organization does not accept money in trust, such a position appears to me to be reasonable. However, the moment such an organization accepts money in trust for those charitable purposes, it becomes in my view a charitable organization.”

It would appear that any association or organization can accept monies for charitable purposes but it will always remain the onus of the donors to substantiate on any subsequent passing of accounts that monies given to an organization were not applied for their non-charitable purposes but were applied exclusively for any of the charitable purposes being pursued. This onus would require written documentation and substantiation in the form of vouchers.

We further note that, upon dissolution, the remaining assets of this organization can be distributed to other athletic or non-charitable organizations. Therefore, this organization does not satisfy the requirement of charitable entities whereby, upon dissolution, all assets of that charity must be distributed to another charity. A mixture of charitable and non-charitable purposes disqualifies this Association from being considered a charity in Ontario.

You can appreciate that in Re Laidlaw, the Courts imposed charitable status on organizations which were never given the opportunity to present their case. In spite of that decision, these organizations have decided to retain their non-charitable amateur athletic status in spite of the decision of Re Laidlaw.
We therefore conclude that no donations can be made outright by a charity or charitable foundation to a non-charitable entity.

On any subsequent passing of accounts, the onus remains on the Directors of the charity or charitable foundation to substantiate that all disbursements were made for exclusively charitable purposes.

If you should wish to discuss this matter, please do not hesitate to contact this writer.

Yours very truly, “Stan J. Sokol”

In a telephone conversation with Mr. Sokol, it was confirmed that the statement

“We therefore conclude that no donations can be made outright by a charity or charitable foundation to a non-charitable entity” means that if donations are made to a non-charitable entity for general purposes, the donations will not be considered to have been made for a charitable purpose. If donations are made for a specific charitable purpose, they will be considered to have been made for a charitable purpose.

From a legal point of view, many thought thatRe Laidlaw established that the organizations referred to therein were charitable in law for all purposes. Until this is clarified by further litigation, however, charitable foundations are left with the policy of the Public Trustee which places the onus on them to establish that donations they make to certain organizations which are not registered as charities with Revenue Canada are for charitable purposes.

Re Koeppler’s Will Trusts

With respect to political activity, in a recent English case, Re Koepp/er’s Will

Trusts ( 1985), 2 All ER 869, the Court of Appeal concluded that a bequest to “the Warden and the Chairman of the Academic Advisory Council … of the

institution known as Wilton Park … for the benefit at their discretion of the said institution as long as Wilton Park remains a British contribution to the formation of an informed international public opinion and to the promotion of greater cooperation in Europe and the West in general … “was charitable. Wilton Park was the name of a series of conferences on political, economic and social issues.

In his judgment, Slade L.J. considered whether the topics discussed at Wilton Park, some of which had a political flavour would disentitle the gift as a charitable gift. He concluded that the activities of Wilton Park were not of a party political nature and were not designed to procure changes in the laws or governmental policy of that or any other country but rather were genuine attempts, in an objective manner, to ascertain and disseminate the truth. Therefore, no objections to the trust arose on political grounds.


Member, The Ontario Bar


Thorne, Riddell, Chartered Accountants


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