Tax court disallows charitable donation tax credits

publication date: Oct 11, 2014
author/source: Linsey E.C. Rains

Five recent Tax Court of Canada (the “Court”) decisions illustrate the importance of submitting documentary evidence and providing credible witness testimony when appealing Canada Revenue Agency’s (CRA) disallowance of charitable donation tax credits to the Court. The individual taxpayers involved in Akinbo v The Queen, Ampomah v The Queen, McCalla v The Queen, Imoh v The Queen, and Bello v The Queen (the “Appellants”), had each claimed charitable donation tax credits of varying amounts under section 118.1 of the Income Tax Act.Linsey Rains

Section 118.1 allows individual taxpayers to claim a tax credit for total charitable gifts made to registered charities and other qualified donees. Subsection 118.1(2) requires the individual donor to provide proof of gift in the form of a receipt containing “prescribed information,” as defined in Regulation 3501 of the Income Tax Regulations. The issues in these cases were twofold: first, whether each of the Appellants had discharged the onus of showing, on a balance of probabilities, that they had actually made the charitable gift and second, whether the receipts were issued in accordance with Regulation 3501.

None of the Appellants provided sufficient and credible evidence to meet the onus and demonstrate they made donations in the amounts claimed on their tax returns. The Court cited a host of evidentiary problems for the Appellants including: failing to call a witness with knowledge of events (Akinbo, Imoh); strength of CRA’s audit evidence (McCalla, Imoh); improbability of donation amounts based on net income (Ampomah); lack of connection to the donee charity (Akinbo); inconsistent statements; and general lack of documentary evidence to corroborate claims.   

The Court held it did not need to address the second issue in Akinbo, Imoh, and Bello, because the cases were dismissed based on the first issue. However, the appellants in Ampomah and McCalla argued that their good faith should negate the donees’ receipting deficiencies. The Court rejected these arguments because “it is not a matter of fault, responsibility, good faith or bad faith,” but rather a mandatory requirement that receipts be issued properly.

Although these judgments result from Informal Procedure appeals, i.e. the decisions hold no precedential value, they are useful insofar as they demonstrate how the Court prioritizes properly issuing receipts in accordance with Regulation 3501. It would also be interesting to see how the Court would treat receipting deficiencies in circumstances where the appellants could provide sufficient and credible evidence to meet the onus of showing they had made donations in the amounts claimed on their tax returns.

 Linsey E.C. Rains - Called to the Ontario Bar in 2013, Ms. Rains joined Carters Ottawa office to practice charity and not-for-profit law with a focus on federal tax issues after more than a decade of employment with the Canada Revenue Agency (CRA). Having acquired considerable charity law experience as a Charities Officer, Senior Program Analyst, Technical Policy Advisor, and Policy Analyst with the CRA’s Charities Directorate, Ms. Rains completed her articles with the Department of Justice’s Tax Litigation Section and CRA Legal Services.

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