The CRA has been constantly and consistently re-assessing donors who participated in the tax shelter programs listed below. The re-assessments are a formal demand to repay the tax credits you originally received. If you are one of these donors, you have decisions to make. Some agents for the programs are now advising their clients to pay back the CRA, it is futile to object. One has to wonder why these agents have had such a change of heart from when they originally promoted the strengths of the programs.
Tax Shelter Programs:
- COIP- Canadian Organization for International Philanthropy.
- RLG- Relief Lending Group Ltd.
- MLF- Mission Life Financial Inc.
- PGI- Pharma Gifts International Inc.
Firstly, we believe that these programs were originally very valid programs, structured to be compliant with the new legislation announced in 2003 and passed in 2014. We believe that, in spite of the wrongdoings uncovered during our investigation, the tax credits originally obtained can be maintained under certain circumstances. It requires an analysis of the CRA reasoning for their re-assessments.
The CRA basically has 4 arguments they report in their long proposal letters:
- The donation was not a “gift” at law.
- The financing of the gift was a sham. ie: You never intended to pay back the loan or recognize it as a real debt.
- The value of the pharmaceuticals donated was inflated.
- The donation was a tax shelter. ie: The loan was a partial recourse loan as per the definition of tax shelter.
Justice Pharma Movement continues to believe the following:
- We did make a valid gift and have available all the documentation necessary to prove it.
- The value of the donation is what we paid for it (the loan amount). Fair Market Value is a bit of “red herring” when the transaction is evidenced by full payment at below Canadian wholesale prices.
- Donors MUST treat the debt as real and settle it according to the terms and conditions to prove CRA Points 2 & 4 wrong
- The only known compliant way to settle the debt without indemnification from the lender is through the Justice Pharma program.
One other point to remember is this: If you filed a Notice of Objection at any point, and decide to pay back the CRA, that does not end the case. It just determines who will pay the tax plus interest to whom when the case if finally settled. Fortunately for donors, it is not the CRA that has the final say on the case. If you wish to learn more on this topic, come to one of our Free Seminars and speak directly with one of our Specialists.
This article is attributed to Profitable Giving Canada