For most of the past 15 years, I have taken great pride in the fact that I have provided tax and legal advice on donations amounting to over $100 million each year. None of those donations involved gifts to charity “tax shelter” schemes.
However, the goal in my planning for clients has been to best serve their interests in funding public benefit activities in innovative and tax efficient ways, and not simply to put big numbers on the board.
In the last couple of years, I have become increasingly reluctant to advise clients to donate funds to their private foundations unless they can fully use the charitable donation receipt in the year of the gift. As Canada Revenue Agency’s (CRA) audits of charitable foundations are becoming increasingly hostile and absent any significant economic benefit, it is better to avoid premature funding through the foundation vehicle. (My thinking on this issue is set out at greater length in the article Shekels that Shackle published last year in Offshore Investment.)
A donor who gives millions of dollars is no longer assumed to be on the side of the angels in any tax dispute with CRA. In my experience, CRA is as willing to use its statutory powers to impugn generosity to public charities as it is to counter private greed.
This week, I finalized my first transaction plan for a single donor to move $100 million into a Canadian non-profit organization. Less than $10 million will go to the donor’s private foundation, which has been the primary recipient of the family’s public benevolence for the past 15 years. Some charitable gifting was necessary to reduce taxes triggered when moving assets to the non-profit organization. However, the vast majority of the capital went into a tax exempt non-profit organization because the resulting long-term freedoms in managing, growing, and ultimately distributing the assets were worth more than the immediate tax benefit of a charitable donation receipt. Benefic’s planning increasingly focuses on innovation and tax efficiencies, which can be attained through benevolent structures other than registered charities.
Tags: fundraising, non-profit, planned giving, tax planning
Categories: Charity, Law, Media, Strategy