Christian Economic Assistance Foundation’s charitable status revoked

Numerous families face significant tax bills

By Craig Macartney and ChristianWeek Senior Correspondent | January 15, 2014

ANCASTER, ON—Since 1984, the Canadian Economic Assistance Foundation (CEAF) has helped parents offset the costs of sending their children to Ontario Christian schools. However, in early 2013, CEAF was notified by the Canadian Revenue Agency (CRA) that their School Support Program was under review. CEAF’s charitable status was revoked in July.

More than 50 schools participated in the program, which allowed parents to pay a portion of their child’s tuition to the school and donate the rest to CEAF in order to receive a tax receipt. The schools, in turn, would apply for grants from CEAF to cover the remainder of the student’s tuition.

In addition to reviewing the program, the CRA has issued thousands of reassessments to parents involved. Donations to the School Support Program from 2010 through 2013 have been deemed ineligible for tax receipts. Initially the CRA also intended to reassess donations made in 2009, however, the three-year time frame ran out.

“Generally, a revocation will not invalidate gifts made to an organization prior to its revocation, provided that they are valid gifts under the Income Tax Act,” says CRA spokesperson Mylène Croteau. “However, when the CRA determines that a transaction is not a true gift, the deduction claimed is disallowed. In general, the CRA may go back three years to reassess an individual’s tax filings.”

Typically, religious schools may issue tax receipts for the portion of a child’s tuition dedicated to religious instruction.

Croteau explains: “payments for tuition, even to a school which is a registered charity, are not a gift and therefore would not normally be eligible for a tax credit. However, a portion of tuition payments to religious schools may be considered a charitable donation, for which donors may receive an income tax receipt.”

The implications for parents involved are significant. Many families now owe several thousand dollars in back-taxes and interest. Charityfocus.ca lists CEAF charitable donations from 2009 through 2011 at almost $10 million annually.

“The retroactive approach of the CRA to declare donations invalid certainly hit a chord of discontent among the affected donors,” says Julius de Jager, executive director of the Ontario Alliance of Christian Schools (OACS). “We have heard the whole range of emotions, but many decided to pay the new tax bill and move on.”

De Jager says schools will need to be sympathetic as families struggle with increased tuition costs, while facing significant back-taxes. Surprisingly, he says school enrolments have not been affected.

“The overall OACS enrolment went up by more than two per cent this September, after being in a slight decline for many years. Even the schools involved in the CEAF program under question had a net increase enrolment of one per cent.”

De Jager says affected donors and schools generally appreciate the support OACS has offered through the process, however, some parents have filed a class action lawsuit with the Ontario Superior Court, naming both OACS and CEAF as defendants.

According to the lawsuit approximately 5,000 individuals participated in the program since 2009. Claimants are asking for $5 million in general damages and an additional $1 million in punitive damages.

The lawsuit claims the defendants failed to inform participants about three separate audits by the CRA or that the “CRA cautioned CEAF that it was considering disallowing the claimed charitable donations.” The claims have yet to be proven in court.

CEAF did not return calls from ChristianWeek, however, a notice on their website explains their “programs were audited by the Canada Revenue Agency in 1992, 1996 and 2006. No concerns were raised, and so the programs were continued on the premise that they were in compliance with CRA policies.... CEAF regrets the financial challenges now faced by a number of families.”

Some parents have gone a different route, appealing the CRA reassessment. John Pellowe, CEO of the Canadian Council of Christian Charities, says they are closely watching the outcome of the case.

“CRA policy needs to be strictly complied with. Religious schools that issue charitable receipts and donors that make contributions to them should take this opportunity to carefully review CRA policy. If there is any doubt as to their compliance, professional advice is recommended.”

Chartered accountant Henry Friesen says there are many programs, both secular and Christian, to help donors decrease their taxes. He believes these programs often end up in grey areas, based on vague areas of tax law where there isn’t legal consensus.

“The courts say we have the right to minimize our taxes. But many of these plans, which supposedly work in theory, don’t execute well. When everybody is 99 per cent sure the money donated will benefit your child, does it matter if there is a board making so-called official decision?

“It’s more an ethical question of how far we go towards the slippery slope. Where do you draw the line? For me, the big picture question is ‘am I pushing this to the edge and might I fall off?’ Christians in Canada need to look at their taxes as a privilege and pray for the governments that spend them.”