ORAL
REASONS FOR JUDGMENT
(Delivered orally by conference call on June
18, 2014, in Ottawa, Ontario.)
Bocock J.
[1]
The two Appellants, Pauline and Howard McCalla
are spouses of each other. Their evidence, testimony and submissions were
heard together. In turn, the Respondent’s evidence and submissions were heard
together with this appeal as well together with the appeal of Nana Ampomah
(matter no. 2013-1050(IT)I). The Court will render a separate judgment and
reasons for judgment in the Ampomah matter in keeping with its indication at
the conclusion of the hearing; neither the McCallas nor Ms. Ampomah gave
evidence in respect of the others’ appeals and so such Appellants’ evidence
should not be commingled. However, the Respondent’s evidence and legal
submissions is common to all appeals.
I. Specific
Facts of this Appeal:
[2]
The McCallas appeal the disallowance of
charitable tax credits in the following amounts: which amounts are provided
together with other salient reported information and calculations from reported
income:
|
Tax Payer
|
Tax year
|
Net Income
|
Claimed Charitable Donations to Jesus
Healing Centre
|
Percentage Donations to Income
|
Other Expenses of Living
|
|
Pauline McCalla
|
2007
|
$37,301
|
$3,950
|
11%
|
Mortgage and Two
Children
|
|
Pauline McCalla
|
2008
|
$40,667
|
$4,100
|
8%
|
Mortgage and Two
Children
|
|
Howard McCalla
|
2007
|
$47,724
|
$2,150
|
5%
|
Mortgage and Two
Children
|
[3]
Both attended the Jesus Healing Center, a church and at the time, a registered charitable organization, approximately twice a
month in 2007. Mr. McCalla’s attendance waned in 2008, which he claims reflects
a reduced 2008 donation level and the absence of any receipt.
[4]
Mr. McCalla, who appeared as agent for his wife
and was the sole witness for both Appellants, testified that all donations were
made in cash, utilizing Jesus Healing Center provided envelopes, in varying
amounts. Jesus Healing Center would then allocate the donations to various
uses: Offertory, Mission, Building Fund, Evangelism and Thanksgiving.
[5]
A post CRA reassessment summary of donations was
provided by the Jesus Healing Center disclosing such allocations and confirming
the donations were made. The allocation of such donations among the categories
would have required awkward combined amounts of banknotes and coins: amounts
such as $108, $68 and $61.
[6]
The testimony concerning the location and
facilities was vague and somewhat inaccurate when compared to that of the CRA
Team Leader for Charities Audit. This was apparent to such an extent that there
was disputed evidence as to whether the room of worship was on the main floor or
second floor of the suburban wholesale commercial mall.
[7]
As to the source of the donations, Mr. McCalla
indicated he would give “whatever cash I had on me”. No bank statements,
withdrawal slips, donation envelopes or other evidence of the cash donations were
produced, save and except for the charitable receipts.
[8]
The Receipts themselves in 2008 and 2007
contained deficiencies in that:
a) each spelled the charities’ name incorrectly: “Center” as
apposed to Centre (its official name registered with the Minister);
b) the date of issuance for the receipt was missing;
c) the locality or place of issuance for the receipt was missing;
d) no middle initial was used, Mr. McCalla testified that he had one;
and
e) in 2007 only, there was no statement that the receipt was “an
official receipt for Income Tax Act purposes”.
[9]
The evidence of one Mr. Huenemoeder, CRA Team
Leader-Charities Audit, indicated that the Jesus Healing Center had failed to
keep any meaningful books and records, issued $3 million in donation receipts
in just over 2 years, but only deposited some $18,000 into its bank accounts
during the same period. The Pastors of the Jesus Healing Center admitted that
no sum ever approaching the 3 million dollars was received and that charitable
donation receipts were fabricated. Although some donations were received, the
amounts were a small fraction (less than 7%) of the amounts receipted. No
donation envelopes, receipt records or other evidence of any donations were
ever produced or revealed during the CRA Audit. None of the 400 purported
donors could provide collaborative or supporting proof of the donations.
II. Appellant’s
Submissions:
[10]
On behalf of he and his spouse, Mr. McCalla made
several arguments;
a) While it was clear that the Jesus Healing Center was a discredited
and disregistered organization run by a dishonest man, this should not be the
responsibility of the McCallas who obtained official donation receipts;
b) The Canada Revenue Agency Team Leader’s visited the Jesus Healing
Center some months after the relevant time and it is likely the configuration
of the worship area had changed; and
c) The technical deficiencies of the receipts are not the
responsibility of the Appellants and they should not bear the brunt of such
deficiencies.
III. The
Law Generally:
a) Regarding the Charitable Tax Receipts
[11]
The Court will deal first with the receipts in
response to Mr. McCalla’s assertion that the negligence, dishonesty and poor
record keeping of the Jesus Healing Center in the issuance receipts should not
affect the Appellants.
[12]
Statutorily the Income Tax Act (“Act”)
provide as follows:
[18] Section 118.1(2)(a) of the Income
Tax Act (the “Act”) reads:
118.1(2) A gift shall not be included in
the total charitable gifts, total Crown gifts, total cultural gifts or total
ecological gifts of an individual unless the making of the gift is proven by
filing with the Minister
(a) a receipt for the gift that contains
prescribed information;
[…]
[13]
In turn, in subsection 3501(1) of the Income
Tax Regulation (the “Regulation”) sets out the requirements for the
charitable donation receipt the applicable sections relevant to these appeals
are as follows:
3501(1) Every official receipt issued by
a registered organization shall contain a statement that it is an official
receipt for income tax purposes and shall show clearly in such a manner
that it cannot readily be altered,
(a) the name and address in Canada of the organization as recorded with the Minister;
[…]
(d) the place or locality where the
receipt was issued;
(e) […]
(f) the day on which the receipt was
issued where that day differs from the day referred to in paragraph (e) or
(e.1);
(g) the name and address of the donor
including, in the case of an individual, his first name and initial;
[…]
[14]
The Appellants, Mr. and Mrs. McCalla, must
understand there are numerous decisions of this Court which have held
unequivocally that deficiencies relating to those items detailed above render
the donation receipt invalid for the purposes of subsection 118.1(2) and under
the prescribed information required under the Regulation which
information must appear in the donation receipt. A recent decision of this
Court, Sowah v Canada, 2013 TCC 297, reflects this where C. Miller, J.
states:
[16] […]
Case law is clear that these
requirements are mandatory and are to be strictly adhered to (see for example
the cases for Afovia v. The Queen, Sklowdowski v The Queen, Plante v Canada).
[17] […] First, the receipt does not
contain the statement that it is an official receipt for income tax purposes.
In the case of Ehiozomwangie v R,[4] Justice Campbell made it clear that the
requirement that the receipt indicate that it is an official receipt for income
tax purposes is one of the mandatory requirements. I agree. There can be no
clearer reassurance to a taxpayer on the face of a receipt than an indication
that it is an official receipt for tax purposes. Failure to meet this simple
qualification casts real suspicion on the credibility of the receipt. It is a
mandatory condition that has not been met in this case.
[18] Second, another simple requirement
is the date on which the receipt was issued. On Ms. Sowah’s receipt no date is
given, only the year (January to December 2006). Again, this is a mandatory
condition that simply has not been met.
[19] Third, the receipt must show the
locality or place where the receipt was issued. This is a separate requirement
from the address of the organization as recorded with the Minister. Here, while
we might presume the address of the organization is the same place as where the
receipt was issued, this should not be left to presumption. Maybe there are
several Jesus Healing Centers throughout Toronto. It should be clear on the
receipt from which place the receipt is issued. It is not. Again, a requirement
has not been met.
[15]
To be clear, it is not a matter of fault,
responsibility, good faith or bad faith. It is a mandatory requirement of the Act
and the Regulation. There are other mandatory requirements, some people
feel too many perhaps, but this is certainly one which, in this case, has not
been met. For this clear and obvious breach of this mandatory requirement,
these appeals must be dismissed.
[16]
Although unnecessary, I will briefly turn to the
onus of the Appellants to provide evidence on the balance of probabilities
(that is more likely than not) that he or she donated the money. Quite apart
from the physical layout of the premises, which is frankly not a particularly
important point since both parties may well be somewhat correct given the time
sequence differences, the following evidence remains uncontroverted before the
Court;
a) Not one of the 400 members of the Jesus Healing Center who purported to give these large donations to the Jesus Healing Center has ever
produced a cheque, an ATM withdrawal slip, donation log or donation envelope
relevant to the donations to the CRA;
b) The amounts of the donations are very large, although oddly
symmetrical as to amounts given each week and yet oddly asymmetrical as to a
logical and convenient amount someone would likely give by cash each week,
especially where such amounts always consisted of the cash “I had on me”;
c) The Pastor, or former Pastor, admitted to CRA auditors the donation
receipts were, at best, widely exaggerated and, at worst, bogus; and
d) These Appellants specifically offered no evidence of having more likely
than not given the money: no ATM slips, no bank statements and no donation
envelopes (not even an example).
[17]
It is perhaps stated best by Sheridan, J. in Patel
v Canada, 2011 TCC 555 at paragraph 16, in turn citing Tardif, J. of this
Court as noted below.
The Appellant pointed out to me that
there was nothing illegal about making a donation in cash. This is quite true:
paragraph 3501(1)(e) of the Regulations specifically contemplates that
possibility. However, when a taxpayer chooses to deal only in cash, whether for
charitable donations or any other matters likely to come under the scrutiny of
the Minister of National Revenue, she imposes on herself the burden of having
some means of verifying the otherwise untraceable transactions. The present
case provides a perfect illustration of why the Act strictly regulates the
conditions of eligibility for charitable donation deductions. As Tardif J.
explained in Plante v. The Queen, [1999] T.C.J. No. 51:
[46] The requirements in question
are not frivolous or unimportant; on the contrary, the information required is
fundamental, and absolutely necessary for checking both that the indicated
value is accurate and that the gift was actually made.
[47] The purpose of such
requirements is to prevent abuses of any kind. They are the minimum
requirements for defining the kind of gift that can qualify the taxpayer making
it for a tax deduction.
[18]
Aside from the countervailing evidence offered
by the Respondent’s witness, which remains uncontroverted, by not providing any
objective evidence to confront the Minister’s assumption that the cash
donations were not made, the Appellants have not discharged on the balance of
probabilities the onus they have before this Court. It is possible that some
nominal cash may have been given, but on the basis of the evidence, not even
remotely close to the claimed amount otherwise reflected in the deficient
donation receipts.
[19]
For these reasons, the appeals are dismissed.
Signed at Ottawa, Ontario, this 19th day of June 2014.
“R.S. Bocock”
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