Citation: 2013 TCC 37
Date: 20130131
Docket: 2012-1642(IT)I
BETWEEN:
WAYNE SKLODOWSKI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2012-1609(IT)I
BETWEEN:
JOHN ASHBERT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
C. Miller J.
[1]
Mr. Sklodowski and Mr.
Ashbert both appeal by way of Informal Procedure the Minister of National
Revenue’s (the "Minister") denial of charitable donation tax credits.
[2]
Mr. Sklodowski claims
to have made cash donations of $9,250 throughout 2007 to The Christ Healing
Church, a registered charity in 2007. Mr. Ashbert claims that he made cash
donations of $6,000 throughout 2005 to The Redemption Power International
Ministry, a registered charity, the credits being claimed in 2006, and
donations of $8,000 throughout 2007 to The Christ Healing Church.
[3]
I will review Mr.
Sklodowski’s evidence first. He testified that he started going to The Christ
Healing Church as a result of his daughter going there with her boyfriend. He
found the atmosphere supportive and helpful, given he was experiencing marital
difficulties at the time and was at times suicidal. He divorced his wife in
2008 and left Canada, he believed for good, but given the economic climate in
Europe he eventually returned to Canada, though is currently struggling as he
is unemployed and homeless.
[4]
Mr. Sklodowski
described The Christ Healing Church as being in an industrial area at 1177 Finch Avenue in Toronto. He indicated that in 2007 he would go to the church sometimes
three times a week and sometimes not for a couple of weeks. He suggested he did
not attend services but simply went to talk. It was a place to help people, as
he put it, Christian but different. He did not donate cash every time he went
but if he did not donate one time he would feel obliged to give more the next
time. He testified that the largest cash donation he made was approximately
$1,700. He would give the cash to the priest, and if the priest was not
available then to his wife or to someone in the office named Andrew. He had no
records confirming when and in what amount the cash donations were made.
[5]
As Mr. Sklodowski had
gone bankrupt 12 years earlier, he indicated that he did not have his own bank
account in 2007, and he therefore deposited his earnings in his wife’s account.
He could access this account to withdraw funds when required, including for the
purpose of making donations to the church.
[6]
Mr. Sklodowski
testified that he made other charitable donations such as Salvation Army and
the Autistic Children’s Fund, but the Canada Revenue Agency (the
"CRA") showed no claim for charitable donation credits for the years
2002 to 2011, other than the $9,250 in dispute and $12,750 allowed in 2006.
Mr. Sklodowski had earnings of approximately $48,000 in 2007 and his wife
had approximately $58,000 of earnings. She also claimed a charitable donation
of $8,500 to The Christ Healing Church.
[7]
The receipt that Mr.
Sklodowski relies upon from The Christ Healing Church (receipt number 171)
shows the church’s address at 134 Norfinch Drive, #202, Toronto, while the
address on record with the CRA is the 1177 Finch Avenue address. The receipt
also indicates a date of February 2008 without specifying a day, nor does it
indicate the place or locality where the receipt was issued.
[8]
With respect to Mr.
Ashbert, he claimed he also made cash donations to The Christ Healing Church in
2007, but as well made $6,000 in cash donations to The Redemption Power
International Ministry in 2005, which he claimed in 2006.
[9]
Mr. Ashbert confirmed
that The Christ Healing Church was indeed at 1177 Finch Avenue, an industrial
area with a printer operation next door. He was first invited by a friend,
Oscar, and continues to attend every other Friday or Sunday. Prior starting to
go to The Christ Healing Church he attended The Redemption Power International
Ministry, which he described as also being in the Finch area, though nothing
more specific. He started going there on the invitation of the Pastor, as he
was working at the premises on a job in 2004.
[10]
Mr. Ashbert described
his donations, which he said he made on most church visits, were not for any
particular purpose: in effect everyone donated, "so I did too". He
claimed the money came from his earnings or out of something he referred to as
su su, his community’s collective gathering of funds, ultimately to be shared.
This was a vaguely defined concept. He said he would give $250 or more at a
time, either by going to an usher or the Pastor. He had no records of these
cash donations, other that the two receipts he is relying upon.
[11]
The Redemption Power
International Ministry receipt shows no address for Mr. Ashbert, shows no
location of the donation nor CRA’s website address. It does show a breakdown of
the $6,000 donation amongst:
Tithes $4,016
Offering $ 500
Building fund $ 500
Thanksgiving $ 250
Pledge $ 250
Donation $ 484
[12]
Mr. Ashbert was unable
to explain the significance of this breakdown. He certainly did not earmark
anything, but simply "just gave money".
[13]
Mr. Ashbert also did
not have any history of charitable donations other than the two years in issue.
In those years he earned income of approximately $42,000 and $46,000
respectively.
[14]
Mr. Huenemoeder, a
charities auditor with the CRA, testified regarding the audit of The Christ
Healing Church, of which he had firsthand knowledge. He testified that the
books and records of The Christ Healing Church were inadequate. The
registration was revoked in 2008. Little cash went through the church’s books,
minimal deposits were accounted for (approximately $70,000 to $90,000);
receipts reported by the church indicated approximately $60,000, though the
auditors found individual receipts totalling well over $200,000. A CRA
worksheet identified those receipts, one of which was to Mr. Ashbert, though
also showed receipts numbered 81 to 160 signed in blank by Pastor Ankrah.
Receipts 160 to 200 were missing (recall Mr. Sklodowski’s was numbered 171).
There was no concrete evidence of cash receipts from either Mr. Sklodowski or
Mr. Ashbert.
[15]
The audit of The
Redemption Power International Ministry was for the 2001 and 2002 years though
the registration was not revoked until 2007.
Issue
[16]
Are Mr. Sklodowski and
Mr. Ashbert entitled to tax credits based on charitable cash donations of
$6,000 and $8,000 by Mr. Ashbert in 2006 and 2007 to The Redemption Power
International Ministry and The Christ Healing Church respectively and of $9,250
by Mr. Sklodowski in 2007 to The Christ Healing Church?
[17]
The Respondent argues
that they are not entitled to such credits for two reasons:
a) first, the receipts
provided by Mr. Sklodowski and Mr. Ashbert to support the credits do not
contain the requisite prescribed information;
b) second, Mr. Sklodowski
and Mr. Ashbert have not proven they made the cash donations.
Analysis
[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;
…
[19]
Income Tax
Regulation 3501(1) (the
"Regulation") sets out the requirements for the charitable
donation receipt 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;
(b) the
registration number assigned by the Minister to the organization;
(c) the
serial number of the receipt;
(d) the
place or locality where the receipt was issued;
(e) where
the donation is a cash donation, the day on which or the year during which the
donation was received;
(e.1) where
the donation is a gift of property other than cash
(i) the
day on which the donation was received,
(ii) a
brief description of the property, and
(iii) the name and address of the
appraiser of the property if an appraisal is done;
(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;
(h) the
amount that is
(i) the
amount of a cash donation, or
(ii) where
the donation is a gift of property other than cash, the amount that is the fair
market value of the property at the time that the gift was made;
(i) the
signature, as provided in subsection (2) or (3), of a responsible individual
who has been authorized by the organization to acknowledge donations; and
(j) the
name and Internet website of the Canada Revenue Agency.
[20]
Read together these
provisions require there be:
a) a gift;
b) a receipt proving it is a
charitable gift.
The Crown maintains the Appellants have not provided
sufficient evidence of either.
i) Validity of receipt
[21]
In the recent case of Afovia
v. Her Majesty the Queen,
Justice Paris dealt with both these issues. He had this to say about the
receipt requirements:
9. The question that must be
decided by this Court is whether it is mandatory that a charitable donation
receipt contain all of the information listed in subsection 3501(1) of the
Regulations, including a serial number and the name and Internet website of the
Canada Revenue Agency. On the basis of the clear wording of that provision, I
find that all of the information listed there is mandatory. The material
portion of the section states that “every official receipt issued by a
registered organization . . . shall show clearly in such a manner that it
cannot be readily altered . . .” the information listed in
paragraphs (a) to (j).
…
14. The fact
that the appellants were unaware of what information was required on a
charitable receipt cannot relieve them of the obligation to support their claim
for the charitable donation tax credits with official receipts that contain the
prescribed information. This Court is bound by subsection 118.1(2) of the
Act.
[22]
Do Mr. Ashbert’s and
Mr. Sklodowski’s receipts conform to the mandatory Regulation 3501
requirements? First, looking at Mr. Ashbert’s receipt from The Redemption Power
International Ministry, it clearly does not provide all the prescribed
information. It is missing:
- the place where the receipt was
issued;
- Mr. Ashbert’s address;
-
the name and internet
website of the CRA.
Next looking at the Mr. Ashbert’s and Mr. Sklodowski’s
receipts from The Christ Healing Church, these receipts are missing:
-
the correct address of
the church as recorded with the Ministry;
-
the place where the receipt
was issued;
-
the date including the
day, not just the month and year in which the receipt was issued.
[23]
These cases can be
dismissed on this basis alone: the Appellants have simply not provided the
necessary receipts with the prescribed information. I do, however, also want to
address the second element of the argument.
ii) Were the cash donations made?
[24]
It is clear that I have
not heard the full picture of what was really going on with these charitable
organizations and the purported donations. While there could be a number of
possibilities there are three primary alternatives: first, Mr. Sklodowski
and Mr. Ashbert did make the cash donations which for reasons of mismanagement
or misappropriation were not properly accounted for by the church’s filing of
the required information return T3010. Second, Mr. Sklodowski and Mr.
Ashbert never made the cash donations claimed. Third, there is a middle ground
that Mr. Sklodowski and Mr. Ashbert did make some cash donations but not
nearly as much as the amount indicated on the receipts. Frankly, this is what
makes the most sense to me given Mr. Sklodowski’s and Mr. Ashbert’s
somewhat vague testimony as to the amounts donated. Their evidence regarding
their attendance at the church was credible. I was not left with the impression
that this whole thing was a sham, that they simply bought into some scheme of
fictitious donations for fictitious receipts. However, the lack of any detailed
accounting of cash donations actually made, the large amount of the donations
in comparison to their income, their lack of donation history and the vagueness
of their testimony generally all suggest to me that the amount of the
charitable receipts is simply not accurate. Unfortunately for
Mr. Sklodowski and Mr. Ashbert they not only were unable to verify the
amounts claimed, they also provided nothing upon which I could possibly
find there was a legitimate lower amount, not that that could have helped. The
only evidence of the amounts donated were the receipts themselves, receipts
emanating from organizations where audits concluded books and records were
inadequate. The Pastor was not called, no bank records were presented and there
was simply nothing to verify the amounts. I can only conclude that
Mr. Sklodowski and Mr. Ashbert did not make the cash donations in the
amounts receipted. Perhaps they did make some cash donations to The Redemption
Power International Ministry and The Christ Healing Church, but they have
fallen far short of proving on balance the amounts of $6,000, $8,000 and $9,250.
[25]
Something is rotten in
the state of Denmark, but I have insufficient evidence to pinpoint exactly
what. I do, however, have enough evidence to find both that the receipts are
deficient and also that Mr. Sklodowski and Mr. Ashbert did not make the cash
donations claimed. The Appeals are therefore dismissed.
Signed at Ottawa, Canada, this 31st day of January 2013.
"Campbell J. Miller"
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