All About Estates

Tax Shelters and Charitable Intent

In early February, the Tax Court of Canada put another nail in the coffin of “one of the biggest tax scams in Canadian history.”

The case involved the Global Learning Gift Initiative, a charitable tax shelter that attracted 40,000 investors who – through a complex structure with no clear public benefit – made money by giving it away. The disqualified tax benefits from 2004/5 totaled $400 million. The Tax Court, in rejecting yet another taxpayer appeal, emphasized that charitable intent matters.

Charitable Intent

What is charitable or donative intent? And how does it manifest itself in a donation?

According to Justice Frank Pizzitelli, who ruled in a related 2015 Tax Court case, “any benefit or consideration [from the donation] will do to find there was no donative intent.” This statement builds on the classic common law formulation that “a gift must be freely given without consideration”. The taxpayer in this case “donated” $130,250 and initially received $985,056 in tax savings. There was consideration.

Proved in the Absence

But the Tax Court’s explanation of donative/charitable intent is a negative formulation.  We don’t know what charitable intent is, but we know what it isn’t! Evidence of the profit motive merely disproves claims of charitable intent.  Usually a donation produces an “impoverished” donor, even after factoring in regular tax benefits.  It’s up to the donor to prove a genuine, altruistic motivation, which didn’t work out so well in the most recent case.


Many in the charitable community viewed the donation tax shelters from the 2000s with incomprehension. How could tax shelter investors genuinely believe they were making a real donation? The charities were no-name shells.  The schemes were complex.  The goods being donated were odd, including software licences, time shares, comic books. The promised profits from tax credits were huge.

These schemes clearly weren’t regular fundraising for legitimate charities. And nobody even much pretended that anyone was really being helped as a result of the gift, except the donor

It took over a decade for the Federal Government to shutter these abusive charitable gifting arrangements. Ottawa pursued a combination strategy that included new laws, enhanced enforcement and prosecution.  One of the new laws was Section 248(30)(b) of the Income Tax Act.  It introduced language about the “intention of make a gift”. Putting the language of common law into the ITA was controversial, and it helped with the prosecution of the big tax shelters.

Estate Donations

The one moment where charitable intent is most clearly present is gifts by will. In my experience, most estate donors have a clear desire to make a major charitable gift that will produce good in the world.  Often tax benefits are a minor consideration – and in many cases are under utilized.

Yes, it is easier to be charitable after you’re dead.  Estate donations make it easier to spot, feel and experience that elusive concept: “charitable intent”.

About Malcolm Burrows
Malcolm is a philanthropic advisor with over 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own.


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