Class action filed against Canada Revenue Agency over disallowed charitable deductions

Uncharitable change in deduction stance Class action filed against CRA following change of stance on deductions involving a defunct charity. Lea Williams-Doherty investigates

Thousands of Calgarians are eligible to join a national class action alleging the Canada Revenue Agency (CRA) misled taxpayers after changing its stance on donations to a specific charity.

According to the suit, taxpayers were informed donations to Global Learning Group Inc. (GLGI) would provide significant income tax deductions. GLGI, an Ontario based company, provided computer and job training software to other charities that work with the poor and unemployed at no cost.

Canadians who donated to GLGI received healthy income tax deductions for both the value of the cash donation as well as the value of the job training software purchased.

Now, the CRA has altered its position on GLGI and the agency wants taxpayers to return billions of dollars.

Two court ruling s found GLGI to be greatly overvalued and the CRA deemed the GLGI program to be an illegal tax sham. The CRA has disallowed the GLGI deductions and is ordering 118,000 taxpayers to pay $5.7 billion in taxes, interest and penalties.

Calgarian Dean Horvath, a member of the class action suit, says he has donated roughly $40,000 to GLGI over the years after receiving advice from a family member. Horvath says he received legal and tax guidance to ensure the legality of the tax shelter before making his decision to donate to the organization.

“We’re not ones for taking risks, my wife and myself,” said Horvath.

A CRA agent confirmed to Horvath the deduction was on the level.

"When I talked to (the CRA) in 2006 why didn't they tell me 'they (the GLGI) haven't done wrong 100 per cent but we're questioning it'," asks Horvath. "I'd have dropped out."

Horvath says he has been ordered to pay approximately $100,000 to the CRA placing him in a difficult financial situation.

“Now I’m worried about liquidating more stuff,” said Horvath. “Especially now, with the oil going down and not working, we’re struggling through this.”

Merchant Law Group has filed a national class action against GLGI and related entities, its legal and accounting firms and the CRA for misleading or allowing taxpayers to believe the deductions were legitimate.

"The CRA, through its own accountants and lawyers and opinions they received, knew before they let people know that theses tax credits were not legitimate," said Josh Merchant, class action lawyer. "They failed to notify the taxpayers of that which is one of their duties."

CTV Calgary’s Consumer Watch reporter Lea Williams-Doherty contacted the CRA asking for the agency’s response to the allegations cited in the lawsuit.

In an email, a CRA spokesperson said the income tax act prevents it from addressing the cases of individual taxpayers.

Attempts to contact GLGI representatives resulted in the discovery the company is no longer in operation.

With files from CTV's Lea Williams-Doherty