Canada Branch Finances - What's Going On?

by berrygerry 40 Replies latest watchtower beliefs

StarTrekAngel

Wasn't there a UK version of the "debt forgiveness letter" floating around?
sir82

The WTS was forced to make this change by the CRA. They were likely censured for giving out loans as a profit making venture and, if they hadn't forgiven the loans, they could have lost their tax exempt status.
This fits perfectly - a missing piece of the puzzle just appeared.
was the forgiveness of KH loans only a North American phenomena, or was this policy put in effect globally? Did the WTS forgive the loans in countries that didn't require it for tax exempt purposes?
Pretty sure it is the worldwide policy now.
But that raises the question - why would a change to Canadian tax law force a worldwide change to revenue structure? Less than 2% of the JW population resides in Canada. Couldn't they just quietly fix things there?
A similar change to US tax law might prompt such a response though, since the largest portion of WTS assets would (I assume) be located in the US.
Any tax attorneys or accountants out there? Did the IRS enact similar laws for non-profits recently?
OrphanCrow

sir82: But that raises the question - why would a change to Canadian tax law force a worldwide change to revenue structure? Less than 2% of the JW population resides in Canada. Couldn't they just quietly fix things there?
Which leads me to believe that tax laws (in developed countries) for charitable and non-profits are being scrutinized in countries other than just Canada. We are smart up here :p but lots of countries have smart people in them who don't like religions being used as profit making machines.
The UK, for one, has been pretty intense in their investigations into charities, as well as Australia.
No wonder the WTS has focused so much on developing countries - the tax laws are likely different than in developed countries.
sir82
Found this on a site explaining proposed US legislation. Does the part bolded & highlighted have anything to do with the KH construction loans the WTS was financing? Maybe the WTS was anticipating a change in the US law, and with the significant change in Canada already in the bag, just decided to go ahead and make the change universally?
Need input from someone way smarter than me.
On February 26, 2014, Ways and Means Committee Chairman Dave Camp (R-MI) released draft legislation for the Tax Reform Act of 2014. Over the past three years, Congress has held more than 30 hearings in the process of developing this proposal. Also, Chairman Camp and Ranking Member Sander Levin (D-MI) formed 11 separate bipartisan Tax Reform Working Groups to focus on specific issues that included tax-exempt organizations and charitable giving.

While the Draft’s many provisions will be debated throughout the year ahead, and it’s doubtful that it will even be voted on in 2014, it’s crucial that tax-exempt organizations and charities stay on top of the process and understand the possible ramifications of the bill’s many provisions.

Some of the most significant highlights of the Draft Legislation include:

Repealing the tax exemption for professional sports leagues
Imposing a two-percent Adjusted Gross Income (AGI) floor on deductible charitable contributions
Imposing a 25% excise tax on compensation paid over $1,000,000 by exempt organizations to their five highest-paid employees
Expanding the reach of Intermediate Sanctions
Tightening the rules on the unrelated trade or business income tax (UBIT)
New and increased penalties related to return preparation
Eliminating future tax-exempt private activity bonds.
OrphanCrow

Sir82, the links in your post go to "page not found".
But I did find an article that gives more information on the highlights of the Tax Reform Proposal:
12 Things Nonprofits Should Know About Proposed Tax Reform

Unrelated Business Income Tax – Currently under the law, tax-exempt organizations may calculate unrelated business income tax (UBIT) based on the gross income of all business activities, minus the deductions connected with carrying on those activities. Losses generated by one activity can be used to offset the gains from another. However, under the Camp legislation, organizations will have to calculate UBIT separately for each business activity. This means that the loss from one unrelated business activity will no longer be used to offset the income from another unrelated trade or business activity. Furthermore, any sale or licensing by a tax-exempt organization of its name or logo (including any related trademark or copyright) will be treated as an unrelated trade or business.
From reading the rest of the article, there are some pretty big changes being proposed to tax law for nonprofits. Here is one:

Payout Requirement for Donor Advised Funds – Donor advised funds will be required to distribute all contributions within 5 years of receipt or otherwise face a 20% excise tax on the amount not distributed.
This one may impact the WTS as well:
Two-percent Floor for Charitable Giving – A two-percent floor will be imposed for charitable donations to qualify for a deduction. This means that taxpayers may only deduct the amount of their charitable giving that exceeds two percent of their AGI. A 2011 study by the Congressional Budget Office determined that this type of two-percent floor would likely cut charitable giving by approximately $3 billion
Would this not impact every JW who contributes? It sounds like they will lose the full amount of their donations as a tax exemption.
OrphanCrow

I think that 2% floor could impact the WTS in a big way. Let's say that someone's AGI is 100,000. that means that the first 2 grand that they donate to the WTS comes completely out of their pocket - no tax deduction.
Maybe the WTS has forgiven KH loans for another reason as well.
Tax status as a charity requires donations.
I think the push for donations from the JWs is critical for the WTS at this point. I don't think they need the money so much - they need to show donations on the books to keep their tax free status. The WTS couldn't claim the KH loans as donations.
Without donations, a nonprofit can lose their tax free status.
tim3l0rd

Even if the change was due to a tax law change in Canada, the WTS MO is to always make changes appear as if they are doing for a good reason. They want to always cast themselves in a favorable light and not admit that they are dodging taxes or making changes because they are forced to. They did the same thing with removing the charge for the literature. It was presented as if this was a streamlined arrangement to the congregation, but in reality it was to dodge taxes on the sold literature. Even the change in blood fractions was likely due to pressure from the outside and not some 'revelation' or 'new understanding'.
The same applies with this change. If they had only made the change in Canada, then it would have been readily apparent that the change was to dodge taxes. By making the change globally, they can spin this as a blessing from Jehovah and a way to equalize.
OrphanCrow

Yes, Tim, the doctrinal and structural changes are always about the money.
Even the change in blood fractions was likely due to pressure from the outside and not some 'revelation' or 'new understanding'.
I totally agree. The changes in the blood doctrine are absolutely connected to money - the blood transfusion ban makes lots of money for the WTS. They won't drop it - they have created a perpetual money machine from that one.
The WTS has far too much invested in the bloodless industry to let the blood transfusion ban go. What would happen to all those JWs who work in the field of bloodless medicine if they dropped that ban? What would the WTS do without all those valuable donations that 'bloodless' JW doctors, nurses, administrators, etc, give to them?
I could go on about the WTS connections to bloodless medicine and their investments in that field...but...this thread is about tax. And the WTS' financial maneuvers to keep ahead of the tax man.
It is rather ironic that the WTS' recent push for donations makes it appear that they are in desperate need of cash. They are and they aren't. They need the cash - but it is so they can protect all that money and property they have. Without donations, all of their assets are in jeopardy - they could lose their tax free status. And then the Tower would fall.
Their appeal for donations is an appeal for a defense of their holdings. Their mistake has been to be too profitable and the taxman has an eye on all their wealth. The taxman is coming after them big time. Like Al Capone, evading tax will be their downfall. When you worship money, you worship a god that will bite you on the ass.
umbertoecho

Very very interesting material. I recall about two years ago or a little less, that all kingdom hall loans were "forgiven" in Australia.
But the forgiven loans were a ruse. It was made very clear that the same amount of money as the so called forgiven loan, was to be donated. (This on top of the weekly donations always made by the congregant's)
All members were given forms to take home and fill in. They were asked to budget a portion of their income to include a regular donation that would be counted up at the end of their fiscal month.
This left some very bemused people who were in Halls that were paid off decades ago. These properties had gained in value in a huge way. And some were sold off. Quite a few but I don't know the number. That money went somewhere, but no one really knows where. (your' suspicions are as good as mine)
Congregations were merged to allow up to three meetings in some instances.
WTBTS Australian send a good portion to America, and from there it is allocated to ...who knows where.
Ironically, it has backfired in some ways for this reason. Having made this promise of a certain pledge per family. It became evident that this pledge was not always going to be met. In many cases people had things to fix in their own homes, or kids clothes to buy for school....or perhaps the family car broke down. It is basic human nature in normal families to take care of the kids, have some small luxury.........normal things. If that meant not being able to stick to their "anonymous" promise, then they didn't or couldn't.
Money via donations has dried up to some degree in Australian...I am told that we are the least religious place in the world......or close to it. Hedonistic bastards that we are.
This year the WTBTS cannot afford to hire the large facilities that have always been a feature of JW life in yearly assemblies. No more large conventions, unless you are personally invited to some other country and provided you have no disabilities....
This is my view from Australia. I think it ties in with all the other observations made regarding NGO and the attempts to evade future taxes, fines, scrutiny........who knows?
umbertoecho

So Brooklyn (Warwick) is not only taking all the US congregations money but also the foreign branches as well..
Exactly

Canada Branch Finances - What's Going On?

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