Canada: Charities Audits: Dealing With The CRA

Last Updated: June 2 2014
Article by Riley R. Burr and Jonathan Wright

CHARITIES AUDITS: DEALING WITH THE CRA

Any taxpayer can be audited. With certain taxpayers or certain types of taxpayers it happens often. For large businesses or high net worth individuals it is a fact of life. Registered charities are also a type of taxpayer that is disproportionately audited, but a charity audit usually feels very different from a business audit.

For other taxpayers, the fight is usually about income or expenses. Maybe an item is income or capital. Maybe an expense is deductible or not. In most cases, a significant amount of tax is being paid and disputes are typically on the margins. With registered charities, which do not pay Part I tax, the dispute is more typically about compliance and principles, rather than counting and methodology. Instead of numbers on the margins, the stakes are often existential for the charity.

The Canada Revenue Agency (the "CRA") certainly sees charities primarily as beneficiaries of tax benefits, and not as contributors to the fisc in the same way that taxable enterprises are. This is the fundamental point to remember when dealing with the CRA on an audit. The CRA views their work in this area (i.e. enforcing the strict requirements necessary for a charity to receive favourable tax treatment) as important, and it is the Act's requirements, and not the social importance of the charity's mission, that should be focussed on in order to achieve the best success when dealing with the CRA on an audit.

In other words, the CRA is generally indifferent to the importance of the work of the charity if that work cannot be accomplished or is not being accomplished in a way that meets the requirements of the Act. They are an administrative police force aimed at ensuring that the "registered charity" (or other "qualified donee")1 stays within the boundaries set by the Income Tax Act of Canada (the "Act") and case law. And they are a busy police force. In 2012/2013 alone, the CRA's Directorate's Compliance Division completed 799 audits of charities.2

On a more practical note, the audit can be a major disruption. The process of preparing for the possibility of an audit and responding in a manner acceptable to the CRA can be a significant hassle, and will often involve extra work for the most important people in an organization, and extra spending on professional fees. Also, it is not the sort of business that a charity is usually involved in. The focus of the charity is its mission. That work (the relief of poverty, advancement of education, advancement of religion or certain other purposes beneficial to the community3) is what everyone wants to be doing. Spending time on detailed record keeping can sometimes take a backseat to the compelling work of a charity, but when the CRA begins asking questions, how well such records and documentation are kept and how careful a charity has been about scrupulous compliance with the Act requirements may mean the difference between sanction (including revocation) and being left alone by the CRA.

Room to resist the demands of the CRA is limited. Charities and other taxpayers who have asserted privacy over their documentation have been told by the courts that their expectations should be set low.4 In the end, in the event the CRA does choose to audit a charity, it is important to be responsive and helpful to the extent possible, while at the same time taking steps to ensure that the CRA follows the rules set out for it in the Act and otherwise.

This paper seeks to provide guidance on this subject by offering a general overview of documentation requirements for charities and CRA powers to audit, in addition to presenting some advice both on how to prepare for audits and how to properly respond (including comment with regard to privacy and solicitor-client privilege).

AUDIT POWERS

The Act sets out both the requirements for charities with regard to keeping records and the powers of the CRA to examine these records and to audit the charity or other taxpayer. This section focuses on the requirements for charities specific to audits.

The majority of taxpayers selected by the CRA for audit are done randomly, based on recommendations made by its audit software. The CRA also, at times, undertakes audit projects on particular groups of taxpayers if certain "results indicate that there is a significant noncompliance within [a] group" or targets particular taxpayers based on leads from other files or their connection to other problematic taxpayers.5

In general terms, the purpose of auditing a charity is to enable to CRA to:

  1. verify revenues, including all charitable donations received;
  2. verify that resources are spent on charitable programs;
  3. and verify that the charity's purposes and activities continue to be charitable.

The CRA's power to audit is found in subsection 231.1(1) of the Act. The CRA is explicitly permitted to inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer. It is also granted certain investigation rights, such as the authority to enter into the premises of the taxpayer and the ability to require the management of the taxpayer to give it "all reasonable assistance and to answer all proper questions relating to the administration or enforcement of [the Act]".

The powers to audit are clearly very broad, essentially allowing the CRA to demand anything that contains information6 relevant to whatever is or should be in the books or records of the taxpayer. The auditor is also permitted to obtain information on unnamed persons during the audit of the taxpayer without seeking judicial authorization. In the context of charities, the identification of unnamed donors is relevant in determining the legitimacy of the donations and issued receipts and thus the validity of the taxpayer's charitable status.

Information from third parties may also be sought when the taxpayer cannot or will not provide the information the CRA is authorized to demand. Thus, in addition to the working papers prepared by the taxpayer's internal accountants, the CRA is also empowered to demand the working papers of third-party accountants and auditors where it is needed in accordance with the scope of the CRA's review.

Under subsection 238(1) of the Act, a failure to comply with a demand for information or documents is an offence which can result in fines or imprisonment.

Subsection 230(2) of the Act sets out the requirements for charities, among others, to keep records and books of account, for a period of two to six years (depending on the type of document),7 containing the following:

  1. all information in such form as will enable the Minister to determine whether there are any grounds for the revocation of the charity's registration under the Act;
  2. a duplicate of each donation receipt for a donation received by it; and
  3. information in such form as will enable the Minister to verify the donations to it for which a deduction or tax credit is available under the Act.

These records may be kept in electronic format, but if so, they must be "retained in electronically readable format" for the entire required retention period referred to above.8

In cases where an audit reveals non-compliance, the CRA has a number of corrective tools for enforcement purposes including:

  1. Education letters: An education letter does not adversely affect a charity's registration. The letter identifies where the charity has not complied with the Act or CRA policy. The letter provides guidance to the charity so that it can take the required steps to become fully compliant.
  2. Compliance agreements: In more serious cases of non-compliance, the CRA may enter into a compliance agreement with the charity which outlines the noncompliance issues and the remedial actions that the charity has agreed (perhaps reluctantly) to undertake, sets out timelines for the changes, and outlines the consequences if the charity fails to abide by the agreement.
  3. Sanctions: In even more serious cases of non-compliance, sanctions may be imposed. Sanctions may include a temporary suspension of a charity's tax receipting privileges, suspension of its status as a qualified donee or financial penalties.
  4. Revocation of registration: This is the most serious enforcement tool available to the CRA: where there is a serious case of non-compliance, the CRA will revoke the charity's registered status.9

It is evident that there are potentially serious implications arising from a failure to keep proper records and books of account. As an example, not keeping the required documents may be grounds for revocation.10 However, in order to succeed on this ground, the Minister must clearly identify the information which the charity has failed to keep, and explain why this breach justifies the revocation of the charity's registration.11

In order to determine the scope of the records that must be kept, "grounds for revocation" should be examined. Other grounds for revocation include, in addition to failing to keep necessary records:

  1. carrying on certain types of businesses;
  2. failing to expend, on its charitable activities and by gifts to other qualified donees, amounts at least equal to the charity's disbursement quota (or entering into transactions designed to avoid this requirement);
  3. making a distribution by way of gift other than in the course of its charitable activities or to a donee who was a qualified donee at that time;
  4. if an "ineligible individual" is a director;
  5. failing to file an information return for the year; or
  6. improperly issuing a gift receipt.12

These are the requirements for record-keeping for charities and the scope of the CRA's powers to audit charities and access these documents for the purposes of enforcing the requirements for compliance under the Act. Next, we turn to how a charity may prepare for such an audit.

HOW TO PREPARE

All organizations, long before they are audited, should be prepared in the event that an audit or other request for information arrives. The basic idea is to keep all the documents that tell the financial and legal story of the charity, and have them organized in a manner that would allow for, at least, the production and disclosure of the documents in a logical and timely manner. Even better than simply having the documents organized and ready is having them and other historical information of the charity arranged in such a way that the charity and its professional advisors can use that raw material to craft a compelling narrative in a hurry if forced to by a serious audit action.

This means everything, starting from the constitution and bylaws that set out the charity's purposes and rules for operation set out the purpose of the charity, in addition to other legal requirements for operations within the charity. Invariably, this will be one of the first documents the CRA will wish to see upon the beginning of an audit, and will often play a substantial role in framing the audit. That is, the CRA will in many cases be auditing to determine whether a charity has valid charitable purposes and that it is operating in accordance with its purposes.

When responding to accusations that the charity is not being operated in accordance with its charitable purposes, the charity must, to effectively refute such accusations or characterization of its activities, be able to relate each one of its activities to one of its specific charitable purposes as set out in its constitution. One practice that will make it much simpler to respond to a future audit is to document, at the outset of each discrete project or activity of a registered charity, which specific charitable purposes of the charity the project or activity is meeting, with reference to the constitution of the charity. This could be done in a project mission statement document, minutes of the meeting establishing the project or internal memorandum, for example.

In addition, the charity should ensure that it drafts, and keeps, those documents which both tell and corroborate the legal and financial story of the charity's activity. Some of these will be strictly required under the obligation to keep proper books and records. Crucially, the charity must keep copies of all the gift receipts issued. These can assist in tracking where the charity's resources have come from and also stand as key evidence in proving to the CRA that there are no irregularities in the charity's receipting procedures. In addition, keeping copies of all payroll accounts and bank statements assist in tracking how the money of the charity has been dealt with. Along the same lines, it is very helpful to have financial statements that show useful information and the presentation of which is tailored to the charity's activities. And finally, the charity should be sure to draft and retain the minutes of board or members' meetings, the resolutions of the board, decisions taken outside formal meetings and all agreements entered into by the charity. These documents tell the legal story of the charity and the more regularly they are kept as a matter of principle, the more helpful they will be in proving to the CRA that a charity is complying with the requirements of the Act – and in all cases, the closer a record is created to the decision or activity it is documenting, the more persuasive it will be.

When demands for information are made, a charity might find that there are missing records or missing important pieces of information. In particular, it might discover that not every corporate action was properly undertaken (in a formal sense – that is, a decision of the board might not have been made at a duly constituted meeting, or signatures may be missing on unanimous consent resolutions, etc.). If there are significant gaps in the corporate records, it may be prudent to pass an "omnibus resolution" which acknowledges the problems in the records, confirms the charity's continuing efforts to fix them and which indicates that the decisions undertaken in the resolution reflect actual past corporate actions to the best of the knowledge and belief of the directors and members and that all such decisions are ratified accordingly.13

Organization of the required documents is also vital. The Prescient case, mentioned above, involved an appeal against revocation by a charity, Prescient Foundation, which was involved in a number of irregularities, including certain improper transactions and a donation to a US charity. In addition to these irregularities, Prescient had been slow in responding to the inquiries of the CRA and had not retained documentation with regard to the donation discussed above. The Federal Court of Appeal found that Prescient's registration could be revoked simply on the basis of the poor maintenance of its books and records:

Though Prescient was remiss in maintaining proper records of the Farm Sale Transactions, the CRA auditor was nevertheless supplied with a considerable amount of information concerning these transactions which allowed her to understand both their scope and their nature. In my view, it would not have been reasonable for the Minister to revoke Prescient's registration on that basis alone. On the other hand, Prescient's failure to maintain adequate records and books of account showing that its contribution to DATA was made to an American charity, coupled with its failure to voluntarily and promptly disclose this fact to the auditor, constitutes a very serious matter. Thus, both failures, taken together, are sufficient, in the circumstances of this case, to conclude that the Minister acted reasonably in revoking Prescient's registration on the ground that it had failed to maintain adequate books and records.14

Presumably in this case the court felt that the lack of proper documentation was indicative of an attempt to conceal facts, but nevertheless, this passage nevertheless illustrates the importance of the ability to respond promptly and in a fulsome manner to the CRA's audit requests. Had Prescient maintained proper records and supplied them willingly, we could imagine a situation in which the result may have been different – maybe the sanction applied would not involve revocation.

The importance of keeping proper records becomes clearer with the knowledge that an appeal against revocation must proceed directly to the Federal Court of Appeal15. These appeals are based on written record only, and the materials placed before the CRA prior to the appeal will form the body of "facts" placed before the court. That is, no new evidence is permitted. The evidence is only that evidence that was before the Minister when the decision to revoke was made. Further, the only way to successfully appeal the CRA's decision in this area is to demonstrate that the CRA's conclusions were unreasonable.16 Without a coherent evidentiary foundation to support the charity's arguments at the audit stage, proving that the Minister was unreasonable in revoking registered status can be an insurmountable challenge.

Finally, the ability to be transparent may be helpful, not only in preparing for an audit, but also, perhaps, in precluding one. The CRA has recently adopted an approach to compliance that evaluates the risk of the taxpayer. Specifically, it has said, at least in the business context, that "[b]usinesses can lower their risk profile by being transparent and accountable and engaging constructively."17 The CRA is allocating its resources toward auditing the riskiest taxpayers, and it stands to reason that a charity should do its best to avoid being such a taxpayer if at all possible. A good way to do that is to show clean books the first time they are looked at.

So, as with all advocacy, preparing for an audit involves developing a compelling and truthful story with regular and ample evidence (in this case mainly documentary evidence) to support that story. Nothing is more persuasive to an auditor than a charity capable of placing its legal and financial story, in the form of properly kept gift receipts, bank statements, accounts, financial statements, board resolutions and other legal documents, at the hands of the auditor upon request in a form that can be understood. It is to the actual audit process that we turn next.

THE AUDIT

The CRA engages in two primary types of audits: let's call them the field audit and the office (or "desk") audit. The size and complexity of a charity's operation will sometimes dictate the type of audit chosen. Sometimes the nature of a suspected offence or irregularity will.

A field audit is conducted on the charity's premises, while an office audit is conducted by the Charities Directorate at CRA Headquarters. While an office audit usually only involves a review of the information and documentation available in a charity's file, including its governing documents and financial statements, the field audit process is more detailed and usually includes examining the charity's ledgers, journals, bank accounts, expense accounts, investments, agreements, contracts, governing documents, annual reports, minutes or other records of board or staff meetings, and other documents that relate to the charity's activities.18

Where a field audit is being conducted, paragraph 231.1(1)(d) of the Act requires that an owner or manger of the property or business (or any other person on the premises) give the auditor all reasonable assistance and answer all proper questions of the auditor relating to the audit.

The principles with regard to preparation for an audit do not change when the audit commences. In fact, they intensify. At this point, the charity's ability to tell a compelling story through its financial and legal documentation is absolutely crucial. Transparency and organization remain the best means of ensuring a smooth audit, but by this point it is too late to create the documentary support. Rather, the task turns to organizing and managing it.

Generally, it is the right idea to get appropriate professionals (i.e. accountants and/or lawyers) involved at the earliest opportunity when audits commence or other requests for information are made that might be sensitive or lead to some audit or enforcement action, and in any event it is certainly a good practice to have the response to the audit demands made or co-ordinated by an outside professional such as a lawyer who has knowledge of the charity's workings but who can be objective enough to focus the response on the compliance matters that will mean something to the auditor and to the CRA, who speak a different language than charities do, for the most part.

The central point of this paper, and the most important thing to remember when facing the audit process, is that vis-à-vis the CRA, the most important thing, perhaps the only important thing, is compliance. Many charities do important and difficult work of great social utility. That is not so important to the CRA. The CRA will revoke or sanction charities that do great works but which do not comply with their obligations under the Act, yet will register other charities of very limited public interest or utility, provided that such charities comply with the terms of the Act of their registration.

In other words, social usefulness or moral importance is not an effective answer to a question of whether an activity of the charity falls within one of the four recognized heads of charity, or as to whether sufficient documentation about receipting is kept or as to whether agreements with foreign contractors reflect reality. Such questions are much more usefully approached by supplying a narrative with evidence, submissions that look like a combination of a statement of defence, the evidentiary record, as well as an appeal brief or factum. This document should be put together by a lawyer working with the charity staff to craft a persuasive narrative that is complete enough so that it will either persuade the auditor and CRA officials involved in the file, or that it can be convincingly argued on appeal that it is unreasonable to revoke the charity's registration given the evidence before the Minister in the form of this narrative.

There may be circumstances where the charity feels that the auditor is not being completely forthright about what the audit is about and what the stakes are. The auditor may be vague about her requests or, later in the process, refuse to give any meaningful update as to how the audit is progressing. In these circumstances, it may be best to begin with an informal request to the CRA that they provide further information with regard to the progress of the audit or specifics as to what precisely may be required.

In certain instances, something more than an informal request will be necessary. Andrew Kingissepp notes in "Taxpayer Access to Government Papers and Government Access to Taxpayer Papers",19 a dialogue with the CRA and the Department of Justice, that "the manner in which the CRA exercise its [audit] powers ... is discretionary and is determined by the CRA auditor in each case". Needless to say, this does not give the CRA or its auditors license to unfairly target a charity or to pursue it with undue aggression or malice, and the CRA's policy that "officials will always attempt to collect information from the most direct source in the least intrusive manner possible"20 is not always followed.

Where it is expected that an incident along these lines is occurring, it may be best to initiate a formal request for information under the Access to Information Act of Canada or the Privacy Act of Canada.

These statutes allow the charity or other taxpayer to access information drafted by government bodies, redacted to remove information about other taxpayers, about that charity that may provide more fulsome knowledge as to the nature of the audit and, if any exists, reveal any bad faith of the auditor or department.

Such requests to the CRA are made using the RC378 "Access to Information and Personal Information Request Form". These may be drafted broadly, such as:

We would like to request any and all documentation on file with respect to Health and Love Charity Society, including all documentation using the name "Health and Love" or "Charity Society", and including, but not limited to, all audit reports, T20s, records of conversation both internal and external to the Canada Revenue Agency, and electronic records, for the period beginning January 1, 1957 to the present date.

Or in a more limited fashion:

We would like to request any and all e-mails and internal communications of the Canada Revenue Agency on file relating to the most recent audit of the Health and Love Charity Society.

The broader the scope of the request, the more expensive it will be to have the CRA process it; however, the more limited, the more likely it is that an important document may be missed. In our experience, it is best to begin broadly. If the request turns up a large number of documents, the CRA will notify the charity and ask if it would like to narrow its search. It is at this time, if necessary, that the scope of the request should be limited.

In circumstances where the CRA is demanding documents that the charity refuses, or is unable, to provide, the CRA may initiate a proceeding under subsection 237.1(1) to compel compliance. In these circumstances, when all that can be done by the charity has been undertaken, and perhaps the records simply do not exist or cannot be found, the charity has a due diligence defence.21

Finally, if the result of the audit is incorrect in the estimation of the charity, it may file an objection under subsection 168(4) of the Act, addressing it to the Assistant Commissioner, Appeals Branch of the CRA. If this objection is not accepted, an appeal may be initiated.22 As noted above, the appeal must proceed directly to the Federal Court of Appeal, and will be based on written record only. The materials placed before the CRA prior to the appeal will form the facts placed before the court – again, a compelling reason on its own to spend the time and money necessary to put together the submissions to the auditor with the same care as one would put together a factum and evidentiary record for an appeal court in a different context.

PRIVACY AND PRIVILEGE

As noted earlier, the charity does not have a very strong claim to privacy in the midst of an audit.23 There are a few, but not many, basic privacy afforded to taxpayers at law. These preclude warrantless intrusions into a person's dwelling and access to privileged information. However, as was recently discovered by the Redeemer Foundation in a Supreme Court of Canada case cited above, there is no protection in the course of an audit afforded to documents, such as donor lists, containing the information of third parties.

In Redeemer, the CRA requested that the Redeemer Foundation provide information about the identity of its donors in the course of an audit primarily concerning a forgivable loan program which appeared to be offside the requirements of the Act in providing a private benefit to certain donors. There was no question that the CRA had the power to request such information under section 231.2 of the Act, but the question in this case was whether the CRA could require that this information be given in the course of an audit which is initiated under subsection 231.1(1) of the Act.

The conclusion in this case was that the section 231.2 information request will only be necessary in the course of an audit of a charity where the situation is such that the requested information is not required in order to verify the compliance of the taxpayer being audited. If this information would be required in order to determine compliance, nothing should prevent these documents from being handed over in an audit initiated under subsection 231.1(1):

Regardless of whether or not there is a possibility or a probability that the audit will lead to the investigation of other unnamed taxpayers, the CRA should be able to obtain information it would otherwise have the ability to see in the course of an audit.24

The result is that if, in the course of an audit, documents are requested of a charity which reveal personal information about third parties, one should consider first whether the requested documents are relevant to the audit, and if so, these should be provided to the CRA.

A minor limitation on the CRA's investigative powers is the requirement that they obtain a warrant in order to enter a person's "dwelling-house" for the purposes of an audit. In order for a warrant to be obtained successfully, there must be reasonable grounds to believe that the house is a place of business or where property, books or records of the charity is being kept, entry into the house is necessary for the enforcement of the Act and entry into the house has or will likely be refused.25

Where documents which are subject to legal privilege are requested, a charity is under no obligation to disclose them—and if the CRA insists, there are procedures in place for ensuring that privilege is upheld without any detrimental effects to the charity. Commonly, in a charities context, privileged documents will generally fall under the categories of those protected by solicitor-client privilege or by litigation privilege. Litigation privilege is straightforward and can be summed up for present purposes as communications related to ongoing or reasonably contemplated litigation the dominant purpose of which is related to that litigation.

Solicitor-client privilege is the privilege that protects certain communications between a person and his or her solicitor. In order for a record or communication to be privileged, it must be oral or written communication of a confidential nature between a client (or his or her agent) and a legal advisor (or his or her agent), including in-house counsel, and the communication must be directly related to the seeking, formulating, or giving of legal advice.26 That a person's communications with her legal advisor are to be permanently protected from disclosure except if that client chooses to waive protection is a fundamental legal right,27 and at the heart of this right is the concept that people must be able to speak candidly with their lawyers so as to enable their interests to be fully represented.28

Not every item of correspondence between a solicitor and a client is automatically subject to privilege. Records which are purely factual are not privileged because they are not "communications" as such.29 Examples of this may be legal bills or accounting records. However, the courts have also recognized that there is a "continuum of seeking or giving legal advice such that privilege [may attach] in the particular circumstances even though the document itself does not incorporate specific legal advice."30 For example, in the Supreme Court of Canada decision R. v. Fink,31 the court noted that the name of the client, an inherently factual piece of information, may be protected by solicitor-client privilege. And in Donell v. GJB Enterprises Inc.,32 trust account ledgers were found to be potentially privileged if they could be used to deduce communications protected by privilege. The crux is that the question of whether a record or communication is subject to privilege is fact-specific and will depend not only on the nature of the record or communication itself, but also on the surrounding circumstances.

Charities should be aware that this privilege can be waived if the holder of the privilege is aware of the existence of the privilege and shows that she voluntarily intends to waive that privilege.33 Additionally, in certain circumstances, waiver has been implied even where express intention is not present, but there is some limited manifestation of a voluntary intention to waive privilege.34 For example, should a director of a charity who is generally aware of the existence of solicitor-client privilege provide a legal memo to the CRA in order to demonstrate his or the charity's bona fides, this will certainly waive privilege over this document if the audit develops into a legal proceeding, and may result in the requirement to disclose related documents over which the director did not intend to waive privilege.35

In circumstances where the auditor has requested a document which a charity suspects is subject to privilege, the process to be undertaken, as prescribed by subsection 232(3.1) of the Act is to place that document in a sealed package and retain it until it is produced to a judge in order to obtain an order with regard to the status of the document. This provision refers only to potentially privileged "documents in the possession of a lawyer", but since solicitor-client privilege is a common law right, it is likely that the CRA would be compelled by a court to extend the procedural protections under this section of the Act to situations where such a document is requested of a charity.36

CONCLUSIONS

Though an audit can be a very unpleasant experience, the pain can be lessened by due preparation and documentation. Before an audit and near its commencement, the auditor's understanding of the charity's situation will not be nuanced, and she will be looking for warning signals. Reticence or apparent disorganization, whether real or for ulterior motives, will be a trigger for an auditor and has the potential to turn what might have been a routine audit into a witch hunt or wild goose chase.

Instead, the best advice for the charity that has been complying or which wants to comply with the Act is to have the legal and financial documentation in place to be able to tell a compelling and truthful story of its good intentions and careful practices in attempting to comply with the Act. Be responsive and helpful so far as it is possible, while at the same time taking steps to ensure that the CRA does not itself cross the boundaries set for it in the Act. And where the required documentation is simply not available, being as open and transparent as possible should ensure that the consequences of these deficiencies are minimal. If the unthinkable happens and the CRA's decision is to revoke the charity's registration, the appeal process is available as a final recourse, but there is so much that can be done before matters escalate to that level that will make it easier for the CRA to permit a charity to repair and correct deficiencies and non-compliance than for it to bring out the hammer of revocation.

Footnotes

1 Subsection 149.1(1) of the Income Tax Act of Canada. Though the tax-exempt status and ability to issue gift receipts for donations are available to all "qualified donees", this paper will confine itself to a consideration of "registered charities" (subsection 248(1) of the Income Tax Act of Canada).

2 Canada Revenue Agency, Charities Program Update – 2014 (Feburary 26, 2014), http://www.cra-arc.gc.ca/chrts-gvng/chrts/bt/chrtsprgrm_pdt-2014-eng.html.

3 Vancouver Society of Immigrant and Visible Minority Women v. Canada (Minister of National Revenue - M.N.R.), [1999] 1 S.C.R. 10, at 144.

4 Redeemer Foundation v. Minister of National Revenue, 2008 SCC 46, at 25.

5 Canada Revenue Agency, Information Circular 71-14R3 (June 18, 1984), at 14-16.

6 Cf. the definition of "record" in subsection 248(1) of the Act.

7 Subsection 230(4) of the Act and Regulation 5800 of the Income Tax Act Regulations.

8 Subsection 230(4.1) of the Act.

9 Canada Revenue Agency, Pamphlet T411- Auditing Charities, (March 31, 2008), at 4.

10 Paragraph 168(1)(e) of the Act.

11 Prescient Foundation v. Canada (National Revenue), 2013 FCA 120, at 47.

12 Subsections 149.1(2) and (4.1) and 168(1) of the Act.

13 Alexandra Tzannidakis, "Books and Records For Charities: Part III (What to Do about Missing Records)", http://www.drache.ca/articles/charities/books-and-records-for-charities-part-3

14 Prescient, supra at note 11, at 56.

15 Subsection 172(3) of the ITA.

16 Loba Ltd. v. Canada (Minister of National Revenue), 2004 FCA 342, at 2.

17 Carole Benoit, Susan Betts, and Andrew Kingissepp, "Taxpayer Access to Government Papers and Government Access to Taxpayer Papers", an edited transcript of a panel discussion presented at the 2012 Tax Dispute Resolution, Compliance and Administration Conference (June 6, 2012).

18 Canada Revenue Agency, supra note 9 at 3.

19 Ibid.

20 CRA, "Acquiring Information from Taxpayers, Registrants and Third Parties", http://www.cra-arc.gc.ca/tx/tchncl/cqrngnfrmn/menu-eng.html.

21 See, for example, Canada (National Revenue) v. CD²I Coopérative de Services en Développement International, 2009 FC 820.

22 Subsection 171(3) of the Act.

23 Redeemer, supra at note 4, at 25.

24 Ibid., at 22.

25 Subsection 231.1(3) of the Act.

26 British Columbia (Securities Commission) v. C.W.M., 2003 BCCA 244, at 46

27 Descoteaux v. Mierzwinski, [1982] 1 S.C.R. 860, at page 873.

28 Regina v. McClure, [2001] 1 S.C.R. 445, at page 449.

29 Wirick (Re), 2002 BCSC 1355.

30 British Columbia (Securities Commission) v. B.D.S., 2002 BCSC 664, at 17.

31 2002 SCC 61, at 28.

32 2012 BCCA 135, at 64.

33 S & K Processors Ltd. V. Campbell Avenue Herring Processors Ltd. (1983), 45 B.C.L.R. 218, at page 220.

34 Great Atl. Ins. Co v. Homes Ins. Co., [1981] 1 W.L.R. 529.

35 Though a more nuanced approach was taken in similar circumstances in the British Columbia Court of Appeal case of Power Consol. (China) Pulp Inc. v. B.C. Resources Invt. Corp., 32 B.C.L.R. (2d) 320.

36 Lisa Heddema and Grant Russell "CRA Requests For Information Under the Income Tax Act: A Review of Sections 231.1 and 231.2", 2008 BC Tax Conference.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jonathan Wright
 
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Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.