Canada: The Canada Revenue Agency Revokes The Registration Of The ACTLAP Children's Foundation (A.C.F.)

Last Updated: July 18 2016
Article by Victoria Prince

Most Read Contributor in Canada, September 2016

On July 8, 2016 the Canada Revenue Agency (CRA) issued the news release set out below. The CRA is revoking the registration of a charity for several reasons:

  • Issuing receipts for transactions that did not qualify as gifts
  • Issuing receipts otherwise than in accordance with the legislation
  • Failing to maintain proper books and records
  • Not devoting all of the organization's resources to charitable activities

The CRA "will revoke the registration of ACTLAP Children's Foundation (A.C.F.), a charity based in North York, Ontario, effective July 9, 2016. The notice of revocation has been published in the Canada Gazette.

On May 3, 2016 the CRA issued a notice of intention to revoke the registration of the ACTLAP Children's Foundation (A.C.F.) as a charity, in accordance with subsection 168(1) of the Income Tax Act (The Act). The letter stated, in part, that:

"The audit by the Canada Revenue Agency (CRA) has revealed that the Organization operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Pharma Gifts International Inc. program. The Organization agreed to accept alleged gifts of property from participants and to act as a receipting agent for this donation arrangement. For the period of June 16, 2012 to June 15, 2014, the Organization improperly issued receipts totalling over $64 million for purported donations of cash and pharmaceuticals, which were not legitimate gifts. Of the $1,724,814 in cash contributions it received, the Organization paid $1,289,385 to the promoters of the tax shelter. Of the $62,315,818 million [sic] worth of tax receipts issued for the gifts of pharmaceuticals, the CRA determined that the Organization significantly over-reported the value of the alleged property, resulting in grossly inflated tax receipts to participants.

The audit has shown that the Organization has failed to comply with several requirements set out in the Act. In particular, the Organization issued donation receipts for transactions that did not qualify as gifts, issued receipts otherwise than in accordance with the Act and its Regulations, did not devote all its resources to charitable activities and failed to maintain proper books and records. For all of these reasons, and for each reason alone, it is the position of the CRA that the Organization no longer meets the requirements necessary for charitable registration and should be revoked in the manner described in subsection 168(1) of the Act."

Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Act and is committed to ensuring that they operate in compliance with the law. When a registered charity is found not to comply with its legal obligations, the CRA may revoke its registration under the Act.

Registered charities receive generous tax incentives under the Act including the ability to issue official donation receipts. To maintain this privilege, charities must continue to meet all the requirements of the Act.

The CRA is committed to preserving the integrity of Canada's tax system. The CRA audits every gifting tax shelter that offers official donation receipts in excess of the value of any property donated. The CRA has also repeatedly warned Canadians of the consequences of participating in abusive tax shelters that it holds to be non-compliant with the Act. There is a substantial amount of information on the CRA's website and the CRA has published information, including warnings about tax shelters and donating wisely, in a variety of newspapers, magazines and various other media sources. For more information, go to Tax shelters and Donor Beware, a special report from the Office of the Taxpayers' Ombudsman.

An organization that has had its registration as a charity revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.

For more information about the registration of Canadian charities or to find out more about a registered charity, go to the CRA's Charities and Giving webpage.

Quick facts

  • As of March 31, 2016, there were 86,191 registered charities across Canada.
  • Canada's approximately 86,000 registered charities issued receipts worth more than $15.7 billion in 2014.
  • In the 2015-16 fiscal year (April 1 to March 31), the CRA's Charities Directorate completed 726 audits of registered charities chosen using a variety of methods, including random selection, follow-up on possible non-compliance or complaints, and based on a review of annual information returns; during that same period, 20 charities had their registered status revoked by the CRA as a result of an audit.
  • As of March 31st, 2015, the CRA reassessed more than 195,000 taxpayer returns, denying in excess of $6.6 billion in donation claims mostly due to tax shelter gifting arrangements.
  • A copy of the Notice of Intention to Revoke and other letters relating to the grounds for revocation are available to the public on request, in the language in which they were originally written, by going to Request for registered charity information."

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