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."
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.