July 9, 2016: The Canada Revenue Agency Revokes the Registration of the ACTLAP Children’s Foundation (A.C.F.)

The Canada Revenue Agency (CRA) has posted on their website that they 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 on charities:

• 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.

Related Products

Canada Revenue Charities Listings: http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html
Charities Media Kit: http://www.cra-arc.gc.ca/chrts-gvng/md-kt/menu-eng.html

Stay connected

To receive updates when new information is added to the CRA website, you can:
• Follow the CRA on Twitter – @CanRevAgency.
• Subscribe to a CRA electronic mailing list.
• Add the CRA’s RSS feeds to your feed reader.
• You can also watch the CRA’s tax-related videos on YouTube.

In a nutshell, this charity received $1,724,814 in cash contributions.
It paid $1,289,385 of that money to the promoters of the tax shelter who were bringing in the people to donate.
This charity issued donation receipts totalling $62,315,818 million dollars.
It failed to keep adequate books and records.
It failed to devote 100% of its efforts to charitable work.

As a result, any of the taxpayers who have filed their tax returns claiming any of the donation deductions from this charity should hope that the CRA offers them a deal to accept the money donated on a dollar for dollar basis, or they should use the Voluntary Disclosure Program to amend their returns! (Just not the current year return).

Note: Please use common sense when making a donation! If you make a $100 donation and receive a donation receipt for anything more than that amount understand that the CRA will deny it… eventually.

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Author: Warren Orlans

Welcome to inTAXicating. My name is Warren Orlans and this is my blog. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, inTAXicating is the place you need to contact. inTAXicating works in strategic partnership with amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! info@intaxicating.ca

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