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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When News Really Is Not News: Revenue Canada “Forbids” Unitarians From Working For Justice.

I came across a headline from CBC.ca which screamed “Revenue Canada forbids Unitarians from working for justice – Tax auditors continue Harper-launched probe of religious charity under new Liberal government” and I could not hesitate to stop and see what this was all about.

The link to the original article is here, and comments are already closed for this topic, a day after it hit the public broadcaster’s website with a whopping 732 comments.

To summarize the article for those who do not want to follow the link, the CRA (not Revenue Canada) advised the Canadian Unitarian Council that it’s council bylaws are too vague.  They did not “forbid” them for doing anything but being compliant with Canadian Charity regulations.

The CRA wrote, “Vague purposes are ambiguous and can be interpreted in many different ways,” in a compliance letter, which includes other demands more than a year after the political activity audit of this charity was launched.

The Canadian Unitarian Council bylaws were accepted by Industry Canada when the Toronto-based charity submitted them for approval (applied for charitable status) in 2013, however the Canada Revenue Agency (CRA) found the wording to be contradictory to the Charitable definition set out in the Income Tax Act, and have asked the charity to remove any reference to “justice” or “social justice.”

Where I find this post to be completely irresponsible is where the author begins to compare audits of charities to being a witch hunt which started under Stephen Harper’s Conservative government and is continuing under Justin Trudeau’s Liberal government.

“Many charities targeted by CRA’s political activity audit program, begun in 2012 under the Stephen Harper government, had expected relief from the Liberals, who campaigned on a promise to set charities “free from political harassment.”

It is the responsibility of the Minister of National Revenue through the Canada Revenue Agency to ensure that each and every charity is registered correctly and that they are following guidelines set out in the Income Tax Act and that those rules, regulations and by-laws which were submitted by the charity is being followed.

While it might be a huge pain in the ass for established charities, the CRA audit process provides an opportunity for charities to ensure they are compliant with rules and regulations and are eligible to issue donation receipts.

With all the chaos the CRA has had to deal with regarding the GLGI charity scam and other ineligible donation programs, it is VERY important for each and every taxpayer that the CRA does their due diligence and confirms the charity is following the letter of the law because if they are not, the problems fall to the people who donate!

Wisely, the Minister of National Revenue said the 24 political activity audits underway would continue without interference from the Liberal government and the Notice of Revocation of Charitable Status issued to 5 other charities would not be rescinded by her government.

The Liberals did, however, cancel political activity audits on 6 other charities.

The fact that the Canadian Unitarian Council was a vocal critic of the Harper government is meaningless, as is the fact that many of the 60 charities audited in the $13.4-million political activities audit program were too.

The only thing that matters here is that Taxpayers like you and I will be able to donate to a charity, receive a donation receipt and be sure that the donation receipt is valid and will be accepted by the CRA.  Even if that means that charities which were started with all the best intentions in the world have to work a little bit harder to ensure they are fully compliant with the CRA’s Charities requirements, which can be found right here.

Personally, I’m happy to hear that of 38 completed audits so far, only one found no problems, six have been given notice the agency intends to revoke their charitable status, of which 5 will be appealing.

Considering the amount of discussion and opportunity to meet the CRA’s requirements during the audit process, it is likely that these charities which are appealing either do not meet the CRA’s charity requirements at all, or are refusing to change their bylaws and thus will have their status revoke for good.

At the end of the day, it’s not a war against charities, but it’s the CRA performing due diligence to ensure the taxpayer’s donated money is heading for a cause and not to pad the pockets of the charities Board of Directors.

CRA News Release: Reminder – Registered Charities Prohibited From Devoting ANY Resources to Partisan Political Activities

The Canada Revenue Agency (CRA) has issued a Press Release on their website; http://www.cra-arc.gc.ca/chrts-gvng/chrts/cmmnctn/pltcl-ctvts/dvsry-eng.html, reminding registered charities that they are prohibited from devoting any of their resources to partisan political activities.

The CRA has determined that a “partisan political activity is one that involves the direct or indirect support of, or opposition to, any political party at any time, whether during an election period or not, or a candidate for public office.”

For those of you quick to conclude that this is a recent change – made by the Conservative Party of Canada to protect themselves from negative press, the prohibition on partisan political activity is a long-standing requirement under the Income Tax Act (ITA).

Charities are responsible for their resources, and must devote these resources to exclusively charitable purposes.

Charities that devote any resources to partisan political activities may no longer be eligible for registration. A charity’s resources include funds, property, and personnel (volunteers, employees, and directors).

Partisan political activity may include, but is not limited to:

  • providing financial or material contributions to a political party or candidate
  • making public statements (oral or written) that endorse or denounce a candidate or political party
  • criticizing or praising the performance of a candidate or political party
  • organizing an all-candidates meeting or public forum in a way that could be seen to favour a political party or candidate
  • inviting candidates to speak at different dates or different events in a way that favours a candidate or political party
  • posting signs in support of, or opposition to, a candidate or political party
  • distributing literature or voter guides that promote or oppose a candidate or political party explicitly or by implication
  • explicitly connecting its views on an issue to any political party or candidate

These restrictions on partisan political activities do not prevent volunteers, employees, or directors of charities from:

  • helping in a political campaign, as long as they do this in their personal capacity and do not suggest they represent a charity
  • making partisan political comments in public (including on social media), as long as they make it clear they are speaking in their personal capacity and not as a representative of a charity

Charities that use the Internet or social media to post information should ensure the information does not contain partisan political statements. Also, the information should not link to statements made by a third party that support or oppose a candidate or political party.

An important note surrounds the responsibility charities have to ensure their social media also complies with these rules, and as such, when a charity invites comments on its website, blogs, or on social media, it should monitor them for partisan political statements and remove, edit, or moderate such statements within a reasonable time.

For more information on political activities, you can refer to the CRA’s website, specifically their section on Resources for charities about political activities, including Policy Statement CPS-022, Political Activities, and Partisan political activities, or call the CRA’s Client Service Section at 1-800-267-2384.

The Horse and Pony Protection Association (HAPPA) Sought Voluntary Revocation of Charitable Status From CRA

The voluntary revocation of the registered charitable status of The Horse and Pony Protection Association (HAPPA) as a result of a CBC investigation could leave Canadian Taxpayers who donated to this organization owing back monies to the Canada Revenue Agency (CRA).

Almost one year ago, the CBC Investigates reported on accountability issues at the Newfoundland charity after former members of the Board of Directors raised concerns about the operation of the group, which at the time continued to take donations from the public 18 months after closing its flagship horse sanctuary.

As a result of strict confidentiality guidelines, the Canada Revenue Agency (CRA) are unable to say who made the request to have HAPPA’s charitable status removed, however after the CBC investigation was published, the website was removed, and further investigation turned up a significant breach in reporting requirements on behalf of the charity as it would appear that they filed incorrect information with federal charity regulators, claiming that all board members are “arm’s length” from each other.

According to the CBC, the only current active members of the Horse and Pony Protection Association (HAPPA) board are what appear to be a mother and daughter and what appear to be a long-time couple.

Family members and common-law partners are considered “not at arm’s length” by the Canada Revenue Agency — something that can affect how the agency assesses a charity’s status.

Charities are required to file a form outlining those relationships and the CBC reported that on HAPPA’s website they found their filing for the year ending December 31st, 2011 in which there were 8 directors listed as being “at arm’s length” from each other.

The significance of the revocation of charitable status is that anyone who donated to the charity after that date, will not be allowed to claim the donation as a deduction from their income. If they do so anyway, the CRA will re-assess them plus penalties and interest. The Taxpayer Relief program will not granted penalty and or interest relief to those who donated to this charity, and in situations like these, as there are no categories to apply under.

Once the revoked, the charity should have transferred all of its remaining property — including cash — to an eligible donee, or be subjected to a revocation tax equal to the property’s full value.

If you have donated to this organization and are concerned that the CRA may disallow the charitable receipt, it is best to not submit it with your taxes. You have 4 years to claim charitable deductions.

Get Ready for Filing Season… starting now!

taxes
Get ready for tax filing season… NOW

Now that the calendar has turned from 2012 to 2013, it’s time to get ready for filing your 2012 taxes.  There is no better time to start getting ready than today!  Below you will find some suggestions to help you get started with all of your End-of-Year reporting and tax requirements.

Right away, it never hurts to set up a meeting with your accountant early enough so they still have time to spend with you.  Your accountant will be able to asses your fiscal situation and advise you on things such as your retirement plan, charitable contributions and other deductions that might lower your tax bill, either for 2012 – like making RRSP contributions, or things you can arrange early in 2013 to get you up and running for the year.

Before you meet with your accountant, however, there are some things you should gather and have ready for the meeting:

  • Property tax bills for the year – especially if you use any of your home for business, then you’ll need to know the approximate square footage of your home and the room(s).
  • Letters and receipts relating to charitable donations made in 2012, which must include the monetary value of your gift to the organization, the date and year of the donation and that organizations charitable number (meaning they are legitimate).
  • Relevant reports from whichever of the online bookkeeping tools you are using to capture data.  Be sure the information is accurate and up-to-date.
  • If you hand-write your checks, make sure you have all your receipts and that they are detailed enough to categorize the expense.
  • Medical deductions for the year, if you qualify.
  • Retirement Account information – are they maxed out, have you stayed within the amount available?
  • Bonuses and Gift(s) information – Keeping in mind that employers tend to show their appreciation to their employees by issuing bonuses / giving gifts towards year-end and these are considered taxable benefits.
  • Insurance – Now is also the time to review all of your insurance policies. Life insurance, health insurance, even homeowner’s insurance need to reflect your life situation accurately. Major life changes like marriage, divorce or the arrival of a new baby (or 2) require changes in coverage.  A new job that requires you to travel for business means you have to change your car insurance policy.

Your accountant should also be able to help you keep track of what you received last year in the way of slips and returns and thus advise you what to expect this year and when it should come so that you don’t have to wait until the last-minute to file.

You should also get a box or magazine box and set it up in your office for all the tax information to reside in until you need it at year-end.  There is nothing worse than forgetting to gather something or losing a record at year-end.

End-of-Year preparations don’t have to be stressful and if you need a little more help, you could always hire a bookkeeper to reconcile your chequebook / online purchases with your bank statements among many other things which can simplify your life by keeping your data organized, which ultimately saves time for your accountant (and that saves you money!).

Happy filing!