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CRA puts federally-incorporated charities on notice

By Joel Secter

In September, we received a number of inquires from charities that received alarming letters from the Canada Revenue Agency’s Charities Directorate with regard to keeping their registered charity status under the Income Tax Act. Apparently, in anticipation of the October 17th deadline for federal corporations to continue under the Canada Not-for-profit Corporations Act (NFP Act), the Charities Directorate put all registered charities that are incorporated federally on notice that they must continue or risk being dissolved and revoked. At a time when many are scrambling to comply with the new legislation, this mistake has caused considerable confusion and unnecessary work, not to mention expense to the Canadian taxpayer.

The letter with subject heading ‘[k]eeping your status as a registered charity’ begins,

[y]our charity is currently incorporated under Part II of the Canada Corporations Act (CCA)”

and continues,

[i]f a registered charity established under the CCA does not apply for the certificate of continuance… its registration could be revoked by the Canada Revenue Agency (CRA)”.

While this is an accurate prognosis, the Charities Directorate unaccountably sent these notices to charities that had already completed the transition process with Corporations Canada and supplied the required information to the Charities Directorate. We have also been informed that, in some cases, notices were sent to charities that were never established under the CCA in the first place.

By way of example, one of our clients was issued a certificate of continuance well over a year ago. As required, it provided copies of the relevant documents to the Charities Directorate, which, in due course, acknowledged the charity’s change of governing documents by letter on January 23, 2014. Notwithstanding, the Charities Directorate still sent one of these notices dated September 12, 2014 to the charity.

Admittedly, the notice does provide helpful information to charities that are unware that, for some corporations, the transition process does not end when a certificate of continuance is issued.

After a charity’s transition to the NFP Act is complete, it must send its new governing documents, certificate of continuance, and certified bylaws to the Charities Directorate. As mentioned, once the Charities Directorate has received the relevant documents, it will send a confirmation letter to the charity. This letter should be kept as part of the charity’s permanent records since it serves as the Charities Directorate’s official notification of a change to the organization’s governing document.

It also bears mentioning that federally-incorporated registered charities operating in Ontario are subject to the oversight of the Office of the Public Guardian and Trustee (OPGT). As such, registered charities in Ontario should also provide the OPGT with copies of their certificate of continuance and articles of continuance.

While we can appreciate that mistakes happen, the Charities Directorate has had over three years to provide assistance to registered charities making the transition to the NFP Act. If the public can easily determine the governing legislation of a federal corporation by searching Corporations Canada’s website,[1] we think that the CRA should be able to as well.


 
[1] https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html?locale=en_CA

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Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLPis one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more
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