In January 2017, the CRA released its Report on the Charities Program 2015–2016, which provides interesting insights into Canada’s charitable sector. A common thread weaving through issues related to obtaining and maintaining charitable status is the need to create, maintain, and report/file information required by the Charities Directorate and the Income Tax Act.
Whether it is assisting Syrian refugees to settle in Canada or helping those fleeing from floods and fires, the goodwill of the people and charities in Canada always make headlines. In times of disaster, it seems many charities want to raise money and get on the bandwagon to help those in need. Although this may be a laudable goal for charities that want to show their benevolence, sometimes it could simply get them into trouble.
In most cases the application of law is conceptually simple the law is transgressed and a punishment applies. Unfortunately, in the charity world nothing is simple. When a charity is found to have transgressed the law the Charities Directorate may decide on a range of options. One widely used mechanism is the Compliance Agreement (a “CA”) in which the Directorate identifies the offence and the charity promises not to do it anymore. If (and when) the Directorate audits again it almost always moves directly to revocation if the charity is again (or still) offending in the same way.
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.
When a charity becomes aware that it has been non-compliant with either the Income Tax Act or the common law, it can cause great anxiety within the organization. According to the CRA, however, most non-compliance issues are “unintentional, accidental, and often of low material consequence,” and they encourage charities to disclose any non-compliance issue to the Charities Directorate. Non-compliance issues that charities might experience include:
On January 29, 2014, the Canada Revenue Agency announced that due to a software error, they will be sending out a second annual information return package to charities subject to the Ontario Corporations Act .
On May 1st, 2013 the Federal Court of Appeal issued its judgment in the Prescient Foundation. The case itself was notable not simply because of the decisions rendered by the Court on the questions in issue, but also (and perhaps primarily) because of the standard of the review analysis conducted by the Court. Those us who have appeared before the Federal Court of Appeal know that the standard of review can in fact decide the case and so of all the issues decided by the Court this might perhaps have the greatest long term impact on future litigation in the charities area.
The story of Achilles comes to mind in thinking of the approach most charities take toward formatting their receipts. The recent Afovia v. The Queen, 2012 TCC 391 case being the most recent instance