by: C. Yvonne Chenier
Every once in a while the Charities Directorate of the Canada Revenue Agency sends out a news release with details about a Charity that has had its charitable status revoked. It is interesting to compare the revocations the CRA widely publicizes in this way and the ones they do not. A quick search of the CRA website does reveal that this year alone almost fifteen hundred Canadian charities have had their charitable status revoked by the CRA Charities Directorate. Of those, approximately half have been revoked for failure to file their annual information return or for cause and the other half have been revoked voluntarily.
One situation where charitable status was revoked for failure to file the annual return was that of Charity Intelligence. It is interesting because this organization, according to its information on its website, purports to help potential donors by analyzing charities across a number of matrixes that includes management strength. When the purported watchdog of charities gets their charitable status revoked for failing to file their return, one sees how easy this could happen. All charities should beware that they need to file that annual return. It is one of the most important documents that a charity needs to devote itself to on an annual basis. Survival as a charitable entity depends on it.
There are other important things that we can learn from past revocations. In this year alone, many of the charities that have had their status revoked for cause have had it revoked simply because they have ceased to exist as an entity at law. This may mean that they have simply failed to file annual returns with the Provincial or Federal body that they are incorporated under and they have been struck off the relevant registry. If you don’t have any existence at law then you cannot continue to be registered as a charity under the Income Tax Act of Canada.
One entity that the Canada Revenue Agency’s Directorate did put a news release out about was The Canadian Quadriplegic Association. This association failed to keep adequate books and records and had not kept any records of the receipts that they had issued. The CRA found taxpayers submitting receipts that totaled over $400,000 and figured out that there was a discrepancy. One questions how an organization could miss $400,000 in revenue receipts on their books and records.
However, stranger things are happening out there this year in charities who are getting their status revoked. It is hoped that no charities who read this newsletter are guilty of any of the following that have resulted in revocations in the year 2012:
· Not keeping adequate enough books and records so CRA can confirm that any amounts were devoted to charitable activities,
· Providing a personal benefit to a director or member of the organization,
· Failing to meet the disbursement quota,
· Failing to devote all of its resources to charitable purposes and activities,
· Not keeping duplicate copies of donation receipts,
· Participating in a dubious tax shelter or promoted donation arrangement,
· Issuing improper receipts,
· Allocating the majority of resources to finance and administrative expenses
· Filing an inaccurate T3010 annual information return,
· Not maintaining adequate direction and control over resources purportedly used in foreign programs.
· Acting as a conduit for non-qualified donees.
· Issuing receipts on behalf of non-qualified donees; and
· Contributing funds to organizations that were named on such lists as the United Nations Security Council’s Al-Qaida and Taliban and Sanctions Committee or the United Nations Suppression of Terrorism Regulations.
One lesson to be learned is if you don’t know what organizations are on any “no donate lists” you should make yourself aware, just in case. Furthermore, check your information return to make sure it’s accurate and if you are doing any of the above in the bullet points be very afraid.