Revocation is not the only way that charities can lose their registered status.
The following comes from the web site of an organization which was a registered charity called Dying With Dignity:
Dying with Dignity Canada (“DWD Canada”)has learned it will lose its registered charity status as the result of recent political-activity audits by the Canada Revenue Agency (CRA).
In a letter dated January 16, the CRA said DWD Canada’s charitable status will be annulled as soon as next month because the organization, in the federal agency’s view, had been “registered in error” in 1982 and again when DWD Canada was re-registered in 2011.
Based on our findings, it is our opinion that the Organization was, in fact, registered in error and, as a result, its registration under the [Income Tax Act] should be annulled.
The assertion that the organization was “registered in error” (twice) sets the stage for the possibility of annulment as opposed to revocation. The argument that the registration was an error by the CRA or one of its predecessors gives a face-saving “out” for the bureaucrats, but also can become a sort of life-saver for the organization. Registration is error is one of the two reasons the statute gives for allowing annulment, the other being a change in the law subsequent to registration.1
If a charity is annulled as opposed to having its registration revoked, it is not subject to the so-called revocation tax and thus can keep all its assets. In addition, the charitable tax receipts which it has issued prior to the annulment are valid.
The bottom line is that the organization keeps all its assets and can carry on as a non-profit organization…the main difficulty being that it can no longer issue receipts in return for any gifts it receives.
Founded in 1982, DWD Canada is a health and educational charity focused on promoting choice and dignity at end of life. The organization educates about the case for physician assisted dying, provides information about patient rights and advance care planning, and offers one-on-one support to individuals who are dying and want to do so on their own terms.
However, the CRA determined that DWD Canada does not conduct “any activities advancing education in the charitable sense.”
DWD Canada has a small staff (there were four staff positions during the audit period) and relies on volunteers for much of its work. In 2013, supporters donated approximately 8,000 volunteer-hours to the cause.
After fully assessing all options, the charity’s board of directors has voted not to oppose the annulment, which is expected to come into effect on or after February 15.
The organization’s mission came to particular prominence last year, with Quebec passing a bill that would legalize medically assisted dying and the Supreme Court of Canada hearing arguments on the subject. Dying with Dignity was an intervenor in the Supreme Court case, something it was able to do thanks to pro bono legal support, not its charitable collections. Still, the extra attention the issue garnered in 2014 helped the organization raise approximately $850,000 last year, up from about $400,000 the year before and just $90,000 in 2010.
There is an irony to the timing in that soon after the annulment became public, the Supreme Court unanimously held that in certain circumstances, it is acceptable for physicians to facilitate the death of a patient who made such a request under certain circumstance.
Far be it from us to suggest that the prominence of the issue might have triggered the CRA audit, particularly since the federal government has taken a fairly consistent hard line against physician assisted suicide.
But the annulment allows the organization to survive at least for some time, subject to being able to raise funds.
According to a piece in the Toronto Star, a Montréal-based charity called Alternatives that helps fund health and education in the Third World was also told their charity was mistakenly registered due to an error years ago and that their status would be stripped. Currently, the charity is working with the agency to find a way to retain their status.
This also highlights the option of discussing annulment with the CRA when the Agency is preparing to issue a revocation letter. We should say that we have found that the CRA has been cooperative on this issue in the past and in at least one case we know of, agreed to annulment even after the organization had appealed a revocation to the Federal Court of Appeal and lost. To give you a feel for the use of the power, according to the CRA web site, 246 organizations have been annulled, some of which were registered as far back as 1966 when registration first became part of the Income Tax Act. The annulment power was given to the CRA in the 2004 Budget, but it should be noted is that its use is discretionary and a charity does not have the right to annulment.
Prior to the passage of the power into law, it was usually a matter of negotiation between the tax authorities and the charity.
1 See ITA subsection 149.2(923).