Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Global Giving, Ethics and Canadian Charities, Avoiding 'Charity' Scams
The Charities Directorate of the Canada Revenue Agency has announced the revocation of Marketplace Ministries International as a registered charity for its involvement in the “Insured Giving Donation Program tax shelter gifting arrangement”.
Here is the CRA press release:
“The Canada Revenue Agency revokes the registration of Marketplace Ministries International as a charity Ottawa, Ontario, March 15, 2013… The Canada Revenue Agency (CRA) will revoke the registration of Marketplace Ministries International, a Scarborough-based charity. The notice of revocation will be published in the Canada Gazette with an effective date of March 16, 2013.
On January 31, 2013, and in accordance with subsection 168(1) of the Income Tax Act, the CRA issued a notice of intention to revoke the registration of Marketplace Ministries International as a charity. The letter stated, in part, that:
“Our audit revealed that the Organization has devoted a significant portion of its resources to the promotion of the Insured Giving Donation Program tax shelter gifting arrangement. Our audit has concluded that from January 1, 2009 to December 31, 2010, the Organization issued in excess of $23 million in receipts for cash and non-cash gifts received through this tax shelter arrangement. Of this amount, $19 million consisted of non-cash gifts that the Organization reports to have distributed as part of its own activities. However, the Organization’s records fail to substantiate that the property actually existed, that the property was in the Organization’s possession, that the values recorded on the receipts were accurate or that the property was distributed for charitable purposes.
The remaining $3.9 million was reported as tax-receipted cash donations. Of this amount, the Organization directed $3.8 million to fundraising expenses and retained only $125,370 over the two years for use in its own charitable activities. The Organization’s earnings represent 3% of the gross cash donations received or 0.5% of the gross tax-receipted donations reported.
It is our position that the Organization has operated for the non-charitable purpose of promoting a tax shelter arrangement and for the private benefit of the tax shelter promoters. The Organization has issued receipts for: transactions that do not qualify as gifts; issued receipts otherwise than in accordance with the Income Tax Act and its Regulations; failed to maintain sufficient books and records; and failed to file an accurate T3010, Registered Charity Information Return.”
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 they were originally written, by calling 1?800?267?2384.
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 Income Tax 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.
Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Income Tax 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 Income Tax Act.
The CRA is reviewing all gifting tax shelter schemes (for example, schemes that typically promise donors a tax receipt worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, go to the CRA’s Tax Alert Web page at http://www.cra.gc.ca/alert.
For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at http://www.cra.gc.ca/charities.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.