CRA revokes the registration of The Animals’ Charity as a charity for share donation scheme

November 09, 2012 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, Ethics and Canadian Charities, Avoiding 'Charity' Scams

According to CRA “The Canada Revenue Agency’s (CRA) audit has revealed that the Organization failed to devote its resources exclusively to its own charitable activities by participating in a promoted donation arrangement in 2008. As a direct result, the Organization issued donation receipts exceeding $9 million for cash and shares purportedly traded on the Frankfurt Stock Exchange. Of the $1 million the Organization received in cash, it paid fundraising fees equivalent to 90% of the cash received to the donation arrangement promoter, Innovative Gifting Inc. It is the view of the CRA that the property for which the tax receipts were issued did not legally qualify as gifts; that the Organization failed to demonstrate that it had actually received the tax-receipted property; and that the Organization failed to report the fair market value of the property purportedly gifted. Additionally, the Organization has operated for the non-charitable purpose of promoting a donation arrangement and for the private benefit of the donation arrangement promoters.”

We have covered the Innovative gifting scheme here: http://www.globalphilanthropy.ca/index.php/blog/comments/innovative_gifting_inc._v._house_of_the_good_shepherd_et_al_-_be_careful_wh/

Here is the CRA press release: http://www.cra-arc.gc.ca/nwsrm/rlss/2012/m11/nr121109c-eng.html


The Canada Revenue Agency revokes the registration of The Animals’ Charity as a charity Ottawa, Ontario, November 9, 2012. . . The Canada Revenue Agency (CRA) will revoke the registration of The Animals’ Charity, a Hamilton-based charity. The notice of revocation will be published in the Canada Gazette with an effective date of November 10, 2012.

On October 1, 2012, and in accordance with subsection 168(1) of the Income Tax Act, the CRA issued a notice of intention to revoke the charitable registration of The Animals’ Charity. The letter stated, in part, that:

The Canada Revenue Agency’s (CRA) audit has revealed that the Organization failed to devote its resources exclusively to its own charitable activities by participating in a promoted donation arrangement in 2008. As a direct result, the Organization issued donation receipts exceeding $9 million for cash and shares purportedly traded on the Frankfurt Stock Exchange. Of the $1 million the Organization received in cash, it paid fundraising fees equivalent to 90% of the cash received to the donation arrangement promoter, Innovative Gifting Inc. It is the view of the CRA that the property for which the tax receipts were issued did not legally qualify as gifts; that the Organization failed to demonstrate that it had actually received the tax-receipted property; and that the Organization failed to report the fair market value of the property purportedly gifted. Additionally, the Organization has operated for the non-charitable purpose of promoting a donation arrangement and for the private benefit of the donation arrangement promoters.

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 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 tax shelter-related donation arrangements (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.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

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.

mark@blumbergs.ca
416.361.1982
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