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Revocation of Charitable Status
A Notice of Intention to Revoke (“NIR”) charitable status is a serious sanction that Canada Revenue Agency (“CRA”) can levy against a charity that flaunts its legislative requirements. When imposing this extreme sanction, the Minister has to demonstrate the following two things:
- The findings of non-compliance are reasonable; and
- Given the particular acts of non-compliance, revocation is a reasonable sanction.
In the recent case Al Uloom Al Islamiyyah Ontario v. The Queen, the Federal Court of Appeal considered the reasonableness of the imposition of a NIR where a charity failed to properly maintain books and records, among other things. Citing case law, the Court looked to determine whether the acts of non-compliance were “serious” or “aggravated”, such that the Court should not interfere with the revocation and impose a lesser sanction.
In his decision, Justice Ryer made the following observation:
Registered charities have the privilege of issuing charitable donation receipts which entitle taxpayers to reduce their income tax payable under the Act on the basis of such receipts. This privilege carries with it important responsibilities.
The maintenance of proper books and records is foundational to the extent that, without them, the Minister cannot verify the accuracy of the charitable donation receipts that the charity has issued. Failing to comply with the requirements for maintaining those books and records, as the charity in the Al Uloom Al Islamiyyah Ontario case did, is a serious act of non-compliance, and a NIR was appropriate in the circumstances.
If you are operating a charity, and would like more information on your requirements to maintain your charitable status, or need assistance dealing with a sanction imposed by CRA, please contact a member of the Tax Law team.