Saturday, January 5, 2008

Tax Court of Canada Upholds Suspension of Tax-Receipt Privileges of One of Canada's Largest Charities

In a recent article published in Canada's National Newspaper, The Globe and Mail, it was reported that the Tax Court of Canada upheld a one-year suspension of the issuance of tax-receipts to donors of charitable gifts to one of Canada's largest charities, The International Charity Association Network ("ICAN").  This charity is relatively young, and grew its donations in its first years of operations from $500,000 to more than $400 million.  The Canada Revenue Agency ("CRA"), which issued the suspension, alleges that ICAN is nothing more than a tax-shelter that provides inflated tax receipts to donors and lacks adequate valuation records to support the receipts.  Further, the CRA alleges that ICAN cannot support its claims of ongoing charitable activities in support of various charitable agencies across Canada.  See excerpt below,

ICAN's operations, however, have caught the attention of the Canada Revenue Agency, which suspended the organization's tax-receipt privileges for one year in November. The CRA alleged in a court filing that the Toronto-based organization did not have proper records to back up its activities and the agency signalled that tax officials are auditing more than 34,000 Canadians who participated in a related ICAN donation program.

"The CRA proposes to deny the entire amount of the donation," Holly Brant, an auditor in the CRA's Charities Directorate said in an affidavit filed in court.

. . .

But in his ruling released this week, Mr. Justice Gerald Rip of the Tax Court sided with CRA and raised concerns about some of ICAN's activities. "Ms. Brant's descriptions of amounts of income  "Ms. Brant's descriptions of amounts of income collected by ICAN and disbursements to [related company] Global Group and receipts given for [one type of gift] are disturbing," the judge said. Judge Rip also said he was not impressed by the affidavits filed by Mr. Penney and Ms. French.

For Full Article, see Charity Hits Another Roadblock.

(AMT)

http://lawprofessors.typepad.com/nonprofit/2008/01/tax-court-of-ca.html

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