Updated Charities Audit Statistics for 2015-2016
On May 12, 2016, CRA updated its webpage titled The audit process for charities (the “webpage”). The webpage generally describes the reasons that CRA undertakes audits for charities on a yearly basis and notes that it audits roughly 1% of the registered charities in Canada each year.
CRA’s compliance approach is described as an “education-first” approach, and the outcomes that a charity can receive as a result of an audit include education letters, compliance agreements, sanctions, and revocation of registration. In addition, the webpage lists the types of recourse available to charities during and after the audit.
The updated webpage reflects the following audit outcomes in 2015-2016:
| No Change | 40 |
| Education | 444 |
| Compliance Agreement | 111 |
| Voluntary Revocation | 22 |
| Penalty/suspensions | 4 |
| Notice of intent to Revoke issued | 21 |
| Annulment | 59 |
| Other (includes other audit activities such as pre-registration and Part V audits) | 25 |
| Total | 726 |
Tax Preparers Sentenced to 51 Months of Jail Time
On May 11, 2016, CRA announced the conviction of Fareed and Saheem Raza (the “Razas”). As reported in our February 2016 Charity and NFP Law Update, the Razas were convicted under paragraph 380(1)(a) of the Criminal Code for defrauding the federal and provincial governments of amounts exceeding $5,000 between December 31, 2002, and June 24, 2011. The Razas were sentenced on May 10, 2016, to 51 months in jail for defrauding the government when they forged charitable receipts for a registered charity. Another individual, Faiz Kahn, was also convicted with the Razas, but received an absolute discharge.
Q&A Webpage for Assisting People and Charities Affected by the Alberta Wildfires
On May, 16, 2016, CRA published a Q&A style webpage titled Assisting people and charities impacted by the wildfires in Alberta. On the one hand, topics covered for charities affected by the wildfires include: what to do if charities were not able to file their T3010, Registered Charity Information Return (“T3010”) in time; what to do if their records were destroyed in the fires; what to do if they did not receive their T3010; what to do about meeting filing requirements for incorporating authorities. On the other hand, for charities that wish to assist those affected by the wildfires, CRA addresses topics such as raising funds to assist those affected by the wildfires; whether carrying out that activity comports with their charitable purposes; and what to do in the event their purposes do not comport with these efforts. For donors wishing to get involved to help out, CRA covers a range of questions dealing with how to discover which charities may issue official receipts; whether it is better to donate money or supplies; where an individual can find out more information about registered charities; and when donations can be claimed.
New Guidance on Becoming a Qualified Donee
On April 23, 2016, CRA released new guidance CG-025, Qualified Donee: Low-cost housing corporations for the aged. The new guidance replaces an Income Tax Rulings Directorate letter which was dated March 18, 2013.
According to the guidance, a low-cost housing corporation for the aged (“LCHCA”) that seeks qualified donee status must be resident in Canada and meet the criteria of paragraph 149(1)(i) of the ITA. Paragraph 149(1)(i) states that an LCHCA is “a corporation that was constituted exclusively for the purpose of providing low-cost housing accommodation for the aged, no part of the income of which was payable to, or was otherwise available for the personal benefit of, any proprietor, member or shareholder thereof.” CRA interprets this to mean an organization that is constituted exclusively for the purpose of providing low-cost housing accommodation for the aged and operated only for that purpose. CRA has also interpreted “aged” to mean 55 years of age and over.
The guidance also explains that such accommodation “includes comfortable but modest rental accommodation, at rents that are low relative to rents generally available for similar accommodations in the same community (other than subsidized or non-profit accommodations).” An LCHCA may also provide housing related services such as “meals, laundry services, home furnishings, medical/nursing care, house-keeping services, resident aides’ services, and general assistance with matters of daily living.” As well, an LCHCA must not distribute income, either directly or indirectly, to, or for the personal benefit of, any member or shareholder. It also should not have the power to declare and pay dividends out of income.
The guidance also sets out how a corporation can seek QD status, as well as the documentation that the Charities Directorate will expect of an LCHCA when applying.