On February 10, 2016, the Federal Court of Appeal (“FCA”) delivered from the Bench a summary decision in Al Uloom Al Islamiyyah Ontario v The Queen. The FCA confirmed a decision of the Minister of National Revenue (the “Minister”), acting through the Canada Revenue Agency Charities Directorate (the “Charities Directorate”), to issue a Notice of Intent to Revoke (“NIR”) the charitable status of Jaamiah Al Uloom Al Islamiyyah Ontario (the “Charity”).
The NIR resulted from an audit by Canada Revenue Agency (“CRA”) of the Charity for its 2007 and 2008 taxation years. The NIR was issued on the basis that the Charity failed to maintain adequate books and records in accordance with the Income Tax Act (“ITA”), issued receipts for gifts otherwise than in accordance with the ITA and the Income Tax Regulations (the “Regulations”), and failed to file information returns when required. The Canada Revenue Agency Appeals Branch confirmed the decision by the Charities Directorate to issue the NIR.
In its appeal to the FCA, the Charity did not deny that it had been non-compliant with the requirements of the ITA and the Regulations. Rather, the Charity asserted that it understood why its actions were not in compliance, that they would not occur again, and that it had already hired experienced accountants to address the deficiencies. The Charity asserted that the sanction of revocation was too extreme under the circumstances and failed to address the remedial steps that the Charity had taken.
In its analysis, the FCA stated that the privilege of issuing charitable donation receipts is one that comes with important responsibilities, one of which is to maintain proper books and records. The FCA went on to say that the absence of proper books and records prevented the Minister from fulfilling her obligation to verify the accuracy and validity of the charitable donation receipts that the Charity has issued. As a result, the failure by the Charity to maintain adequate books and records was considered by the FCA to be serious and justified the Minister’s conclusion that the penalty of revocation was warranted.
This decision underscores the importance of a charity maintaining proper books and records in accordance with CRA requirements under the ITA and Regulations. This decision is also important in demonstrating that even if remedial actions are taken, charitable status may still be revoked if CRA is of the opinion that the incidents of non-compliance are either “serious” or “aggravated” under the circumstances.