On March 24, 2016, the Federal Court of Appeal (the “Court”) released its decision to dismiss an appeal of the proposed revocation (the “Revocation Proposal”) of the Minister of National Revenue (the “Minister”) in the matter of Opportunities for the Disabled Foundation v Minister of National Revenue.
In three audits (taxation years 1995 to 1997, 1998 and 2004), CRA raised concerns about the Opportunities for the Disabled Foundation’s (the “Appellant”) “books and records, failures to devote all of its resources to charitable activities, incomplete/inaccurate information returns and gifts made to non-qualified donees”. As a result of these concerns, in 2006, the Appellant and CRA subsequently entered into an agreement that addressed these concerns and mandated corrective actions by the Appellant (the “Compliance Agreement”). The subsequent Revocation Proposal resulted from an audit for the 2010 taxation year, which identified concerns similar to those of the previous audits and in the Compliance Agreement. CRA then sent the Appellant the Revocation Proposal, stating that their concerns had not been addressed and that it proposed to revoke the Appellant’s charitable status.
Although there were various jurisdictional issues raised by the Appellant, Justice Ryer noted that “[t]he overarching issue in this appeal is whether the Minister erred in issuing the Revocation Proposal”. Accordingly, it was incumbent upon the Appellant to demonstrate that the Minister acted unreasonably in identifying the specific grounds for issuing the Revocation Proposal. For each of the grounds, however, the Court found the Appellant did not offer enough evidence to discharge its onus and that each ground, on its own, provided a sufficient basis to dismiss the appeal. The Court therefore found that the Minister had acted reasonably in issuing the Revocation Proposal.
Of note, one of the grounds for revocation relied upon by the Minister was that the T3010 information return filed by the Appellant was inaccurate or incomplete and therefore the Appellant had failed to file an information return as required by the Income Tax Act. While the Appellant argued that any errors on its T3010 were minor, the Court found that the record demonstrated the inaccuracies were beyond minor and that simply filing an information return by the required deadline is not sufficient to comply with the requirement in the Act that the return meets the requirements of the “Act and applicable regulations”.
The decision is a reminder for charities of the importance of ensuring compliance with the Income Tax Act, and recognizing that a compliance agreement is also a binding obligation of the charity, which can lead to revocation of charitable status if not followed.