[2013] 3 F.C.R. D-13
Income Tax
Charities—Revocation of registration—Appeal from Minister of National Revenue’s confirmation of proposal under Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 168(1) to revoke appellant’s registration as charity—Minister relying on four independent grounds to sustain revocation of appellant’s registration: (a) appellant participated in tax planning arrangement for private benefit of others; (b) appellant transferred $574 000 for share purchase constituting in fact non-charitable gift to non-qualified donee arising from tax planning arrangement; (c) appellant made gift to non-qualified donee in form of $500 000 transfer to non-profit organization in U.S.; (d) appellant failed to maintain adequate books, records—Appellant incorporated as corporation without share capital under Canada Corporations Act, R.S.C. 1970, c. C-32, applying for registration as charity—Designated thereafter as charitable public foundation—Initially involved in transactions relating to sale of farm (farm sale transactions) involving other charities, third parties—Minister of view that appellant’s purchase of shares resulting in $574 000 non-charitable gift to non-qualified donee—Appellant later transferring $500 000 as donation to non-profit organization resident in U.S., exempt from taxation—Both transactions representing large part of appellant’s activities for financial years at issue—After Canada Revenue Agency (CRA) performing audit, CRA notifying appellant of intention to revoke appellant’s registration pursuant to Act, s. 168(1)—Appellant challenging all four grounds for revocation—Whether Minister erring in concluding that $500 000 gift to American organization constituting gift to non-qualified done; in concluding that consideration paid for purchase of shares involving farm sale constituting gift to non-qualified donee, that participation therein part of tax planning arrangement for private benefit of others; in concluding that appellant’s books, records not adequate; in informing public through CRA’s website that appellant’s registration revoked “for cause”—As for appellant’s contribution to American charity, Act, s. 149.1(1) providing that “charitable purposes” including disbursement of funds to qualified donee—Amendments to add proposed ss. 149.1(2)(c), 149.1(3)(b.1), 149.1(4)(b.1) to Act adopted; would allow Minister to revoke registration, in particular, of charitable organization, which after specified date, making gift to foreign non-qualified donee—However, legislative amendments not in force when appellant making gift to American charity; still not in force presently—CRA’s holding that registered charities cannot make gifts to foreign charities not qualified donees not grounded in enforceable legislative enactment—In present case, Minister revoking appellant’s registration invoking ground not reflected in enforceable legislation; applying ground of revocation provided for in provision (s. 149.1(3)(b.1) not yet in force when revocation decision made—Ground for revocation therefore unfounded—As to Minister’s conclusion that farm sale transactions amounting to participating in tax planning arrangement for private benefit of others, not entered into for charitable purposes reasonable in circumstances—Appellant breaking important rule that charitable foundations must be operated exclusively for charitable purposes in accordance with Act, s. 149.1(1)—Appellant’s participation ignoring fundamental purpose of special advantages provided to charities under Act, namely that special advantages extended to charities to assist them in pursuing charitable purposes—Given egregious nature of farm sale transactions, appellant’s participation therein, Minister’s revocation reasonable—As to ground of inadequate books, records, Minister’s conclusion that appellant failing to maintain proper records reasonable—Appellant not maintaining records, documentation of board of directors meeting relating to farm sale transactions, of gift to American charity; appellant also not disclosing gift to CRA auditor in timely fashion—Appellant, remiss in maintaining proper records of farm sale transactions, nevertheless supplying CRA auditor with considerable information thereon—However, appellant’s failure to maintain adequate records, books showing contribution to American charity, coupled with failure to voluntarily, promptly disclose fact to auditor constituting very serious matter—Thus, both failures, together, sufficient in circumstances to conclude that Minister acting reasonably in revoking appellant’s registration—As for revocation “for cause” issue, registration of charitable public foundation, such as appellant, may be revoked under Act, inter alia, for one or more enumerated grounds in Act, ss. 149.1(3), 168(1)(b) to (e)—Also, under Act, s. 241(3.2)(e), revocation of charity’s registration allowing CRA to disclose information relating to grounds of revocation in specific circumstances—Appeal dismissed.
Prescient Foundation v. Canada (National Revenue) (A-310-12, 2013 FCA 120, Mainville J.A., judgment dated May 1, 2013, 24 pp.)