Sanctions and Special Taxes

Under certain circumstances, we may

• apply sanctions to organizations that fail to meet their obligations; or
• require that a special tax be paid.

In certain cases, we can impose an intermediary sanction, that is, suspend an organization's right to issue official receipts and, in other cases, we can revoke an organization's registration or recognition.

The organization can file a notice of objection to contest the suspension of its right to issue official receipts or the revocation of its registration or recognition. For more information, contact us.

Suspension of receipting privileges

An organization’s right to issue official receipts may be temporarily suspended if the organization

• has not complied with requirements with regard to keeping and retaining registers; or
• can be reasonably considered to have accepteda gift on behalf of another organization whose receipting privileges have been suspended.

We notify the organization of our decision to temporarily suspend its receipting privileges by registered mail.

This sanction applies for one year as of the eighth day following the sending of the notice. The organization must then inform all potential donors that, further to the decision, gifts made during that period will not give entitlement to any tax benefit (deduction or credit).

Revocation of registration or recognition

The circumstances under which we may revoke an organization’s registration or recognition include the following:

• The organization requests the revocation.
• The organization fails to file form TP-985.22-V, Information Return for Registered Charities and Other Donees, or files the return after the filing due date provided for in the Taxation Act (that is, six months after the end of each fiscal period).
• In a given fiscal period, the organization does not incur expenditures for programs related to its objectives that are at least equal to the disbursement quota for the fiscal period.
• Where the organization received during a given fiscal period a gift of property from another organization with which it is not dealing at arm's length and did not spend, before the end of the subsequent fiscal period, an amount equal to the FMV of the property for activities related to its objectives or for gifts to qualified donees with which the organization is dealing at arm's length. However, if the organization is a registered charity, this requirement does not apply for a designated gift.
• The organization has made gifts that are not in keeping with its activities, or it has made gifts to a donee that is not a qualified donee.
• One of the main purposes for which the organization has made a transaction (including a gift to another organization) is to avoid or unduly delay expenditures on its activities.
• It is reasonable to conclude that the organization has accepted a gift from another organization in a concerted action to unduly delay expenditures for the latter's activities.
• An official receipt issued by the organization contains false information or does not comply with the provisions of the Taxation Act or the Regulation respecting the Taxation Act.
• The organization does not keep registers and supporting documents, or does not keep them in an adequate manner.

Charity

A charity may also have its registration revoked if it

• carries on a business (however, a charitable organization or a public foundation may carry on a business related to its objectives, or a business in which all or substantially all of the employees are not remunerated by the organization or foundation);
• did not spend, in a given fiscal period, for activities related to its objectives, an amount equal to the fair market value (FMV) of the gift that another organization not dealing at arm’s length with the organization made during the previous fiscal period. This requirement only applies to a registered charity that receives such a gift, unless the gift is reported by the other charity as a designated gift; or
• has made a false statement in its application for registration, in circumstances amounting to culpable conduct.

“False statement” means a statement that is misleading because of an omission from the statement.

“Culpable conduct” means an act or a failure to act which, as applicable:

• is tantamount to intentional conduct;
• shows an indifference as to whether the Taxation Act is complied with;
• shows a wilful, reckless or wanton disregard of the Taxation Act.

Special tax for a disbursement shortfall

As a rule, museums, cultural or communications organizations and political education organizations must pay a special tax if they have not spent an amount equal to the disbursement quota for the fiscal period.

This special tax is equal to the additional amount that organizations should have spent in order to fulfil the obligation. The tax must be paid within six months after the end of the fiscal period.