Charity registration revoked by the CRA

The Canada Revenue Agency (CRA) will revoke the registration of the Canadian Friends of Pearl Children, a charity based in Ottawa, Ontario, effective July 18, 2015. The notice of revocation has been published in the Canada Gazette.

On June 2, 2015, the CRA issued a notice of intention to revoke the registration of the Canadian Friends of Pearl Children as a charity, in accordance with subsection 168(1) of the Income Tax Act. The letter stated, in part, that:

"The audit by the Canada Revenue Agency (CRA) has revealed that the Organization operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Mission Life Financial Inc. Canadian Relief Program. The Organization agreed to accept alleged gifts of property from participants and to act as a receipting agent for this donation arrangement. For the period June 1, 2008 to December 31, 2012, the Organization improperly issued receipts totalling over $167 million for purported donations of cash and pharmaceuticals, which were not legitimate gifts. Of the over $4 million in cash contributions it received, the Organization paid $3.19 million to the promoters of the tax shelter. With the over $163 million worth of tax receipts issued for the gifts of pharmaceuticals, the CRA determined that the Organization significantly over-reported the value of the alleged property, resulting in grossly inflated tax receipts to participants. Further, the Organization failed to demonstrate that it had actually received the tax-receipted pharmaceuticals or that it had carried out any charitable activities using these pharmaceuticals."

Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Income Tax Act and is committed to ensuring that they operate in compliance with the law. When a registered charity is found not to comply with its legal obligations, the CRA may revoke its registration under the Income Tax Act.

Registered charities receive generous tax incentives under the Income Tax Act including the ability to issue official donation receipts. To maintain this privilege, charities must continue to meet all the requirements of the Act.

The CRA is committed to preserving the integrity of Canada's tax system. The CRA audits every gifting tax shelter that offers official donation receipts in excess of the value of any property donated.

An organization that has had its registration as a charity revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets. 

Quick facts

  • As of December 31, 2014, there were 86,193 registered charities across Canada.
  • Canadian registered charities issued receipts worth more than $14.5 billion in 2013.
  • In the 2013-14 fiscal year (April 1 to March 31), the CRA's Charities Directorate completed 845 audits of registered charities chosen using a variety of methods, including random selection, follow-up on possible non-compliance or complaints, and based on a review of annual information returns; during that same period, 23 charities had their registered status revoked by the CRA as a result of an audit.
  • As of March 31st, 2014, the CRA reassessed more than 190,000 taxpayer returns, denying in excess of $6.3 billion in donation claims mostly due to tax shelter gifting arrangements.
  • A copy of the notice of intention to revoke and other letters relating to the grounds for revocation are available to the public on request, in the language they were originally written, by calling 1-800-267-2384. 

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