Federal Court of Appeal confirms that charitable status can be revoked for overspending on fundraising

Via Neal Armstrong I note that the Federal Court of Appeal has decided in Opportunities for the Disabled Foundation v. Canada (National Revenue) that the Minister was entitled to deregister a charity (thereby revoking its charitable status for tax purposes) because it had overspent its resources on fundraising.

The Foundation spent 70% of its revenue, according to CRA’s analysis, on fundraising activities and only 1% on charitable activities. This was during the 2010 taxation year. The Court of Appeal rejected the Foundation’s argument that amounts spent to employ disabled people in its fundraising arm were charitable, and on the basis that the charity had failed to spend all of its revenue on charitable activities (1% being a very long way from “all”) the Minister’s decision to deregister the charity was upheld.

The charity might have led evidence or made legal arguments to support its point that the fundraising was a related business to the charity; this might well have assisted them. They failed to do so, which Ryer J.A. highlighted in the Court’s decision.

The decision certainly confirms the need for charities to get good legal advice regarding their operations, and to retain quality representation for matters as important as a Court of Appeal case.

Written by Craig Burley

Craig is a tax lawyer in private practice in Hamilton, Ontario. Call Craig at (905) 870-0196 to discuss issues that you think may need independent tax advice. In addition to tax, Craig writes and works publicly on a number of other issues related to law, justice, and public affairs.

Website: http://craigburley.com