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CRA Taking Heat Over its Charity and NPO Audit Activity - by Pam Prior 

Canadian Tax Adviser

 

April 10, 2012

 

Pam Prior
Vancouver, Enterprise Tax

 

The Canadian Chamber of Commerce has urged the CRA to stop issuing "education letters" to certain non-profit organizations (NPO) suggesting that they may not be in compliance with the Act. The Canadian Chamber of Commerce advises that these letters may have a negative effect on NPOs and could, for example, lead to the resignation of volunteer board members over potential liability concerns.

Background
The CRA is renewing its audit focus on golf courses and other entities organized as NPOs. The CRA has recently sent letters to certain golf courses stating that it does not consider them to be NPOs. At the 2011 Canadian Tax Foundation conference, the CRA stated that it selected 1,500 taxpayers in the NPO sector that it would audit over three years.

 

Canadian Chamber of Commerce letter
In the letter, the Canadian Chamber of Commerce says that although the CRA "appears to be unaware of the impact of such letters" it may cause many volunteer board directors to resign their positions over liability concerns. The Canadian Chamber of Commerce also notes that the education letters suggest that all activities of a not-for-profit should be non-profitable, which "flies in the face of the current practices of virtually all our association members."

 

As a result, the Canadian Chamber of Commerce urges the CRA to withdraw all education letters that have been issued so far, and to refrain from issuing further letters. The Canadian Chamber of Commerce believes that "it is inappropriate for the [CRA] to make these kinds of suggestions in advance of any Parliamentary debate about modernizing the legislation".

 

For more information, contact your KPMG adviser.

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