Ottawa, Ontario, February 9, 2009 . . . The Canada Revenue Agency (CRA) has annulled the charitable registration of the Phoenix Community Works Foundation, a Toronto-area charity.
The notice stated, in part, that:
The audit conducted by the Canada Revenue Agency (the "CRA"), identified that Phoenix Community Works Foundation (the "Charity") was not established for exclusively charitable purposes and has undertaken a varied and non-cohesive series of non-charitable activities in pursuit of those purposes. As such, it is the CRA’s view that the Charity’s registration was granted in error as it did not at the time, and has not since the time of its registration, operated in an exclusively charitable manner. Where charitable registration has been granted in error, the appropriate course of action is annulment of the registration of the Charity with the consequences described in this letter.
However it continues to be the CRA’s view that were annulment not the most appropriate course of action, that is, that if the organization had not been registered in error, the grounds contained herein would certainly warrant the revocation of the Charity’s registration.
In support of grounds for revocation, it is the CRA’s view that the primary or collateral purpose of
the Charity is to further a tax shelter donation arrangement. During the period September 1, 2004 to August 31, 2006, the Charity’s predominant activity was to receive funds and issue receipts on behalf of a tax shelter arrangement. The Charity issued over $56.5 million in donation receipts for money received from participants in the tax shelter. From this amount, it paid over $600,000 in fundraising expenses, transferred more than $55.4 million to another participating Canadian registered charity and was entitled to retain a meagre 1% or $565,000 of monies so received. The CRA’s audits also revealed that substantially all of the monies “donated” to the Charity were returned to the promoters of the tax shelter arrangement – a fact clearly facilitated by the Charity’s role of receiving and receipting "donations" and, once received in its accounts, transferring 99% of the monies as per the promoters’ instructions.
The notice of annulment and other letters relating to grounds for annulment of the Phoenix Community Works Foundation are available to the public on request by calling 1-800-267-2384.
A charity that has had its charitable status annulled can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Income Tax Act. The charity is no longer exempt from income tax, unless it qualifies as a non-profit organization.
The CRA is reviewing all tax shelter-related donation arrangements (for example, schemes that typically promise donors tax receipts worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, go to the CRA’s Tax alert Web page at www.cra.gc.ca/alert.
For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at www.cra.gc.ca/charities.
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