First Excess Business Holdings Penalty

November 2010 | Kate Lazier

The CRA has publicly announced the first penalty for excess corporate holdings. According to the CRA’s registered charities database the Radcliffe Foundation was penalized $147,749 for its excess corporation holdings.

The 2007 budget introduced the so-called excess business holdings rules that require private foundations to divest shareholdings over certain thresholds.   In general, where a private foundation and persons related to the private foundation own more than 20% of the shares of any class, either these parties must reduce their combined holdings to less than 20% or the private foundation must reduce its holdings to below 2%.

According to the Globe and Mail (http://www.theglobeandmail.com/report-on-business/philanthropist-frank-giustra-hit-with-tax-penalty/article1803479/) the CRA informed the private foundation that it held excess shares last year.    A spokesperson for the Foundation stated that the Foundation has paid the penalty by making a gift to another charity.

The Charity and Non-Profit Lawyers at Miller Thomson LLP can assist private foundations to understand and comply with these rules.

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