New Revocation Offence – Accepting Donations from State Supporters of Terrorism

February 12, 2014

The Budget introduces a new revocation offence that is intended to curb abuse by foreign state sponsors of terrorism. The Budget proposes that any registered charity or registered Canadian amateur athletic association (RCAAA) that accepts a donation from a foreign state (or agency thereof) that is listed as a terrorist supporter under the State Immunity Act (Canada) can have its registration revoked. The Budget also proposes to give the Minister of National Revenue the discretion to refuse to register an organization as a charity or RCAAA that has accepted such gifts.

Perhaps anticipating concern over how this measure will be applied, the Budget confirms that in exercising its authority under these provisions, the Minister will take into consideration the specific facts of each case and exercise this authority in a fair and judicious manner. As lawyers we are not comforted by this.

The Budget suggests that CRA will provide enhanced information on due diligence practices that charities should adopt in order to prevent abuse by terrorist organizations. It also confirms that CRA will utilize existing compliance reporting to audit for such donations.  The T3010 already contains a requirement that registered charities report gifts in excess of $10,000 received from foreign donors, which would presumably provide CRA with the information necessary to determine if a charity has accepted a gift from a foreign state that is listed as a terrorist supporter under the State Immunity Act.

Charities should ensure that they exercise care in their activities to avoid allowing their resources to fall into the hands of terrorist or criminal organizations, and to avoid being used inadvertently to launder money.  CRA has already published recommended due diligence steps that charities should take in order to avoid working with terrorist organizations.  Charities should review these steps carefully in addition to any new guidance that the CRA publishes. Needless to say, being found guilty of supporting terrorism carries very serious consequences, not only under the Income Tax Act (Canada) (“Tax Act) but also under the Criminal Code. Charities should now review any proposed gifts from foreign states or foreign state agencies to confirm that the prospective donor is not listed under the State Immunity Act. A list of state sponsors of terrorism under that Act is attached as a Schedule to the Order Establishing a List of Foreign State Supporters of Terrorism annexed to and made pursuant to the Act.

This measure will apply to donations accepted on or after Budget Day.

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