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Imagine Canada recently released, in an Early Alert, the answer to a question posed to the Minister of National Revenue in October 2014 on the status of the political activity audits. The information obtained is quite interesting and gives us a glimpse into the Audit Program. Additional information has been shared by the Director General of the Charities Directorate in her public presentations. The information shared which is discussed in this article is current as of October 2014.
We understand that at that date 403 files had been screened by the Canada Revenue Agency (“CRA”) under this program and 40 audits were underway. Of those 40 audits, 13 had been completed. Of the total of 60 audits planned, we understand that another 12 organizations were on the audit list and expect those audits had not yet commenced.
The Early Alert highlighted a few matters of particular interest:
First, the response noted that CRA is using a tool outside of the audit program where it has identified possible areas of non-compliance. These “reminder letters” are meant to be helpful by notifying recipients of the charity rules of which they may not be aware. They are not a notice that the organization will be audited. We understand however that some organizations that have received these letters did not understand that distinction. In any event, Minister Findlay’s response confirms that 12 reminder letters were issued in 2012-2103, 13 in 2013-2014 and another 13 from April 1, 2014 to the date of the response in October 2014.
Second, CRA confirmed the statistics on complaints concerning political activities since fiscal year 2008-2009 when they began to record such information. It was particularly interesting to see that in the fiscal year 2011-2012 there were 139 complaints and in 2012-2013 there were 159 complaints. That appears to have fallen off in 2013-2014 but yet again may be higher in 2014-2015 as 79 had been filed from April 1 – October 21, 2014 date. There are no statistics on the nature of these complaints or on whether these complaints led to the audits undertaken to date.
Third, the information discussed the audits themselves and disclosed the number of days to complete the audits that have been pursued. It appears that CRA is spending a significant number of days looking at the organizations that have been under audit under the political activities program. One thing that was notable was the fact that CRA confirmed that normally a straight-forward audit takes three to six months, but audits of a complex nature can range from several months to years in length. The average number of days for the political activity audits is over 500 days.
Recent newspaper articles dealing with the organization Dying with Dignity provide further insight and understanding of the nature of the audits being conducted. By choosing to propose an annulment rather than revocation of charitable status, the Directorate is confirming that it has now decided the organization should not have been registered as a charity in the first place. This result is less onerous than a revocation of charitable status for the organization. The concern, however, is that it is difficult to distinguish the activities of Dying with Dignity from many other organizations that are working in Canada to improve our communities, our health and quality of life. This situation is likely to increase the existing chill on advocacy in the sector, regardless of the fact that this may be appropriate charitable activity.
The members of Miller Thomson LLP’s Charities and Not-for-Profit Group are familiar with the rules under the Income Tax Act and the CRA Guidance on Political Activities and would be pleased to assist your organization with any questions or concerns you have around your charitable advocacy and whether it is in compliance with the rules.