Charity breached requirement to maintain adequate books and records

Tax – Income Tax – Special rules

Charity had been registered for purposes of Income Tax Act since early 1990s, with activities that included overseas missions. After one audit, CRA and leader of charity executed compliance agreement in which charity committed to rectify concerns about its books and records, particularly relating to documents supporting overseas expenses, and to implement corrective measures. After second audit, Minister determined that charity had failed to maintain adequate books and records and to implement corrective measures. Minister suspended charity’s receipting privileges and qualified donee status for one year. Charity appealed. Appeal dismissed. Charity’s natural justice argument had no merit as CRA clearly particularized alleged deficiency of charity’s books and records, specifically requesting invoices and vouchers to substantiate mission expenses, and gave charity multiple opportunities to respond. Leader knew from outset that CRA’s focus was on expenses for activities outside Canada and that all such documentation had to be retained. Charity’s attempt to attribute blame to former accountants was insufficient and irrelevant as charity had ultimate responsibility for keeping records, including invoices, vouchers and expense receipts. Charity breached requirement to maintain adequate books and records and, regardless of difficulty of obtaining and tracking receipts in cash economies, it had obligation to find ways to address CRA’s concerns. This was not charity’s first experience and it had committed to keeping all receipts moving forward from compliance agreement. Breach justified lesser sanction of suspension as there had been repeated non-compliance involving receipts for foreign expenses, it could only account for half of such expenses and production was not timely and indeed still outstanding. Minister’s decision was reasonable.

Promised Land Ministries v. The Queen (2019), 2019 CarswellNat 3118, 2019 TCC 145, K. Lyons J. (T.C.C. [General Procedure]).

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