Charities faced with CRA requests should consult lawyer

Although compliance requests from the Canada Revenue Agency (CRA) can place significant financial demands on small charities, a tax lawyer may be able to help negotiate a better solution, says Toronto tax litigation lawyer David J. Rotfleisch.

As the Toronto Star reports, B.C.-based charity CoDevelopment Canada Association is attempting to deal with the demands of a compliance letter it received from the CRA earlier this year, requesting that the four-person organization translate boxes of documents it receives from its partners in Latin America into either English or French. The CRA, says the article, also audited the charity's political activities last year.

“A request to translate 100 per cent of numerous records will have a financial and administrative impact on any organization,” says Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, a boutique tax and business law firm specializing in tax dispute resolution and income tax planning,

Although a request for translation of all accounting receipts would not normally be required, Rotfleisch says, “If they are looking to confirm that no more than 10 per cent of the charities’ activities are political, then the CRA would need to determine that no more than 10 per cent of all receipts are related to those political activities. To do that, in theory, they might need to have all receipts translated so that they can audit what each category of expenses was,” he adds.

Ultimately, organizations faced with such requests should retain a tax lawyer to deal with the CRA, says Rotfleisch, as failing to comply with a proper CRA request “can lead to de-registration of the charity, after appeal steps are exhausted.

“I would try to negotiate a better solution, such as group expenses by type and have a translation of the category only. If the CRA needs to drill down into any specifics, then I would have those specifics only translated,” he explains.

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