Tax

Charity has same rights as taxpayer if challenged by CRA

As the Canada Revenue Agency (CRA) widens its audit into the political activities of charities, organizations should be aware of their rights, and how the process works if they are challenged, says Toronto tax litigation lawyer David J. Rotfleisch.

As the CBC reports, in 2012, the CRA was ordered to audit political activities as a special project, originally focusing on environmental charities. The agency has recently been given an additional $5 million through to 2017 to make the project permanent, and is reportedly also looking at charities focused on foreign aid, human rights and poverty. More than 50 “political-activity audits” are underway, says the article.

Charities that are challenged by the CRA have the same rights as any other Canadian taxpayer, 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, tells AdvocateDaily.com.

“They have the right to present information and appropriate documentation to the CRA auditor. They can meet with the team leader of the auditor if their interaction with the auditor seems unfair or inappropriate,” he adds.

If the results of the audit are unsatisfactory, he says, a notice of objection can be filed to the resulting assessment. This entitles the charity to an independent review by the CRA appeals division where submissions are made to the appeals officer, and, if necessary, to the team leader, he adds.

“If this does not satisfactorily resolve the issue, then an appeal to court is the next step,” says Rotfleisch.

However, he adds, in the context of a deregistration of a charity for inappropriate activities, the process is slighly different.

In that case, says Rotfleisch, the CRA will investigate the charity’s activities.

“This is the equivalent of an audit, and submissions are made at that time, including to the team leader. If this results in an adverse determination, the CRA will send a notice of intention to revoke a charity's registration. The charity has 90 days from the date of notice to file an objection by writing to the assistant commissioner, appeals branch, providing reasons as well as relevant facts and documents. If the charity disagrees with the CRA decision, they have 30 days from the date on the notice to appeal to the Federal Court of Appeal.”

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