No shelter from tax storm
ICAN has charity status revoked
This past week, the Canada Revenue Agency followed through on an earlier threat and revoked the charitable status of International Charity Association Network (ICAN).
Never heard of ICAN? Not too many Canadians have, unless you're one of those unlucky donors currently being reassessed by the CRA because of your investment in tax shelters in which ICAN has been involved.
According to testimony from the CRA, ICAN was one of the highest-grossing charites in Canada in 2006, issuing about $464-million in donation tax receipts through its participation in various tax-shelter programs. That's nearly 900 times higher than its 2001 revenue of about $528,000.
By comparison, the United Way of Greater Toronto issued about $95-million in tax receipts in 2006. That year, the United Way employed about 200 full-and part-time staff members. ICAN employed 16 people.
Most of ICAN's revenue was derived through its involvement with the Global Learning Gifting Initiative tax shelter. In 2006, nearly 23,000 donors contributed to ICAN and its tax shelter.
The CRA's main concern was that ICAN "actively participated in tax-shelter schemes" in which it received property, while issuing donation tax receipts for amounts "far in excess of" the fair market value of the property being gifted.
ICAN's problems first became public last November, at the height of the 2007 year-end tax-shelter-selling season. The CRA issued a notice to ICAN, suspending its ability to issue donation receipts for one year due to failure to "provide access to books and records relating to its involvement with tax-shelter arrangements."
Once a charity has been suspended, it is no longer able to issue receipts for funds or gifts it receives during the suspension period. By suspending ICAN late last year, the CRA was essentially shutting down the tax-shelter program for the balance of 2007.
In early December, 2007, the CRA notified ICAN of its intention to revoke its charitable registration altogether.
ICAN appealed the suspension to the Tax Court of Canada, which confirmed the suspension in early January.
ICAN went to the Federal Court of Appeal, which in April, 2008, also sided against the company. The court stated that "the public has a legitimate interest in the integrity of the charitable sector.
"It is reasonable to safeguard that integrity by carefully scrutinizing tax-shelter schemes involving charitable donations of property and, where there are reasonable grounds to believe that the property has been overvalued, by taking appropriate corrective action."
ICAN's suspension comes one year after the CRA issued its most terse warning ever to Canadians last August, cautioning them to be wary of all tax-shelter-related arrangements, where donors end up with tax receipts worth more than the amount actually donated.
The CRA plans to continue auditing "every participating charity, promoter and investor."