In a recent Federal Court of Appeal decision, Cheder Chabad v. The Queen, the registered charity Cheder Chabad had asked that CRA be prohibited from publishing a notice of revocation until the charity had exhausted all its rights to object and appeal.  In other words CRA should not revoke their status for years while the appeal process winds its way up to the SCC.  The charity operates a Jewish boys school.  The charity then reduced its request that the notice of revocation be delayed for 6 months.  The Federal Court of Appeal in this particular case gave the charity a four month period in which the CRA could not publish a notice of revocation to allow the charity a few months to organize its affairs and to avoid prejudicing the education of about 180 students which was to begin in a few days.  After the four-month delay the CRA can revoke the charity.

In this case, the charity was alleged to have issued donation receipts for over $10 million for gifts in kind that it was unable to substantiate and the CRA advised that it would be revoking its charitable registration. The court granted a short delay because the charity was able to demonstrate, on a balance of probabilities, that the revocation of their registration would cause ‘irreparable harm’. The publishing of the notice of revocation was delayed “on a one-time basis” until December 31, 2013 and the court held that:

“During this period, the applicant will be expected to proceed with an orderly liquidation of a large part of its assets in kind. It will also be expected to develop, if feasible, an alternative plan to continue the operations of the school after December 31, 2013 without the status of a registered charity under the Act.”

Until a few years ago CRA was administratively deciding to hold off on publishing the notice of revocation while there was an appeal.  That meant that very non-compliant charities were continuing for long periods while the court process dragged on.  However, a few years ago CRA changed its tack after egregious receipting schemes were discovered, in some cases involving the issuance of hundreds of millions of dollars of inappropriate receipts.  CRA was not prepared to allow those responsible for such serious non-compliance to be able to continue as a registered charity for years while the charity exhausted its appeal rights..  There have been a number of cases that set the bar quite high in terms of any court ordered injunction/delay in these matters.  In this case there was apparently enough material before the judge showing the potential prejudice to the students that the judge was prepared to delay the publication of the notice by a few months. 

The decision can be accessed here: Cheder_Chabad_v._The_Queen_(FCA)_.pdf

The case says little about the non-compliance of the charity.  There was another case involving a taxpayer that we discussed a few months ago (and I understand is under appeal by CRA) in which Cheder Chabad was involved in a transaction which may shed some light on potentially the type of receipting that CRA might have been concerned with, although this case and its facts are not referenced in the decision and may not have played a role in the decision: