Federal Budget 2004 brought in a host of new sanctions for charities. In the past, the only sanction was to revoke a charity's registered status. No longer! Effective March 22, 2004, if a charity refuses to abide by the rules, the Minister of Finance can impose fines for certain infractions, tax earnings from some business activities, and of course, revoke its registered status. All penalties feature an increased severity level for first and second or subsequent sanctions.

Briefly, here are some of the first offense major sanctions that can now be assessed against charities:

• Late filing of T3010 (year end report) = $500 fine. - Issuing receipts with false information = a fine equal to 5% of the amount of the receipt.
• Failure to keep proper books and records = one year suspension.
• Public charities that carry on un-related businesses = 5% tax on earning on those businesses.
• Private foundations carrying on any business - 5% tax on earnings from the business.
• Issuing tax receipts that do not exceed $20,000 in aggregate where no gift has been made or contain false information = fine of 125% of the value of the receipts.
• Issuing tax receipts for more than $20,000 in aggregate where no gift has been made or contain false information = fine of 125% of receipted amounts PLUS one-year suspension of the charity.
• Delaying expenditure of amounts on charitable activities by transferring of funds to other charities = both charities are jointly and severally (either one alone) are liable for amounts so transferred PLUS a fine equal to 105% of transferred amounts.

If a charity is assessed a financial penalty in excess of $1,000, it can pay the fine to an Eligible Donee or to the government - which ever it wishes. Please note that such a payment to an eligible donee does not count in the payee's disbursement quota as a charitable acitivty.

Click here for a complete listing of the new penalties. Alternatively, go to the Resources section and download the presentation entitled: "Are you Ready for 2006" for a complete listing of first and second level infractions.