Source: The Canadian Press

The Canada Revenue Agency has revoked the charitable status of two Toronto-area health charities, which it says were scamming the tax collectors.

The agency says Liberty Wellness Initiative and Destiny Health and Wellness Foundation issued receipts far exceeding the actual donations and contravened other key elements of the tax law.

It says Liberty Wellness issued nearly $89 million in receipts for health-care units received through the Universal Donation Program between 2004 and 2006, five times the value of actual donations.

The agency says Destiny Health and Wellness Foundation issued $42 million in receipts for cash received through the Universal Donation Program and Destiny Gifting Program between 2005 and 2006.

It says most of the Destiny funds were transferred to another registered charity as compensation for its role in the arrangement, to the tax-shelter promoters as fundraising fees and to a related investment company.

It says Destiny itself retained $840,000 of the total tax-receipted amount for its own use.

“Our audit has also revealed insufficient separation between the organization’s operations and the personal business and financial interests of those responsible for its operation,” it said in separate statements relating to each of the charities.

“In particular, the organization has entered collusive contractual arrangements with directors and related parties who are themselves promoting the tax-shelter programs.

“These arrangements have resulted in substantially all of the actual cash received being diverted into the hands of the promoters and related companies rather than used for charitable purposes.”

It alleges both groups operated for the “non-charitable purpose of promoting tax-shelter arrangements and for the private benefit of its directors and the tax-shelter promoters.”

They’ve issued receipts for transactions that do not qualify as gifts, it said, issued receipts that don’t comply with the Income Tax Act and failed to meet their annual disbursement quota.

“For all of these reasons, and for each of these reasons alone, it is the position of the CRA that the (registrations) should be revoked.”

Once charitable status is revoked, a group can no longer issue receipts for income-tax purposes and loses its special status under the Income Tax Act.

That means it’s no longer exempt from income tax unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.