Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether subsection 188.1(9) applies to a municipality.
Position: Yes.
Reasons: Subsection 188.1(9) imposes a penalty on a person for issuing a receipt for a charitable donation deduction or tax credit, if the receipt includes a false statement made under circumstances amounting to culpable conduct. Subsection 248(1) defines a person to include a tax-exempt entity listed in subsection 149(1). A municipality is listed in paragraph 149(1)(c) as a tax-exempt entity. Therefore, subsection 188.1(9) applies to a municipality.
August 1, 2013
Charities Directorate HEADQUARTERS
Operational Policy and Legislative Income Tax Rulings
Issues Section Directorate
Lindsay Frank
Attention: Susan Mott, Manager (613) 960 - 7919
2013-049779
Penalty for Donation Receipt Issued with False Information by a Municipality
We are replying to your request for a technical interpretation. At issue, is whether subsection 188.1(9) of the Income Tax Act (the "Act") applies to a municipality.
Subsection 188.1(9) of the Act imposes a penalty where a person issues a receipt for a donation at any time, for the purposes of a charitable donations deduction or tax credit, if the receipt includes a false statement made under circumstances amounting to culpable conduct. Subsection 163.2(1) defines culpable conduct as an act, or a failure to act, that is tantamount to intentional conduct, which shows an indifference as to whether there is compliance with the Act, or a wilful, reckless, or wanton disregard of the law. More information on what constitutes culpable conduct can be found in Information Circular IC01-1, Third Party Civil Penalties.
Subsection 248(1) of the Act defines a person to include any tax-exempt entity listed in subsection 149(1). As a municipality is listed in paragraph 149(1)(c) as a tax-exempt entity, it follows that subsection 188.1(9) applies to a municipality.
The penalty for including false information with a receipt may be assessed against the municipality at any time, pursuant to subsection 189(7). It is equal to 125 per cent of the amount reported on the receipt, and is attributed to a particular taxation year of the municipality. If subsection 188.1(9) and section 163.2 apply in respect of the false statement by the municipality, subsection 188.1(10) limits the municipality's liability to the greater of the two penalties.
Once the penalty is assessed, subsection 189(8) provides, among others, that subsection 152 applies. Hence, the normal reassessment rules in subsection 152(3.1) become operational after such an assessment.
Should you have any questions or require additional information, please do not hesitate to contact Lindsay Frank at the number provided above.
Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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