Judge says foundation has history of noncompliance with income tax legislation
The Federal Court has refused to set aside a jeopardy order issued in connection with the minister of national revenue’s revocation of a foundation’s charitable registration, given the foundation’s history of noncompliance with the Income Tax Act, 1985 (ITA).
In Canada (National Revenue) v. Ne'eman Foundation Canada, 2025 FC 670, the respondent was a foundation registered as a charity in March 2011 and established under the Canada Not-for-profit Corporations Act, 2009, in October 2013. The foundation’s charitable activities involved raising funds in Canada and transferring them to agents in other countries.
In early July 2024, the national revenue minister issued a notice of intention to revoke the foundation’s charitable registration. At the end of that month, the foundation brought a notice of objection to dispute the minister’s allegations. The merits of the notice of objection are awaiting determination.
The minister revoked the foundation’s charitable registration in August 2024 and applied ex parte for a jeopardy order to prevent the foundation from dissipating its assets in November 2024.
A Federal Court judge granted a jeopardy order based on the foundation’s history of non-compliance with the ITA, the precipitous decrease in its bank accounts, and an ineligible individual’s efforts to transfer the foundation’s operations to a fund while actively involved as an officer. This individual was the foundation’s chief executive officer, founder, president, treasurer, and sole banking authority.
The foundation moved to set aside the jeopardy order under s. 225.2(8) of the ITA.
The Federal Court denied the motion upon finding that the foundation failed to show:
First, the court ruled that the foundation failed to show that the minister’s evidence supporting the ex parte application did not meet the test required by s. 225.2 of the ITA, either through affidavits or cross-examination of the minister’s witnesses.
The court determined that the foundation instead provided bald statements and conclusions through its CEO and refused to give the requested receipts and descriptions regarding its charitable activities last year.
The court found it reasonable for the minister to request a jeopardy order based on the foundation’s history of non-compliance with the ITA and the CEO’s recent attempts to transfer its assets to a fund.
Next, the court held that the minister met her obligation to provide a full and frank disclosure in making her ex parte application seeking a jeopardy order. The court noted that the jeopardy order authorized the minister to take immediate actions under ss. 225.1(1)(a) to (g) of the ITA concerning the amounts assessed against the foundation.
The court rejected the foundation’s argument that the minister should have called attention to s. 188(2) of the ITA, which would allow her to assess third-party transferees to recoup unpaid revocation tax.
The court said the foundation’s counsel failed to explain this argument. The court added that its role was not to decide how the minister should recover tax debt.
The court found validity in the judge’s concerns leading to the issuance of the jeopardy order, regardless of whether the winding-up period was underway or the foundation was able to transfer its assets to eligible donees under the ITA.
Lastly, the court noted that the parties agreed to address the foundation’s arguments regarding the constitutionality of s. 225.2 of the ITA relating to charities at a future hearing.
