Annulment is one of those antiquated words the whispers “convenience” and “pragmatism”. Failed or incomplete marriage? Divorce not an option? A Church-granted annulment will set both partners free. Annulment is also a term in the Income Tax Act that applies to registered charities and registered amateur athletic associations. It’s rarely used, and the rules, as with marriage, are forgiving and practical.
The CRA database of registered charities currently lists 206 registered charities that have been annulled since 1967. A charity annulment assumes a mistake has been made. The entity is not charitable at law and shouldn’t have been registered under the Income Tax Act by the Charities Directorate. Oops. And so the organization is deemed to have been never registered.
CRA is complicit with registrations made in error, which perhaps explains the spirit of administrative forgiveness. The organization can no longer issue tax receipts for donations or receive grants from other registered charities. But the entity does keep its assets (assuming it has any). By contrast, a charity that is deregistered gives up its receipting powers, assets, and may wear a stain on its reputation.
Dying with Dignity Canada
Dying with Dignity Canada, the leading Canadian registered charity advocating for assisted dying, was annulled in January 2015. This was a result of a Harper-era political activities audit, but it was annulled because the charity never should have been registered in 1982 with its original purposes. Simply, the organization sought to change laws, which has been considered political, not charitable. (Just to be clear, upholding laws is generally charitable).
The story has a happy ending. Dying with Dignity was registered for a second time in January 2018. It now appears to have charitable purposes that advance education and human rights, although I don’t really understand how its activities have changed. The new political activities rules for registered charities released in 2018 also helped.
Estate Planning Implications
Dying with Dignity is top of mind for me due to a client and his estate plan, but I must say that charity annulments are an infrequent hiccup in estate planning. Annulments are rare. Most of the annulled entities on the CRA list are small and insufficiently established to attract significant estate donations. A few of the more established entities, such as Credit Canada Debt Solutions Inc. and Burstall (SK) Curling Club, have continued operating as not-for-profits, but most disappeared.
If an organization continues as a not-for-profit organization after annulment it would still be a legal beneficiary of a will. The tax receipt for estate donation would, however, be lost. The will be drafted to make the gift contingent upon the organization being a registered charity, but often tax is not the primary consideration for an estate donor. During the estate planning process, it is worth discussing the possibility of a failed gift or a loss of charitable status with certain charities. A more practical approach is to make regular will updates and check registration status on the CRA website.