CRA annuls waterfront trust’s charitable status
Agency should have been more transparent: experts
The Hamilton Waterfront Trust has lost its charity status because the Canada Revenue Agency says the work it does is not “exclusively charitable.”
CRA annulled the status of the arm’s length agency whose mandate is helping Hamiltonians connect with their waterfront in November 2016 following an audit of its books and records.
Despite this change, the waterfront trust was still billing itself as a “charitable organization” on its website Wednesday morning, more than two years after the annulment process began. This was changed to say a “not for profit organization” by Wednesday afternoon.
Some experts say this phrasing was misleading to the public and that the trust should have been more transparent about the circumstances around the annulment.
The notice of annulment from CRA says the trust “was not established or operated for exclusively charitable purposes, and fails to devote all of its resources to charitable activities.”
“It is our belief that the organization was registered in error and is presently ineligible for registration under the act (Income Tax Act),” CRA wrote in a letter dated June 1, 2015.
An annulment, which is different from having charity status revoked, means the waterfront trust can no longer issue official donation receipts and is not exempt from income tax as a registered charity. An annulled charity
has its registration cancelled as though it had never been registered and is not subject to revocation tax.
Hamilton Waterfront Trust was registered as a charity in 2004 after beginning its life four years earlier with $6.3 million in seed money, which has since run out. The endowment was to settle a lawsuit by the City of Hamilton that contended it hadn’t been properly compensated by the former Hamilton Harbour Commission for its share of port profits dating back decades.
“It appears that the organization’s intention at the time it received charitable registration was not to focus on the beautification and improvement of the environment, but rather to focus the majority of its resources to carry on businesses designed to promote the Hamilton waterfront as a tourist destination,” the notice from CRA says.
Ward 2 Coun. Jason Farr, who sits on the trust’s board alongside Coun. Tom Jackson, said the trust now operates two entities — a notfor-profit Hamilton Waterfront Trust and a corporation, HWT Inc., both of which were registered in January.
The nonprofit includes recreational activities like the rollerskating and ice-skating rinks, and HWT Inc. has Williams Fresh Café and the Hamilton Waterfront Trust Centre, which houses the restaurant Sarcoa, Farr said.
The waterfront trust’s website did not use the words “registered charity,” but it’s still “misleading” for it to call itself a “charitable organization” now that its status has been annulled, said a professor in Carleton University’s philanthropy and nonprofit leadership program.
“Saying they are ‘charitable’ is likely incorrect — and misleading,” Susan Phillips wrote in an email.
Farr, to whom trust executive director Werner Plessl has referred all questions, said the trust is not sending a “mixed message” and it’s a question of failing to keep the website up-to-date.
“That’s one thing we’ve got to make a priority — our website,” he said Tuesday. “That should have been changed months ago.”
The annulment of the charity status was discussed at a board meeting, Farr said, but a public announcement was not made.
The trust’s board meetings are open to the public, but he said he didn’t think any private citizens were there at the time.
“I can assure you no one has made a recent donation where they have been in any way manipulated,” Farr added.
The circumstances around the annulment should be disclosed to donors and the public, said Richard Leblanc, associate professor of law, governance and ethics at York University.
“What you don’t want is someone donating to what they believe mistakenly to be a charity and not obtaining the tax benefit that is traditionally associated with a charitable donation,” he said.
According to CRA, the trust receives “minimal donations for which they provide official donation receipts and only a small percentage of these funds are put towards activities that have the possibility of being considered charitable.”
About 83 per cent of the waterfront trust’s 2013 revenues came from operating businesses, according to CRA’s audit.
The trust receives annual city funding for the rink. In 2016, the city provided it with $307,218 to operate the outdoor rink and $333,795 is set aside in the 2017 budget.
As The Spectator reported Wednesday, the waterfront trust owes the city $325,000 in back taxes for 57 and 17-47 Discovery Dr. from 2016 and 2017, which it partly blamed on legal fees.
Hamilton Waterfront Trust has been locked in a $15-million legal battle that waterfront eatery Sarcoa launched against the trust and the city in late 2015 for preventing it from playing amplified music on its patio.
Saying they are ‘charitable’ is likely incorrect — and misleading. SUSAN PHILLIPS CARLETON UNIVERSITY PROFESSOR