Income Tax Act — I-3.3 188.1
Penalty — carrying on business 188.1 (1) Subject to subsection (2), a person is liable to a penalty under this Part equal to 5% of its gross revenue for a taxation year from any business that it carries on in the taxation year, if (a) the person is a registered charity that is a private foundation; (b) the person is a registered charity that is not a private foundation and the business is not a related business in relation to the charity; or (c) the person is a registered Canadian amateur athletic association and the business is not a related business in relation to the association. Increased penalty for subsequent assessment (2) A person that, less than five years before a particular time, was assessed a liability under subsection (1) or this subsection, for a taxation year, is liable to a penalty under this Part equal to its gross revenue for a subsequent taxation year from any business that, after that assessment and in the subsequent taxation year, it carries on at the particular time if (a) the person is a registered charity that is a private foundation; (b) the person is a registered charity that is not a private foundation and the business is not a related business in relation to the charity; or (c) the person is a registered Canadian amateur athletic association and the business is not a related business in relation to the association. Control of corporation by a charitable foundation (3) If at a particular time a charitable foundation has acquired control (within the meaning of subsection 149.1(12)) of a particular corporation, the foundation is liable to a penalty under this Part for a taxation year equal to (a) 5% of the total of all amounts, each of which is a dividend received by the foundation from the particular corporation in the taxation year and at a time when the foundation so controlled the particular corporation, except if the foundation is liable under paragraph (b) for a penalty in respect of the dividend; or (b) if the Minister has, less than five years before the particular time, assessed a liability under paragraph (a) or this paragraph for a preceding taxation year of the foundation in respect of a dividend received from any corporation, the total of all amounts, each of which is a dividend received, after the particular time, by the foundation, from the particular corporation, in the taxation year and at a time when the foundation so controlled the particular corporation. Penalty for excess corporate holdings (3.1) A private foundation is liable to a penalty under this Part for a taxation year, in respect of a class of shares of the capital stock of a corporation, equal to (a) 5% of the amount, if any, determined by multiplying the divestment obligation percentage of the private foundation for the taxation year in respect of the class by the total fair market value of all of the issued and outstanding shares of the class, except if the private foundation is liable for the taxation year under paragraph (b) for a penalty in respect of the class; or (b) 10% of the amount, if any, determined by multiplying the divestment obligation percentage of the private foundation for the taxation year in respect of the class by the total fair market value of all of the issued and outstanding shares of the class, if (i) the private foundation has failed to disclose, in its return required under subsection 149.1(14) for the taxation year, (A) a material transaction, in the taxation year, of the private foundation in respect of the class, (B) a material interest held at the end of the taxation year by a relevant person in respect of the private foundation, or (C) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the taxation year, unless at no time in the taxation year the private foundation held greater than an insignificant interest in respect of the class, or (ii) the Minister has, less than five years before the end of the taxation year, assessed a liability u