Canadian finance committee recommends abolishing advancement of religion as a charitable purpose
A finance committee report that was tabled in the House of Commons on Dec. 13, 2024, made a recommendation to the Government of Canada to amend the Income Tax Act to provide for a definition of a charity which would remove “advancement of religion” as a recognized charitable purpose.
This recommendation comes after the BC Humanist Association made written submissions to the finance committee on July 18, 2024, requesting such change.
The written submissions began with a statement “tax policy is also a major mechanism to motivate taxpayers to engage in activities that are deemed beneficial to society or, on the contrary, dissuade taxpayers from engaging in activities that are thought to be harmful to society.”
This recommendation, if acted upon, would drastically affect the legal landscape surrounding the use of charitable status under the Income Tax Act.
To be a charity in Canada, an organization must have purposes that are exclusively charitable, and have activities that further those charitable purposes. However, the definition of what is considered charitable under the Income Tax Act has been framed by over a century of court decisions
These decisions, in summary, concluded that there are four charitable purposes:
- the relief of poverty,
- the advancement of education,
- purposes beneficial to the community, and
- the advancement of religion.
The Canada Revenue Agency (the “CRA”) explains that in order for an organization to be considered as a charity that advances religion, the charity must preach and advance the spiritual teachings of a religious faith, and maintain the doctrines and spiritual observances on which those teachings are based. This includes
- establishing and maintaining buildings for religious worship and other religious use,
- organizing and providing religious instruction, and
- carrying out pastoral and missionary work.
Today, Canadian courts refer to the 1891 decision of the United Kingdom’s House of Lords in Commissioners for Special Purposes of Income Tax v. Pemsel, AC 531(HL) where the House of Lords looked back another 290 years to cite the Charitable Uses Act of 1601.
In Pemsel, the House of Lords concluded that there are four charitable purposes, being those four purposes the CRA recognizes today.
What an abolition of advancement of religion as a charitable purpose would mean is a restriction on the number of organizations across Canada that receive charitable status from the Charities Directorate division of the CRA.
This means that not-for-profit organizations and trusts that aim to advance religion would be unable to access the tax benefits provided to charities under the Income Tax Act, such as the ability for charities to provide a donation receipt in exchange for that donation. Further, it could also mean a mandatory review of those charities that currently operate so as to advance religion.
However, as drastic a change as this would be, the recommendation from the finance committee is in its infancy if the journey it’s on is to be an actual change to the legal landscape in Canada.
This article was originally published by The Hamilton Spectator.
