With almost 40% of the registered charities in Canada religious charities, failure to release the guidance has tangible implications for many organizations trying to comply with federal income tax and common law requirements.
(Cet article est disponible en français.)
In the current context of rising antisemitism, concerns over Islamophobia, and questions about Christmas and Easter, it is more important than ever to foster understanding and respect for diverse religious beliefs. Within the charitable sector, we know that close to 40% of the registered charities in Canada have religious purposes (approximately 33,000 of 85,000).
These charities serve their communities in myriad ways, meeting practical needs through food banks and meal service, affordable or transitional housing, addiction recovery groups, and support for people living with disabilities; meeting spiritual needs through religious services, prayer, and providing answers to existential questions about purpose and meaning; equipping and mentoring youth through community outreach, leadership training, employment skills, and volunteer opportunities; caring for the marginalized, the elderly, and the incarcerated; working to end injustice, human trafficking and slavery, and elder abuse. This desire to serve and love others comes because of faith, not in spite of faith. The contributions and positive impact from religious charities are significant and valuable.
Unfortunately, these contributions and positive impacts are often overlooked. One simple step of recognition could show positive leadership and affirm the significance, value, and contributions of diverse religious charities across Canada.
How? Publish the advancement of religion guidance.
Advancement of religion guidance
It’s important to not overstate or exaggerate here. Publication of a policy document will not be a panacea for religious discrimination or tension. And yet, in a state of uncertainty for people of faith, an affirmation that faith can – and does! – have an important role in Canada’s non-profit sector nonetheless has great value in itself and provides a tangible impact.
As we know, charities are regulated by the Canada Revenue Agency (CRA) to ensure that they comply with federal income tax and common law requirements. To help charities avoid problems, CRA publishes guidance on a variety of topics. In November 2020, CRA published two important guidance products: on relief of poverty and charitable registration and on advancement of education and charitable registration.
To help charities avoid problems, CRA publishes guidance on a variety of topics.
What was notably absent was the guidance on advancement of religion and charitable registration.
As noted above, religious charities make up almost 40% of the registered charities in Canada. The advancement of religion guidance has existed in some shape and form for well over a decade and has been operationalized within the CRA. Access-to-information requests prompted the release of drafts from 2016, 2017, and 2019. But the guidance has languished.
This gap has real, tangible implications.
MAC v AG
A recent court decision, Muslim Association of Canada v. Attorney General of Canada, 2023 ONSC 5171, demonstrates some of these tangible implications. The Muslim Association of Canada (MAC) is a registered Canadian charity, operating mosques, schools, and community centres across Canada. As part of its regulatory role, the CRA audits registered charities. Audits are conducted by the Compliance Division and by the Review and Analysis Division (RAD). RAD is responsible for preventing terrorist groups from abusing registered charities.
RAD selected MAC for audit. Abdul Nakua, in his article “Reflecting on the CRA Audits of Muslim Charities,” details MAC’s 13-month audit experience that included 30 site visits, 27 interviews, more than 63,000 files, and more than one million financial transactions. MAC challenged RAD’s audit and decision-making process on Chartergrounds, arguing it was biased and violated MAC’s freedoms of religion, expression, association, and equality rights.
Though the judge was “sympathetic to many” of MAC’s arguments and later affirmed the public interest served through MAC’s Charter challenge, the judge nonetheless dismissed the case due to “prematurity” – steps in the CRA process were still available to MAC and had to run their course before the court would be involved.
How does this decision highlight the urgent need to address the absence of guidance on the advancement of religion? There are several reasons:
1/ Standards for comparison
The judge cited “the absence of benchmarks against which to measure CRA’s conduct” as a key reason for dismissing MAC’s Charter challenge. For example, the evidence showed that RAD took issue with MAC’s “youth social activities” and “unstructured social or recreational activities” because they were not sufficiently ancillary or incidental to advancing religion. Things like a youth centre with “ping pong, football and air hockey tables, a series of sofas, and a television” were all specifically identified.
Arguably, published guidance could have provided a benchmark for comparison. Draft advancement of religion guidance includes the explicit recognition that “charities can conduct social and recreational activities that do not directly advance religion, as long as they remain ancillary and incidental to the charitable purpose(s) or charitable activities. These activities can include providing coffee after a service, games, youth groups, or bazaars” (emphasis added).
A guidance document could have provided standards and benchmarks for the court to assess CRA’s audit and MAC’s Charter claims.
The draft guidance also explains that “ancillary and incidental (activities)” are activities that are connected and subordinate to a charity’s purpose, support that purpose, and are “a reasonable way to achieve them.” To figure out if this standard is met, “the activity should be considered in relation to the charity’s whole program of activities. If the activity becomes the main way of furthering the charity’s purposes, it may no longer be a minor focus of the charity, but an end or unstated purpose in itself.”
The decision repeatedly asks for standards or benchmarks for the court to assess CRA’s audit and MAC’s Charter claims. A guidance document could have provided these standards and benchmarks. But the need for standards goes beyond judges and courts. Charities need access to standards when making decisions; regulators need to use clear standards in decision-making; and charities deserve to understand and know the standards to which they will be held.
2/ Religious charities must be treated fairly
Regardless of which religion a charity advances, all religious charities should be treated fairly, both as compared to one another and as compared to non-religious charities.
Recognizing that RAD’s administrative fairness letter (AFL; a detailed summary of audit findings) was 151 single-spaced pages, the fact that “ping pong, football and air hockey tables, a series of sofas, and a television” were singled out is still concerning. Those facts could equally – and readily – apply to most church youth-group facilities. As the judgment acknowledged, “providing a forum for community and social cohesion is incidental to any religious organization” and “to succeed, [the religious organization] must be able to offer some sense of community and enjoyment that goes beyond religious doctrine.”
The AFL also determined that social aspects of Eid festivals and other community events “outweighed the religious aspect of the activity.”
How can a synagogue or church or mosque know that the same principles are fairly and equally applied to each if the standard isn’t published, let alone clear?
On this point the judgment affirmed that social activities are often an “essential part of religious activity” but went further to raise serious doubts about “whether CRA would revoke the status of a Christian charity because it organized Christmas parties or Thanksgiving dinners or whether it would revoke the status of a Jewish charity because it organized Seders or Succoth dinners for new immigrants.”
This concern was emphasized again in the judge’s December 18, 2023, unpublished costs decision (the federal government sought $220,000 in costs, which were denied; the government and MAC each had to pay their own costs): “The vast majority of the findings on which the revocation recommendation was based were, as noted in my reasons, ones that I did not believe would ever be used to revoke the charitable status of a Christian or Jewish charity.”
That is a very troubling conclusion. But, apart from launching court challenges, how can a synagogue or church or mosque know that the same principles are fairly and equally applied to each if the standard isn’t published, let alone clear?
3/ Tangible impact
It’s possible that clear standards would not have changed the outcome since the judge relied so heavily on the concept of prematurity. But we don’t know that for certain. It’s equally possible that clear standards and any violations thereof would have changed the judge’s decision.
The judge recognized that MAC may be put “to the expense of further exchanges with CRA and the pursuit of an internal appeal within CRA with the possibility that the outcome of those discussions and appeals maintain the recommendation to revoke [MAC’s] charitable status.”
Should charities shoulder these additional legal expenses when guidance could be published to help answer some of the issues at the outset?
MAC could also have been burdened with the government’s legal costs. As noted above, the federal government sought $220,000 in legal costs against MAC. The judge denied the government’s costs claim, noting that the MAC application “served a valid public purpose in pursuing the litigation even if it was unsuccessful.” But that may not be the outcome for all charities that choose to challenge CRA decisions. It also does not eliminate the legal costs of launching the challenge in the first place.
Should charities shoulder these additional expenses when guidance could be published to help answer some of the issues at the outset?
4/ Need for transparency
Draft guidance for religious charities has existed in some shape and form since 2013 but has remained unpublished. Drafts from 2016, 2017, and 2019 were obtained through access-to-information requests, but religious charities are left to wonder whether the 2019 draft has been revised, how it has been revised, how accurately (or not) it reflects the nature and scope of religious entities, and whether it is empowering or restricting the important work done by faith-based charities across Canada.
Where is the advancement of religion guidance?
We know that the guidance has been under development for almost two decades and that it has been operationalized within the Charities Directorate.
The Charities Directorate recognizes that publishing the guide would support transparency in decision-making and has made efforts to publish the guidance, beginning in summer 2021 through to early 2022.
It is unclear why the Charities Directorate’s efforts to publish the guidance have not resulted in a published guidance document.
We also know that some of the most recent stakeholder outreach was to the Advisory Committee on the Charitable Sector (ACCS) sometime in 2020. The ACCS agreed that the guidance should be publicly available and wrote to the minister of national revenue to “expedite publishing the draft guidance” and to do so before a federal election because that could “further delay” publication.
It is unclear why the Charities Directorate’s efforts to publish the guidance have not resulted in a published guidance document. Who or what continues to act as a roadblock to publication? Is it political apathy? Political antipathy? Provincial influence? Or something else entirely? Religious charities are left to speculate.
What does the operationalized advancement of religion guidance say?
As noted above, we do not know what the current version of the guidance contains, but it’s likely different than the 2019 draft. Access-to-information documents reference “previous versions” of the guidance, which strongly suggests that the version operationalized within CRA is different than the 2016, 2017, and 2019 drafts.
While religious charities are left to wonder what the guidance says, they are also left to wonder if they will be consulted. It seems the most recent stakeholder outreach was to ACCS members in 2020; however, at that time nobody within its membership specifically represented any segment of Canada’s faith communities.
While religious charities are left to wonder what the guidance says, they are also left to wonder if they will be consulted.
Without knowing whether and what has been changed, it is entirely possible that the guidance contains unfavourable updates. It’s equally possible that the guidance contains only modest changes and remains appropriately neutral toward charities advancing religion, neither favouring nor hindering the advancement of any religious belief.
This uncertainty means that there is inherent risk in calling for an answer to “Where is the religion guidance?” and “What does it say?” Does it empower religious charities? Does it unduly restrict them? Either way, the document is operationalized within CRA, and charities advancing religion deserve to know what it says. Whether it needs subsequent revision is another matter.
What does a lack of guidance say about the value of faith?
When religious charities are ignored in this way and the guidance stays behind closed doors, it sends a message, even if unintentionally, that they simply do not merit acknowledgement through even a guidance document that speaks to their work.
While CRA’s Charities Directorate has made efforts to publish the guidance and understands the need for transparency, it is unclear why its efforts have not materialized in a published guidance document. What (or whom?) is putting up barriers to publishing the guidance? Again, religious charities are left to speculate.
Religious charities deserve to know what is happening with the guidance, what the guidance states, how it is being applied internally, and whether it accurately reflects the nature and scope of religious charities. In the MAC costs decision, the judge concluded that “it was not unreasonable for the applicant [MAC] to challenge the nature of the [CRA] investigation. Doing so was in the public interest and, one hopes, assists governmental agencies in refining their processes to ensure that minority groups are dealt with fairly and equitably.”
In the face of tension, the guidance would affirm a positive message about religious communities in Canada.
Publishing this guidance is a less expensive, less onerous, and most appropriate opportunity to make sure all stakeholders are aware of the standards and benchmarks used by the CRA to ensure that all groups, particularly minority groups, are dealt with fairly and equitably.
Publishing this guidance is also an opportunity for the government to recognize that people of faith contribute in significant, important, and valuable ways to Canadian society through acts of charity. In the face of tension, it affirms a positive message about religious communities in Canada. In place of an information vacuum, it provides clarity, enhances transparency, and creates consistency.
We trust that those with the answers will respond, for the benefit of the entire charitable sector and beyond.
