By Ryan M. Prendergast

Two successful appeals in the Federal Court of Appeal (“FCA”) insist that the Canada Revenue Agency (“CRA”) cannot treat its policy documents as binding the law for the purpose of registration of a Canadian Amateur Athletic Association (“CAAA”). The two separate appeals, Athletes 4 Athletes Foundation v Canada (National Revenue), and Tomorrow's Champions Foundation v Canada (National Revenue (the “Appeals”), were heard together and released on July 21, 2021. The two appellants, Athletes 4 Athletes Foundation (“A4A”) and Tomorrow’s Champions Foundation (“TCF”), both British Columbia societies, had applied to the CRA in 2014 for Registered Canadian Amateur Athletic Association status (“RCAAA”) under the ITA, which would provide them with tax exemptions and make them “qualified donees”, allowing the issuance of tax receipts for donations. After their applications were refused by the CRA, both A4A and TCF filed notices of objection concerning CRA’s refusal for registration in 2016. However, in 2019, neither notice of objection had been responded to and so both applicants appealed under the ITA for judicial review directly to the FCA. The FCA allowed both appeals.

By brief way of background, subsection 248(1) of the ITA defines RCAAAs as CAAAs that have applied for and received registration, meaning that an organization must meet the requirements of a CAAA, as set out in subsection 149.1(1) of the ITA before being eligible to be registered as an RCAAA.

In the FCA’s view in the Appeals, the CRA and Minister of National Revenue erred on both the A4A and TCF applications in the same ways:

(a) treating its list of acceptable purposes and functions as being the only acceptable purposes and functions for an organization to qualify as a CAAA;

(b) denying the registration of [A4A or TCF] as a RCAAA on the basis that the Minister was unable to draw an analogy between providing financial assistance to athletes and any of the exclusive purposes and functions of an existing CAAA that has been registered as a RCAAA; and

(c) reading into the definition of CAAA a requirement that an eligible organization must directly promote amateur athletics.

The CRA sent letters on the same date (March 18, 2015) to both A4A and TCF, stating similar concerns in each letter that the financial support provided to athletes in A4A’s case, or the financial support for teams and clubs to pay for facilities, equipment and services in TCF’s case, did not satisfy the ITA subsection 149.1(1) requirement for a CAAA to promote amateur athletics in Canada “as its exclusive purpose and exclusive function”. In making this determination, the CRA relied on its policy statement CPS 0-11, “Registration of Canadian amateur athletic associations”, which set out a list of “Qualifying objects” for CAAAs. Based on precedent in the FCA’s decision in Stemijon Investments Ltd. v Canada (Attorney General), the FCA in the Appeals held that the Minister has no broad discretion to refuse registration, and must ensure that Parliament’s statutory requirements are met. A policy or guidance document “as previously drafted by the CRA cannot bind the Minister nor can it alter the provisions of the statutory definition of a CAAA.”

According to the FCA, the Minister also added a word to the requirement that is not in the ITA’s definition of a CAAA for “direct” promotion of amateur athletics in Canada, characterizing A4A and TCF’s financial support as “indirect” and therefore insufficient for registration according to the CRA’s policy. But this interpretation is neither supported by the language of the ITA nor by the Minister’s own reasoning in its correspondence with A4A and TCF, according to the FCA. The FCA held that the Minister had acknowledged that RCAAAs do not “solely” restrict themselves to funding and in effect accepted that funding is a means of promoting amateur athletics. Therefore, the CRA’s argument that financial support is insufficient for registration is not, on its own, a valid basis to deny registration.

A further error in refusing registration was based on a misinterpretation of the required national scope of a CAAA. Because they are based in Vancouver, A4A and TCF did not, according to the CRA, promote amateur athletics on a nationwide basis, which the CRA considered a requirement under the ITA. Citing precedent in Maccabi Canada v Minister of National Revenue, the FCA held that for the purposes of the ITA, it is only necessary that a CAAA “carry on its activities across Canada, [and that] it is not necessary that such organization have a physical presence in each province and territory.” In the TCF case, the CRA implied that a CAAA should be incorporated federally, however, the FCA held this to be too restrictive compared with the language in the ITA, which only requires a CAAA to be created “under any law in force in Canada.” As such, the A4A and TCF incorporations under British Columbia’s previous Society Act satisfied the statutory requirement. In conclusion, the FCA quashed the prior refusals and referred the matter back to the Minister for a fresh determination of the registration applications, taking into account the court’s reasoning in these Appeals.

Read the August 2021 Charity & NFP Law Update