Human Life International in Canada Inc. v. Canada (Minister of National Revenue - M.N.R.)
Federal Court of Appeal File No. A-288-94
Date of Decision: March 18, 1998
In this issue:
Charities; tax law; definition of charitable purpose
Human Life International in Canada Inc. (hereafter HLIC) was registered as a charitable organization in 1984. Its stated purposes are, among others things, "to promote the social welfare and defend the human rights of persons born and unborn" and "to educate persons in their obligation to respect and protect innocent human life." It has pursued these purposes largely by conducting lectures, seminars and conferences and publishing literature on a diverse range of topics such as global population, abortion, pornography, euthanasia, and universal day care. In 1989, as a result of HLIC sending a postcard to all members of Parliament depicting an aborted fetus, the Minister of National Revenue (MNR) decided to conduct an audit of HLIC. The audit was completed without incident, and MNR did not request that HLIC make any changes in its operations. MNR then conducted a second audit which was completed in 1993. MNR revoked HLIC's charitable status in 1994 on the grounds that HLIC was not devoting substantially all of its resources to charitable activity. HLIC appealed that decision to the Federal Court of Appeal.
What are "charitable purposes" as understood under the Income Tax Act? Why is it that altruistic organizations which are dedicated to certain controversial issues under recognized purposes are not entitled to the taxation benefits of charitable status?
The Court refused HLIC's appeal, and upheld MNR's decision to revoke HLIC's charitable status.
The Income Tax Act provides that organizations registered under the Act as charities are exempt from tax and those who contribute to them are eligible for tax credits. The Act does not define "charity," and so interpretation has developed through the common law. Not every act of public utility is considered to be charitable for the purposes of the Act. In 1891, in the case of Commissioners of Income Tax v. Pemsel, the House of Lords held that charity in the legal sense includes: a) relief of poverty, b) the advancement of education, c) the advancement of religion, and d) other purposes beneficial to the community not falling under the preceding heads. The fourth category, "purposes beneficial to the community," has often been interpreted by the courts by reference and analogy to a statute passed in 1601 during the reign of Elizabeth I which provides a non-exhaustive list of purposes which may be considered beneficial to the community and charitable under the law. However the Court questioned the relevance of the Statute of Elizabeth and restricted its analysis to precedent developed by the Federal Court of Appeal.
Justice Strayer, speaking for the Court, pleaded in his reasons for judgment for Parliament to provide some further clarification on the meaning of "beneficial to the community." To come under the heading of "advancement of education," the Court held that an activity of an organization must be directed towards the "formal training of the mind or the improvement of a useful branch of human knowledge." The Court held that HLIC's activities constituted neither of these. Its seminars, conferences, and literature were not sufficiently structured to constitute formal training, and neither were they "significant research or the systematic development of a body of human knowledge." Justice Strayer's opinion was rather that HLIC's material was instead "the dissemination of a set of opinions on various social issues" and so could not fit under the rubric of advancement of education. With respect to HLIC's main submission that its activities came within "other purposes beneficial to the community," the Court held to the contrary that activities designed to "sway public opinion on a controversial social issue are not charitable but are political." Unfortunately counsel for MNR was unable to point to any authority in support of that position, but Justice Strayer drew an analogy from Positive Action Against Pornography v. M.N.R. (1988) Fed. C.A., where an organization which distributed material which showed a clear "anti-pornography bias" and advocated new legislation was held to be acting for political purposes.
At the heart of this case is the troublesome issue of how a judge ought to go about assessing which purposes are "educational" or "beneficial to the community" and worthy of the attendant tax advantages. To answer the question properly requires an understanding of the nature of political community. One cannot understand whether something will benefit a community without having a sense of the purposes for which a community exists. And the purpose, or common good, of a political community is a subject which deserves more attention than it commonly receives.
At a fairly abstract and uncontroversial level, one of the purposes of a political community, or state, is to secure for its members those things which individuals and families are not able to well provide for themselves. Included among such things is the provision of interpersonal justice, which includes some measure of protection for the relatively dependant and powerless from those who might do them harm through malice or, more commonly, through simple indifference to their needs.
It is a time-honoured concept that those who act to secure justice are acting in the interests of the common good of all members of the political community. Actions intended to make a society more just are also the good of those who may as a consequence find their desires frustrated, for example, by being required to pay taxes to provide financial assistance to those who they would feel no obligation to assist. Government acts legitimately both by creating institutions to strengthen the political community and to provide incentives and assistance to individuals and groups of individuals looking to accomplish the same ends. Such is the rationale for providing tax advantages to those who act for such charitable purposes.
The Statute of Elizabeth which Strayer J.A. dismissed as irrelevant, specifies purposes which were considered at the time to be for the common good. Many of those, such as the repair of bridges and highways, are now things which the state normally provides and are not commonly provided through the initiative of individual charity. Other purposes listed in the Statute are as pressing now as they were in 1601, and a common theme throughout is that it is proper, and for the benefit of the community, for individuals to act so as to further the common good. This is the spirit of the Statute which has been invoked by the Federal Court of Appeal on numerous prior occasions.
Justice Strayer was plainly uncomfortable with being asked to determine which activities are beneficial for the community and are therefore entitled to the support of the taxation system. In his words, "[c]ourts should not be called upon to make such decisions as it involves granting or denying legitimacy to what are essentially political views: namely what are the proper forms of conduct, though not mandated by present law, to be urged on other members of the community?" His conclusion is that organization for the purpose of disseminating information about laws and social policies and moral decisions which are believed to be harmful, is not charitable. We would submit that if this is the law, that it is time for the law to adapt to meet changing social conditions. As Lord Wilberforce noted in Scottish Burial Reform and Cremation Society Ltd. v. Glasgow Corp.,  A.C. 138 (H.L.), "the law of charity is a moving subject which may well have evolved even since 1891."
Referring to the same four headings of charitable purpose invoked by the Court in this case, Lord Wilberforce also made the observation that "it is a classification of convenience," and that "there may be purposes which do not fit neatly into one or other of the headings." With respect to whether HLIC's activities qualify as educational, the requirement that an educational activity be "formal" or "structured" sets an impossibly high standard which bears no rational connection to either the quality or charitable nature of education. Depending on one's viewpoint, the current public school curriculum might not satisfy the criteria if by "structured" one means "rigourous." The Court uses "structure" to provide a straightforward, objective test for the quality of education, but it is just the wrong measuring stick to use. One well formed conference, forum or lecture can do more for education than a host of well-structured but intellectually thin programs.
The Court is not asked to determine whether it agrees with the educational purpose of the charity. Had the Court applied Lord Wilberforce's approach it would have been possible to determine that HLIC was in its educative capacity acting charitably, by advancing the cause of the relatively powerless; in this case the unborn and the dependant elderly, among others. It is too easy to characterize any contentious social issue as "polemical" and thereby throw it off the charitable bandwagon. That would be a mistake. Surely those who are most in need of an advocate are those whom society has overlooked or abandoned however "controversial" such advocacy is. When contrasted with the Court's decision in Native Communications Society of B.C. v. Canada (M.N.R.), (1986) 3 F.C. 471, where it rightly held that a native newspaper was a charitable enterprise because of the good it provided to the native community, the Court has made itself vulnerable to the criticism that its conclusions are driven by its sympathies with the charity's purposes, rather than the principles embodied in the common law of charitable trusts.
In fact the Court in 1991 in Everywoman's Health Centre Society (1988) v. Her Majesty the Queen specifically noted that the controversial nature of a charity's activities is irrelevant to its charitable status: "Charity and public opinion do not always go hand in hand; some forms of charity will often precede public opinion, while others will often offend it. Courts are not well equipped to assess public consensus, which is a fragile and volatile concept. The determination of the charitable character of an activity should not become a battle between pollsters. Courts are asked to decide whether there is an advantage for the public, not whether the public agrees that there is such an advantage." While there are, no doubt, marginal determinations in this area that will always call upon the courts to make fine distinctions (such as whether an educational charity's programs have only an allowable ancillary political aspect) it is important that the courts not unduly restrict the ambit of charitable status. Concern about issues such as abortion and euthanasia undoubtedly have theoretical, educational and political dimensions. And such concern does not become political because an issue is the subject of controversy.
It is unfortunate that this decision might lead to the conclusion that all involvement with these "polemical" issues will be necessarily political and therefore not charitable. Such a reading would unduly circumscribe important citizen involvement in the charitable aspects (including religion and education) of these important areas. In a free society causes which seek to educate the public and/or lead its members to consider metaphysical questions in the way religion or some education initiatives can may have "polemical" edges but unless this activity is political per se (the direct support or advocacy of particular political parties) ought not to preclude charitable status. HLIC is applying for leave to appeal this decision to the Supreme Court of Canada, and we hope that the Court will take up the opportunity to clarify this important area and perhaps give guidance as to what aspects of a society's actions may be saved as charitable and "severed" from those activities that cannot be. Charity should be encouraged for a host of reasons and the court should not be afraid of saying so within its proper role of interpreting the common law tradition. If the court fails to do this legislative changes may be necessary.
This issue of LexView was researched and written by:
Iain T. Benson, B.A. (Hons.), M.A. (Cantab.), LL.B. of the British Columbia Bar
Brad Miller, B.Comm., LL.B, LL.M. (magna cum laude) of the British Columbia Bar.
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