On October 31, the Canada Revenue Agency announced that it will waive penalties and interest related to the Underused Housing Tax (UHT) for the 2022 calendar year, provided the UHT return is filed and paid by April 30, 2024.

The Minister of National Revenue explained that many homeowners aren’t aware of the new law and its requirements and wants to ensure “every effort” is made to inform homeowners. To determine if you are an “affected owner” CRA has an online self-assessment tool. If you are an affected owner, you will need to file separate UHT returns for each property you owned on December 31 for the 2022 and 2023 calendar years.

UPDATE! (March 2023)

On March 27, the Canada Revenue Agency announced that it will waive penalties and interest related to the Underused Housing Tax (UHT) for the 2022 calendar year provided the UHT return is filed or paid by October 31, 2023.

Although the deadline for filing and paying the UHT remains April 30, 2023, “no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.”

What Is It?

The Underused Housing Tax (UHT) is an annual 1% tax on the ownership of vacant or underused housing in Canada. While primarily applying to non-resident, non-Canadian owners, there are some instances where the UHT could apply to Canadians.

Who Is Impacted?

For our purposes, I’ll bring attention to two groups. An “excluded owner” has no obligations or liabilities under the UHT and includes a “registered charity for Canadian income tax purposes”. However, “affected owners” do have obligations and liabilities under the UHT, and this includes “a Canadian corporation without share capital”. Since this is a new tax that has yet to be applied by the government or interpreted by courts, the UHT’s exact scope is uncertain.

What Should You Do?

You should reach out to your legal and financial advisors as soon as possible to determine if your organization is an “affected owner” under the UHT. If it is, you must file a separate return for each residential property that the organization owns in Canada, even if it is eligible for an UHT exemption. An affected owner’s failure to file, even if they are ultimately exempt from the UHT, can still result in hefty fines – a minimum $10,000 penalty for corporations. If the organization has to file a return for a residential property for the 2022 calendar year, the return is due by April 30, 2023. Since April 30, 2023, falls on a Sunday, the return is on time if the CRA receives it on May 1, 2023. In other words, time is of the essence.

The post Does The Underused Housing Tax Apply To You? appeared first on CCCC Blogs.

That case dealt with the question of ownership of charitable assets after a local church congregation parted ways with its Diocese, pursuant to “profound and long-standing theological differences.” 

Yesterday, the Supreme Court of Canada dismissed an application seeking leave to appeal that decision. This leaves the Ontario Court of Appeal’s decision the final say on that matter.

For my analysis of the ONCA’s decision, see “Ontario’s Highest Court Decides Charity Property Dispute.”

The post Charity Property Dispute Case: An Update appeared first on CCCC Blogs.

In a recent decision that will be of interest to churches and denominations across the country, Ontario’s highest court has weighed in on a number of important legal questions, including: Who owns a charity’s assets in a parting of ways? Who decides what a “congregation” is? And who should bear the legal costs once these questions are answered? The case and its implications for charities are discussed in this article.

Background

On September 4, 2013, the Ontario Court of Appeal released its decision in Delicata v. Incorporated Synod of the Diocese of Huron.[i] That case involved a dispute between the Anglican Diocese of Huron (the “Diocese”) and the membership of St. Aidan’s Anglican Church in Windsor, Ontario (the “St. Aidan’s Group”). The case involved what the court described as “profound and long-standing theological differences relating to Biblical interpretation and the authority for Anglican doctrine found in the Scriptures.” Ultimately, a decision was made by the St. Aidan’s Group, catalyzed by the Diocese’s decision to bless same-sex unions, to leave the Diocese.

As a result of this parting of ways, the question arose as to who owned the church property in Windsor, as well as a charitable foundation established and maintained by St Aidan’s members. The matter made its way to court, where the trial judge focussed on the interpretation of the Diocese’s canons, particularly Canon 14, which stated that the Diocese holds all real property “in trust for the benefit of the Parish or congregation.”[ii]

The issue turned on the interpretation of the phrase “Parish or congregation”. The St. Aidan’s Group argued that a parish is a fluid concept that describes the people who comprise the congregation at any one time. The Diocese argued that a parish is a static concept that continues in perpetuity regardless of changes in membership, and submitted that while members of the parish may choose to leave, “the parish continues in perpetuity to be the responsibility of the Bishop of the Diocese in which it is geographically located.”[iii] The trial judge agreed with the Diocese, concluding: “Members can come and go in a parish at any time, but the parish itself remains.”[iv]

The trial judge determined that the church property would remain with the Diocese, and the St Aidan’s Group appealed to the Ontario Court of Appeal.

Decision

On appeal, the Ontario Court of Appeal agreed with the Diocese and the lower court, and rejected what it described as the “snapshot theory” of a parish:

“[T]he words ‘Parish or congregation’ must denote a static entity that may not be severed from the Diocese and that is not defined by any particular group of members at any particular time.”[v]

The Court was influenced by the Anglican Church’s Canons and incorporating legislation, which both stated that church property could not be sold, mortgaged, or otherwise disposed of without the Bishop’s consent. The Court interpreted this to mean that the Bishop (and by extension the Diocese) retained control over all church property in perpetuity for the benefit of the Diocese. Permitting the property to be distributed “at the will of a single group of estranged congregants” would, in the view of the Court, wholly undermine this objective.[vi] The court also noted that to allow “any group of worshippers who [meet the minimum membership requirements] and…by majority vote, leave the Diocese and take the church property with them” would clearly be contrary to “what the canons intended.”[vii]

The St. Aidan’s Group also argued that, if they could not keep the church building, the Diocese would be unjustly enriched because funds for the church’s land and building, including an addition in the 1990’s that cost $610,000, were raised “entirely by the church members”. However, the Court rejected this argument as well, concluding:

“The congregants who contributed money or labour to maintaining the church property knew they were doing so for the benefit of St. Aidan’s Parish of the Diocese of Huron. It must be inferred that they also knew what the canons and statute stated.”[viii]

For all of these reasons, the Court dismissed the St. Aidan’s Group’s appeal, affirming that the St. Aidan’s Group’s vote to leave the Diocese meant that it had to leave the property of the parish behind.

This left the issue of costs: who was responsible for paying the legal fees for the lengthy court battle? Normally, the general rule is that the unsuccessful party pays at least a portion of the successful party’s costs. In the lower court, however, the costs judge had decided to depart from this usual rule in the interest of promoting “harmony”. The Diocese appealed this decision, and once again, found favour with the Court of Appeal. The Court of Appeal noted that there was “no basis in the evidence” to suggest that the “pursuit of harmony” was a legitimate reason to depart from the usual rules governing cost award. The Court stated:

“As a matter of principle, in our justice system litigation over spiritual or religious convictions should not presumptively have a safe harbour from costs.”[ix]

The Court ordered the St. Aidan’s Group to pay $100,000 toward the Diocese’s legal costs (which amounted to almost $450,000), in addition to their own costs of almost $270,000. The Court made it clear that this money could not be paid from the St Aidan’s Foundations funds, as this would constitute a breach of trust. Presumably, this means that the individuals that formed the St. Aidan’s group will be personally responsible to pay this money.

Commentary

The outcome of this decision is not particularly surprising – it is consistent with the lower court’s findings as well as the conclusions reached by British Columbia courts in a similar case.[x] However, it does affirm a number of important legal concepts, and the following general principles may be drawn from the case (see also our recent article “When a Charity Divides, Who Keeps What?” for a discussion of a similar case from Alberta):

1)    Courts will look to a church’s governing documents and hierarchical structure to determine ownership of property in the event of a dispute between a diocese/denomination and local congregation.

2)    The Ontario Court of Appeal’s comments continue a judicial trend: judges seem to be resistant to allowing dissident groups to unilaterally break away from a larger church body and take property with them, even if those individuals are the ones who actually donated the resources to acquire the property. Of course, each case will be decided on its own facts, and in this case the Anglican Church’s unique hierarchical structure, canons, and legislation all played a role in the final outcome. It is quite possible that a different conclusion might be reached in a different denominational/local church relationship, depending on the specific church laws in place.

3)    It seems that church members and donors will be “presumed” by the court to have read and understood the documents governing the legal relationship between the diocese or denomination and local church. Practically speaking, this does not seem to reflect the reality that many church members have never read their denominational documents or church canons, or at least might interpret them differently than a civil court would. As such, their actual intent in making a donation may or may not reflect what the law presumes it to be. Nevertheless, denominations and churches alike should ensure that everyone has a clear understanding of who has ownership of “church property” and who has the authority to decide what to do with it in the event of a dispute.

4)    Individual litigants should no longer presume that they will be shielded from a costs award should they be unsuccessful, even if they are going to court with the best of intentions. Although previous cases (including a dissenting opinion of the British Columbia Court of Appeal) suggested that there might be some latitude shown to litigants motivated by sincere religious convictions, that view was not adopted by the Ontario Court of Appeal.

Ultimately, the case reflects just some of the difficulties that arise in the unfortunate scenario when a church and denomination disagree on doctrinal matters. Sometimes, recourse to the civil court system is inevitable, but denominations and churches may wish to think creatively and proactively about whether other options could be explored in the event of a dispute. It is best to have that conversation early on, before a dispute arises, so everyone can think objectively about how such matters ought to be dealt with. Hopefully, in the spirit of Christian harmony, some disputes might be resolved without having to commence litigation.

The post Ontario’s Highest Court Decides Church Property Dispute appeared first on CCCC Blogs.

A Case on Point

This issue was recently addressed by the Alberta Court of Appeal in Catholic Charities Clothes Bank of Lethbridge v. Roman Catholic Diocese of Calgary.[i] That case arose from a disagreement between a Calgary diocese and a Clothes Bank (which was described as an agency of the Diocese), over the sale of two properties.  The two properties were originally purchased by the Clothes Bank with its own funds, as well as monies borrowed from the Diocese. However, legal title was registered in the name of the Diocese. The central issue before the court was whether the Diocese owned the properties outright, or whether they were held in trust for the Clothes Bank.

The court concluded on the totality of the evidence that the Diocese was the owner of the properties, based on the parties’ intentions at the time the properties were purchased, as well as their subsequent conduct. The court reviewed meeting minutes, correspondence, and financial records, and noted the following:

• The Clothes Bank, by its own initiative, sought for itself a place in the formal church organization. When the Clothes Bank was incorporated, its objects specifically stated that it would be operated under the auspices of the Diocese.
• The Clothes Bank specifically sought the approval of the Diocese to purchase both properties.
• The Clothes Bank considered the issue of ownership and received legal advice, but agreed that title to the properties would be registered in the name of the Diocese.
• Although the Clothes Bank argued that the Diocese merely held title in trust for the Clothes Bank, there was no evidence of any such arrangement.
• A letter from the Clothes Bank to a local authorities board confirmed that one of the properties was owned by the Diocese, and that the Clothes Bank operated under the auspice of the Diocese

The court concluded: “[I]f the title was to be held in trust for the Clothes Bank, there would at least have been some mention of that, or even a trust declaration prepared. But there was not. This gives credence to the argument that full title to these properties was given to the Diocese, which was not simply to hold that title in trust for the Clothes Bank…We are satisfied that the Diocese is the legal and beneficial owner of the two properties in question.” (para. 30).

Some Important Principles

It must be noted that each case will be decided on its own facts, but some important general principles can be drawn from the court’s decision:

• registration of title is the primary indicator of ownership of property, subject only to clear evidence that the parties had intended and agreed to a trust arrangement
• the clearest evidence of a trust agreement is a written declaration or deed which confirms that a “parent” charity is a trustee of the property, and holds it in trust for the benefit of the “subsidiary” charity
• in the absence of such agreement, courts will look (in ambiguous cases) to organizations’ records, such as correspondence and meeting minutes, to determine their intentions – clear evidence will be required and the onus of proof of a “resulting trust” will be on the charity that does not have title

Finally, it is important to remember that, even if there is evidence of a trust agreement, there may also still be issues about the “true” beneficiary of the trust, and whether the group that wants to “break away” meets that definition. For example, in a recent conflict that arose between a number of Anglican parishes and the Anglican Church in Canada over doctrinal issues, a B.C. court was asked to determine who owned a number church properties in dispute. The court concluded that the buildings and other assets were held in trust to further Anglican ministry in accordance with Anglican doctrine, and that “in Canada, the General Synod has the final word on doctrinal matters”.[ii] As such, the court concluded, the individuals who wished to remove themselves from the General Synod’s oversight could not do so and retain the right to use the properties held for purposes of Anglican ministry. [ii] This reasoning was followed by an Ontario court hearing a similar dispute.[iii]

Although a local church might argue that they are the “true” adherents of the teachings of the Church for which a charitable trust was established, Canadian cases suggest that courts will defer to denominational leadership to determine official Church doctrine. Thus, even if a local church is the beneficial owner of a property, its members may not be successful in retaining possession in the event of a doctrinal dispute. Again, however, it must be emphasized that each case will be decided on its own facts.

The Practical Lesson?

So what can be learned from these cases? An important lesson is this: even though no one ever wants to contemplate the unfortunate scenario of a charity “split”, it always remains a possibility. To mitigate the likelihood of property disputes or other costly court conflicts in such circumstances, it is best to clearly communicate at the outset of the relationship who retains ownership of property, and how assets will be dealt with in the event of a parting of ways.

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