Supreme Court Won’t Hear Revocation Appeal

Authored by Deina Warren, Associate Director, Legal Affairs

The Supreme Court of Canada (SCC) has declined to hear an appeal by Many Mansions Spiritual Centre about the revocation of its charitable status. Many Mansions was appealing a Federal Court of Appeal decision (FCA)[1] that had confirmed the revocation.[2]

When the SCC dismisses an application to appeal (called “leave to appeal”), it means the decision appealed from remains in force.[3] There are no further appeals available. For Many Mansions, this means it has no more recourse to challenge its loss of charitable status.

Why was it revoked in the first place? Many Mansions had been audited for two fiscal periods (2011 and 2012) and the Minister of National Revenue (MNR) provided multiple reasons for revocation under section 168(1) of the Income Tax Act (ITA):

• failure to devote all resources to charitable activities
• activities inconsistent with charitable objects
• providing private benefit to members
• failure to file information returns
• issuing donation receipts not at fair market value
• failure to keep adequate books and records

In its appeal at the FCA, Many Mansions argued that deciding whether its activities were inconsistent with its objects was a matter of doctrine or theology and should “have no place in government.”[4] The FCA disagreed: “in the case of a charity registered for the purpose of furthering a religious object, it may be necessary to determine the scope of that object and the extent to which the charity’s activities come within it.”[5]

Even if the doctrine/theology argument had been accepted, non-compliance with record-keeping requirements and conferring private benefit were sufficient reasons to revoke Many Manion’s charitable status. Indeed, each ground in section 168(1) ITA can independently justify revocation.

Record-keeping problems included failure to document rent payable, failure to document a loan from the pastor’s late wife, and inconsistencies in amounts due to the pastor. Many Mansions argued it was audited as a nascent charity being run by volunteers, the deficiencies were minor, and it had since hired professionals. The FCA disagreed, reiterating that “a charitable organization’s obligation to maintain adequate books and records is ‘foundational.’”[6]  These were not minor deficiencies; these were serious.

Private benefit problems included the pastor using meeting rooms to operate a private business. While the ITA permits a charity itself to carry on a related business, the pastor’s private business did not fall within the exception; it was an impermissible use of charitable funds for personal benefit.[7] 

The FCA held the MNR decision to revoke Many Mansions’ charitable status was not too severe but reasonable. The facts were sufficient to permit the MNR to see the non-compliance as “serious or aggravated” and as “warranting revocation.”[8] While the SCC does not give reasons for dismissing leave to appeal applications, a dismissal suggests the SCC sees no compelling reason to interfere with the analysis or outcome. In other words, it appears that the SCC likewise concurs with the decisions of the MNR and the FCA.

This is a good reminder that all charities need to know, understand and abide by CRA’s requirements for maintaining books and records (see part one of our recent Bulletin series on the topic). Charities also need to avoid using charitable resources for personal benefit.

[1] Many Mansions Spiritual Center, Inc. v Canada (National Revenue), 2019 FCA 189 [Many Mansions], online: http://canlii.ca/t/j16vj

[2] See my article on the FCA decision in “Horizons” CCCC Bulletin 2019:4 (4 September 2019)

[3] There are approximately 600 leave applications submitted to the SCC each year and only about 80 are approved (or “granted”)

[4] Many Mansions, at para 6

[5] Ibid.

[6] Ibid at para 10 [emphasis added]. For further information, see section 230(1) of the Income Tax Act; CRA, “Books and Records” (last modified 21 July 2016) online:  www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/books-records.html; and CCCC Charities Handbook, Chapter 26: Books and Records 

[7] See CCCC Charities Handbook, Chapter 5: Related Business Activities, “Linked and Subordinate Business”; CRA’s “Private Benefit” summary policy, (9 June 2003), online: www.canada.ca/en/revenue-agency/services/charities-giving/charities/policies-guidance/summary-policy-p09-private-benefit.html; and section 3.2.4, “Private benefit: To what extent may individuals benefit privately?” (10 March 2006), online: CRA www.canada.ca/en/revenue-agency/services/charities-giving/charities/policies-guidance/policy-statement-024-guidelines-registering-a-charity-meeting-public-benefit-test.html#toc12.

[8] Many Mansions, at paras 13-14