Year-End Planning: Verify Charitable Status

Year-end is charitable giving time, but remembering to verify the tax status of any organization that you intend to donate a considerable sum to is very important as not all benevolent oriented organizations will allow a tax credit under the Income Tax Act. Last month, a hopeless appeal was lost in the Tax Court of Canada, for example.  

In Hall v. The Queen (2013) TCC 314, Justice Pizzitelli delivered the reasons to the Appellant, Nigel Hall, who was denied a charitable tax credit pursuant to section 118.3 of the Income Tax Act (the Act) for his contribution of $24,800 to a donee that was not a registered charity and therefore not a “qualified donee” under the Act. Hall claimed that this denial was a violation of his section 15(1) rights under the Canadian Charter of Rights and Freedoms (the Charter).

It was not disputed that Mr. Hall actually donated the sum, but unfortunately for him, the International Association of Scientologists (IAS) was not a registered charity. IAS is involved in drug addiction education treatment and disaster relief, among other charitable-like activities. As Justice Pizzitelli stated: “there is no dispute that IAS conducts what are normally considered charitable or charitable-like activities but that IAS is not a registered charity in Canada nor apparently even [ever] applied to be.”

Mr. Hall contended that his Charter Rights were breached because he was unable to receive the charitable tax credit for choosing to donate to an organization that reflected his morals. Section 15(1) of the Charter provides:

Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

This case was dealt with easily and succinctly, however. It has been established in prior decisions, such as Ali v Canada 2008 FCA 190, where the Federal Court of Appeal, relying on the Supreme Court of Canada decision in Auton (Guardian ad litem of) v British Columbia (Attorney General), held that: “the Charter will not be infringed where the benefit sought is not one that is provided by the law that is being challenged. …” How can it be discriminatory to deny the appellants a benefit that no one gets?”

The moral? Check out the tax status before you give to the organization of your choice.