Vancouver Society of Immigrant & Visible Minority Women v. M.N.R. is the leading decision of the Supreme Court of Canada on the meaning and scope of charitable purposes and activities, which are requirements for the registration of a charitable organization under the Income Tax Act (Canada).
Briefly, the plaintiff had long sought registration as a charitable organization from the Charities Directorate but was refused registration. It ultimately appealed that refusal to the Federal Court of Appeal, which dismissed the appeal. On further appeal, the Supreme Court split 4-3, with Justice Iacobucci writing the reasons for the majority, dismissing the appeal. The majority found that neither the purposes nor the activities of the Society were exclusively charitable within the meaning of the Income Tax Act.
The Society's amended objects include providing educational forums, classes, workshops and seminars to immigrant women in order that they could obtain employment or self-employment (which was found by the Court to be charitable under an expanded definition) and also doing all such things that are incidental or conducive to the attainment of the other stated objects (which was found to be too vague and indeterminate to permit the society to qualify for charitable status).
(b) Legislative Scheme
The Act distinguishes between registered charities and non-profit organizations. Both are exempt from paying tax. However, unlike NPOs, registered charities are also able to issue charitable tax receipts to contributors, entitling these contributors to tax credits in respect of the contributions made. Registered charities may, in turn, be divided into charitable organizations (which is the category that the society aspired to) and charitable foundations (which may be either public or private).
The Act defines a charitable organization as an organization, whether or not incorporated, all of the resources of which are devoted to charitable activities carried out by the organization itself and no part of the income of which is payable to, or otherwise available for, the personal benefit of any member, trustee or settlor. If an organization devotes substantially all (that is, at least 90%) of its resources to charitable activities and devotes part of its resources to political activities that are ancillary to its charitable activities and those political activities do not include the direct or indirect support of, or opposition to, any political party or candidate for public office, the organization is considered to be devoting that part of its resources to charitable activities carried on by it.
The rulings of the Court may be summarized as follows:
● The Act impliedly relies on the common law to define the meaning of charity, which defines charities under one of four heads, namely: (i) relief of poverty; (ii) advancement of education; (iii) advancement of religion; and (iv) other purposes beneficial to the community not falling under the other heads. The Court went on to elaborate heads (ii) and (iv).
● It is the purpose in furtherance of which an activity is carried out, and not the character of the activity itself, that determines whether it is charitable in character.
● A charitable activity must be for the benefit of the community, or a significant portion of the community, and not be concerned with the conferment of private advantage. The public benefit requirement is a necessary, but not sufficient, condition for a finding of charity at common law.
● To qualify for charitable registration under the Act: (i) the purposes of the organization must be charitable and must define the scope of the activities engaged in by the organization; and (ii) all of the organization's resources must be devoted to those activities except for the limited ancillary political activities allowed (as described above).
● The advancement of education head means (i) formal training of the mind (the original meaning), (ii) improvement of a useful branch of human knowledge, or (iii) providing information or training in a structured manner and for a genuinely educational purpose (and not solely to promote a particular point of view or political orientation), which the Court added in Vancouver Society. Education can be provided by workshops, seminars, training and self-study as well as traditional, classroom-type instruction. Simply providing the opportunity for people to educate themselves (such as by making material available) is insufficient. Also, the education can advance a specific, practical end.
● The residual head requires more than a public benefit but that the purpose benefit the community in a way that the law regards as charitable. The case law has established certain charitable purposes under the residual head. Others may be added by reasonable extension or analogy. However, given the significant loss of revenue to the public treasury, it is for Parliament, not the courts, to consider a new and more expansive definition of charity
● Unless the purposes of an organization are exclusively charitable, it cannot be said that the organization's activities are exclusively charitable.
● While teaching immigrant and visible minority women the skills they requite to obtain employment in Canada qualifies as a charitable activity, creating a job skills directory, networking, liaising for accreditation of credentials, soliciting job opportunities and offering referral services (which collectively comprise marketing of individual skills to prospective employers) does not.
3. Key Observations
Vancouver Society remains the starting point in determining an organization's charitable status.