Charities council sounds the alarm
Is Revenue Canada unfairly targeting Christian charities?
By Doug Koop ChristianWeek staff
ELMIRA, ON–Recent "aggressive" moves by Revenue Canada to limit the rights of religious groups to issue charitable receipts are setting off alarm bells at the Canadian Council of Christian Charities (CCCC).
In an "open letter to the Christian community" in the upcoming issue of the CCCC Bulletin, executive director Frank Luellau says "This is probably the most serious issue ever faced by donors to the church and other religious charities."
Luellau’s letter also launches an appeal for "as much as $2 million before the end of the year 2000" to cover legal and related expenses as the CCCC attempts "to defend your traditional right to claim tax credits for your gifts to the church and other Christian charities."
The stakes are high. "Failure to defend against current Revenue Canada actions may cost the Christian community in Canada over $1 billion per year," writes CCCC trust services director Dick Kranendonk in a Bulletin article.
Sounding alarms and appealing for finances are unusual activities for the normally staid CCCC, an accountability and resource group serving hundreds of Christian churches, agencies and denominations. But Kranendonk is convinced that Revenue Canada is targeting Christian groups and unfairly applying an inadequately defined policy. "This is really serious," he told ChristianWeek. "The situation is going downhill very rapidly."
"Detached, disinterested generosity"
At the heart of the matter is the criteria Revenue Canada uses to determine whether a contribution to a charity is a "gift," which is eligible for a tax-deductible receipt, or a "private benevolence," which isn’t.
Revenue Canada recently began applying the "detached, disinterested generosity" concept (first used in Australia), which means that donors who receive a direct or indirect benefit from a gift are not eligible for a tax-deductible receipt. Most benignly, the policy can be interpreted to support the existing understanding that a gift must be "a voluntary transfer of property without value consideration."
But it could mean something else entirely, as a couple of recent Revenue Canada challenges seem to portend. Developments in the United States and United Kingdom also herald a more restrictive trend.
Citing two Canadian cases in particular, Kranendonk reports that Revenue Canada is carrying the concept a step further. Last year, for example, Revenue Canada tried to establish that money contributed to support a child under a World Vision child sponsorship program was "private benevolence" and not charitable because the individual knew in advance that some or all of her gifts would go to a named child.
Another case from 1997 involves a church that has a relationship with a Christian school. Revenue Canada argued that taxpayers who contributed to the church’s student aid fund were not eligible for a charitable deduction because parents would receive an indirect benefit as a result of their gift.
Revenue Canada was not successful in these efforts to staunch the legal leakage of tax dollars, because in both cases the charities were able to demonstrate there was sufficient detachment and that the charity, not the donor, controlled the apportioning of funds.
But, as Kranendonk points out, "in spite of the fact that Revenue Canada lost two cases relating to the ‘detached, disinterested generosity,’ or the ‘linkage,’ concept, it is proceeding to apply these concepts in new cases." For example, gifts made by parents to a school in western Canada are being challenged because the school sends its students on short-term mission projects. Revenue Canada argues this constitutes a "benefit."
Kranendonk explains that "it has long been accepted that ‘benefit’ in tax issues relates to something measurable in economic or commercial terms." In a series of arguments detailed in the bulletin, he maintains that if Revenue Canada’s reasoning is upheld, employees of any charity would be unable to make gifts to the charity that employs them.
Diminishing the church
"If Revenue Canada is allowed to proceed with applying its ‘linkage’ concept without challenge in the courts," he writes, "the Christian community, including the church, will eventually be denied most gifts to religious charities as qualifying for income tax purposes."
In the U.S., the "detached, disinterested generosity" principle is being used to challenge the funds raised by missionaries who have been "deputized" to raise support. Even though the money is given to the charity, the IRS is arguing that money designated to an individual in this way is a "private benevolence."
Kranendonk finds the whole concept disconcerting. "We have yet to speak to a donor who believes that he or she has ever made a gift out of a ‘detached, disinterested generosity," he writes. "The dictionary meanings of those words are an oxymoron for all donors who take their acts of giving seriously."
And while he allows that "there are some concerns of abuse [of receipting privileges] by Christian organizations, that is much more rampant in the non-Christian charity sector"–especially among cultural groups, where free theatre or concert tickets are frequently made available to donors.
"Why are gifts to the symphony and other cultural charities not being challenged? Is there an agenda to attack only gifts to the church and other Christian ministries?" he writes in the Bulletin.
"God’s work does not depend on getting tax relief," Kranendonk told ChristianWeek. "But while we have those rights, let’s protect them for as long as we can."
Tax status threatened
OTTAWA–Registered charities are pondering the implications of a Federal Court of Appeal ruling last month that stripped Human Life International of Canada (HLIC) of registered charity status because it engaged in "activities designed to sway public opinion on controversial social issues."
According to reports, the pro-life organization did not lobby for or against legislation, nor did it support or attack political candidates. But it did have an extensive information program designed to convince the public about the merits of the pro-life position.
Just how one determines what constitutes a controversial social issue is an open question, says Arthur Drache, an Ottawa lawyer who argued HLIC’s case at the appeal. "Revenue Canada now has been armed with explicit powers to go after just about any vocal charity that has the nerve to raise or discuss matters that Revenue presumably considers to be controversial," he wrote in The Financial Post.
Other Christian groups, such as the Evangelical Fellowship of Canada and Focus on the Family, which seek to educate their constituencies about a wide range of issues with political ramifications, are wondering where this will lead.
Although the court has not clearly defined what is controversial, involvement in life issues, pornography and gambling (to name several staples for conservative Christians) are almost certain to be considered political activity and therefore ineligible for registered charity status.
Drache says the case will be appealed to the Supreme Court of Canada, adding that "there is no guarantee that the court will decide to hear it or, if it does, that it will disagree with the Court of Apeal.
"Those who believe one aspect of a charity’s objectives is to inform the public about pressing social issues should be appalled at this turn of events that might threaten the preferred tax status of many charitable organizations," he writes.
– Doug Koop
