UPDATE: this decision has been appealed to the Ontario Court of Appeal. We’ll be sure to keep you posted about any further decisions.
An Ontario court dismissed a Charter challenge of Canada Revenue Agency’s (CRA) Review and Analysis Division (RAD) audit process was dismissed because it was made too early.
You may have seen news releases or heard about a faith-based charity challenging CRA’s audit process. But what did the judgment actually say? Here is a summary of the facts, background and the court findings in Muslim Association of Canada v Attorney General of Canada, 2023 ONSC 5171.
The Muslim Association of Canada (MAC) brought a Charter challenge against the Canada Revenue Agency (CRA)’s Review and Analysis Division (RAD) for its audit process and decision-making. MAC argued that its Charter rights were violated as a result of a biased process. While “sympathetic to many” of MAC’s arguments, the judge dismissed MAC’s Charter challenge because it was premature. Prematurity means that the administrative process is ongoing. The judge specifically identified final decisions, internal appeals and court appeals available to MAC that should first run their course.
MAC is a registered Canadian charity with 500 members, 1500 volunteers, 22 mosques and community centres, 30 schools; MAC serves more than 150,000 members of the Muslim community across Canada.
CRA regulates registered charities in Canada, including choosing charities for audit and sometimes imposing sanctions, from financial penalties up to revoking charitable status. Audits are conducted by the Compliance Division and RAD. RAD is responsible for preventing terrorist groups from abusing registered charities.
RAD selected MAC for an audit. MAC argued that its Charter freedom of religion, expression, association, and right to equality were infringed by the audit in three specific ways: RAD’s risk-based assessment process was biased, RAD’s Audit Referral Analysis relies on highly questionable sources, RAD’s Audit and resulting Administrative Fairness Letter profoundly misunderstands Islam.
Issues & Analysis
RAD’s Risk-Based Assessment
MAC argued that RAD’s risk-based assessment process is biased because it disproportionately selects Muslim charities for audit and revocation and is based on publications that unfairly characterize and target Muslim charities.
The judge reviewed three publications that “identify the risk of terrorist financing as foreign, and that violent Islamist extremism is the leading threat” . But this alone did not amount to a Charter violation. No party presented evidence to show that the risk is not, in fact, foreign and that violent Islamist extremism was not, in fact, the leading threat.
Further, the fact that 12 of 14 RAD initiated revocations were of Muslim charities did not mean CRA unfairly targets Muslim charities. The judge had no information about the 12 charities that were revoked, how those grounds compare to grounds in CRA guidance, CRA, policy or to non-Muslim charities .
RAD’s Audit Referral Analysis
MAC argued that RAD’s Audit Referral Analysis referenced highly questionable sources, cited sources that promoted conspiracy theories, and individuals whose public comments are racist and Islamophobic.
The judge agreed that there were very concerning elements within RAD’s Audit Referral Analysis. For example, the fact that a MAC donor also gave to illegal causes does not mean that MAC itself is involved in illegal causes.
However, “the quality of information needed to justify an investigation is substantially lower than the quality of evidence needed to make findings” or impose sanctions . The judge had no information about the standards RAD must meet to justify starting an investigation or at what point starting an investigation could amount to a Charter breach .
RAD’s Audit & Administrative Fairness Letter
MAC argued that RAD’s Audit (and resulting Administrative Fairness Letter, which sets out the detailed audit findings) improperly preferred documentary evidence over interview statements from MAC’s representatives, confused the religious philosophy of the Muslim Brotherhood with the political ideology of the party with the same name, and narrowly interpreted what activities can be incidental and ancillary to the purpose of advancing religion.
The judge did not find evidence in the record to show that RAD’s preference for documentary evidence was based on a belief that Muslims are “inherently unreliable” – it is a common litigation practice to prefer documents over contradictory statements.
In contrast, the judge expressed “serious concerns” with RAD’s inferences about former MAC directors advising candidates in the 2012 Egyptian election, noting that just because a political party may adopt statements similar to those of a charity, or if a charity made statements similar to those made by a political party, that alone does not justify revocation .
Also problematic was RAD’s characterization of “youth social activities” and “unstructured social or recreational activities” as not incidental or ancillary to advancing religion. RAD specifically identified a “large youth Centre … [with] ping-pong, football and air hockey tables, a series of sofas, and a television. In one corner there is a play mat with toys for smaller children” . The judge stated that “providing a forum for community and social cohesion is incidental to any religious organization” and that religious organizations “must be able to offer some sense of community and enjoyment that goes beyond religious doctrine” .
Is the Charter Challenge Premature?
Ultimately, the issue of prematurity decided the outcome of this case.
Prematurity means that unless there are exceptional circumstances, a court will not hear a matter if it is part of “an ongoing administrative process” . In this case, a number of steps were still available to MAC:
- Respond to the Administrative Fairness Letter
- Engage in dialogue with CRA
- Appeal to CRA’s Appeal Branch (if final decision unsatisfactory)
- Appeal further to Tax Court of Canada regarding financial penalties
- Appeal further to the Federal Court of Appeal regarding revocation
The judge rejected MAC’s argument that its case was different because it raised a Charter issue, finding that prematurity applies regardless of the “technical form” the court case may take . In this case it was the “lack of a final [CRA] decision and the absence of benchmarks against which to measure CRA’s conduct” that resulted in the application being dismissed as premature .
Even though the case was dismissed, the judge was careful to say that none of his findings were “intended to be binding on any future court” and should not be used to prevent MAC from raising the same issues in a future challenge .
The Superior Court dismissed MAC’s Charter challenge because it was premature. CRA’s administrative process needed to finish before MAC brought its challenge to a court.
There are a variety of interesting and relevant parts to this decision:
- Even if the government’s process shows some evidence of bias, is long, and costly, a court will not intervene until the administrative process is complete.
- It appears that the government’s definition of advancing religion may be unnecessarily narrow, reinforcing the need for three things:
- CRA’s Advancement of Religion guidance to be published;
- Clarity on the definition and scope of Advancement of Religion that is used in compliance and audit processes; and,
- That advancement of religion be properly understood as far more broad than mere theological instruction;
- There is a lack of publicly available standards in these processes, and/or a lack of standards presented in the evidence before the court.
The content provided in this blog is for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.