SUMMARY OF THE DECISION

Az-Zahraa Housing Society (“Society”) is a non-profit that provides affordable, rent-geared-to-income housing in Richmond, B.C. The Society asked the Minister of National Revenue (“Minister”) to be designated as a municipality for the purposes of the GST/HST rebate because providing affordable housing is deemed a municipal service. The Society’s request was denied multiple times. The issue was whether the decision-maker had relied too much on a Canada Revenue Agency (CRA) information sheet (GI-124, municipal designation of organizations providing rent-geared-to-income housing), which more narrowly defined municipal designation eligibility than the relevant section of the Excise Tax Act (s 259(1)). The Federal Court agreed that the Minister too strictly adhered to the information sheet and had not properly considered all the facts presented by the Society.

ISSUE: DID THE MINISTER FETTER HER DISCRETION?

The Criteria

In its definition of “municipality” the Excise Tax Act does not lay out criteria for the Minister to consider when an entity applies for this status. In contrast, the information sheet lists four criteria, including the one at issue in this case, whether the Society received government funding.

The Society had a complex agreement with BC Housing which meant that the Society didn’t receive direct funding; however, the Society sold six of its fifteen housing units to BC Housing which it leased back to the Society at no cost. In this way, the Society received “government assistance.”  

The Minister found that just because BC Housing allowed the Society to rent out units owned by BC Housing and retain income, that it was “not government funding per the CRA administrative guidelines” (para 15).

The Decision

Administrative decision makers are not supposed to “fetter the exercise of discretionary powers by strictly following administrative guidelines” (para 20). That means that government employees aren’t allowed to treat informal guidelines or information sheets as the law.

In this case, the information sheet more narrowly defined eligibility than the relevant section of the Excise Tax Act and the decision maker wrongly refused “to consider circumstances that fell outside the four corners of the information sheet” (para 25).

The Regulations

The Minister argued that she rightly imported and relied on the definition of “government funding” found in the Public Service Body Rebate (GST/HST) Regulations. The Federal Court found no reference to the Regulations in the Minister’s decision, the Regulation was not directly applicable to the Society’s application, and there was no valid rationale for requiring “government funding” as opposed to “government assistance” in an application for municipal designations.

FINDINGS

The Federal Court granted the Society’s application. Even though the Society had already been through multiple Ministerial decisions (the first application was denied, a reconsideration affirmed the denial, and a second application was also denied), the Federal Court sent the matter back to the Minister for reconsideration by a different delegate.

KEY TAKEAWAYS

This decision has similarities to the Federal Court of Appeal decision in Athletes 4 Athletes Foundation v Canada (National Revenue), 2021 FCA 145.

Both cases addressed a government decision based on either a policy statement (Athletes 4 Athletes) or an information sheet (Az-Zahraa), both of which provided a more narrow interpretation than the legislation itself.

The key takeaway from Athletes 4 Athletes is reinforced in this decision: while we (rightly) rely on CRA guidance a lot, the text of the Income Tax Act or the Excise Tax Act always take priority. It is important to know how courts interpret and apply the law when we read guidance and information sheets. Where there is clear alignment between the law and the guidance, we can have a lot of certainty. But where there is ambiguity, or the guidance goes beyond the scope of the legislation, we should be careful not to equate the guidance with the law. As we see in both of these decisions, that sometimes simply isn’t the case.

The post How Authoritative are CRA Information Sheets? The Federal Court Weighs In… appeared first on CCCC Blogs.

The Bottom Line: CSJ Applicants Successful, Awarded Costs

Two religious organizations – BCM International and Redeemer University – successfully challenged their 2019 Canada Summer Jobs rejections. In both cases the Federal Court held that the government process was unfair to the applicant organizations and that alone would have been sufficient to find in their favour. But the Court went further in the BCM decision and found the denial unreasonable. Because the issue could be decided on procedural grounds, the Court did not make a decision on the various Charter claims.

In terms of a remedy, there was no option to send the applications back for re-assessment. Instead, the Court issued declarations that the government breached its procedural fairness obligations and awarded costs to the applicants.

The Procedure Was Unfair

An administrative decision maker has a duty of fairness. What fairness demands will depend on the facts of specific circumstances. Procedural fairness ensures that decisions are made in a fair and open procedure, knowing what the issue is (e.g. “the case to be met”), with an opportunity for participation – providing evidence, putting forward views – and having it all properly considered by the decision maker.

In both cases, the procedure was unfair. BCM was not given notice of the issues and was not given a chance to provide evidence. It could not have known it was going to be deemed “ineligible because it allegedly discriminates on the basis of prohibited grounds.”

Similarly, Redeemer was not given notice of the case to be met or an opportunity to provide relevant evidence. Nothing in the Minister’s letter shows the Minister believed Redeemer unlawfully discriminated or that the Minister had any issue with Redeemer’s policies. The Court held that the letter “was not … a genuine attempt to seek clarification or further information. […] Sending the letter was simply going through the motions to appear to be fair, not an exercise in fairness itself.”

The BCM Denial Was Unreasonable

For BCM, the Minister never actually assessed whether the project discriminated contrary to applicable laws. In “an after-the-fact attempt at justifying the decision” the government contended that a 2018 BCM summer camp staff application asked employees to divulge their beliefs about sexuality. According to the government, this was sufficient to raise concerns about BCM discriminating.

The Court disagreed. It found there was nothing in the record to show this was the basis for excluding BCM. And if there had been, it would “clearly engage BCM’s Charter interests.”  The decision did not show how BCM purportedly discriminates and it was unreasonable for the Minister to reject its application.

The Charter Claims

Even though the Charter issues weren’t addressed, one of the two judgments made an important comment: just because it wasn’t necessary to make a decision on the Charter questions, the government “should take no comfort from this conclusion.” Why? There was no evidence that they had “made any overt attempt” to consider the organization’s religious freedom, freedom of expression or freedom of association. The Court gave what appears to be a caution to the government, noting that

…should it be established in another case that officials discriminated in administering funding programs against faith-based institutions because of the sincerely held religious beliefs of their community, a finding of a Charter violation may well result. Such institutions must be treated not just with procedural fairness but also with respect for their Charter-protected rights.

This pair of decisions brings great news for religious CSJ applicants. The Court set out how procedural fairness standards apply in the CSJ context to ensure fair and reasonable decisions moving forward. This requires transparency in the decision-making process, an opportunity to provide relevant evidence, and a decision that shows the government actually assessed whether projects discriminate based on applicable laws by clearly indicating how the applicant discriminates.

CSJ Concerns Vindicated

CCCC is pleased to see this positive outcome. After many years of speaking out on CSJ issues through blogs, op-eds, academic papers, meeting with political leaders, and coordinating with other organizations to collectively advocate, CCCC welcomes these court decisions. They affirm the CSJ application process was, in these cases, unfair. The decisions bring a measure of justice and vindication to religious CSJ applicants and sets clear expectations for fairness in the future.

Both decisions are available online: BCM International Canada Inc. v Canada (Employment, Workforce Development and Labour), 2021 FC 687 and Redeemer University College v Canada (Employment, Workforce Development and Labour), 2021 FC 686.

We’ll post more on the decisions and their significance – stay tuned!

The post A Win for Religious Organizations Challenging Canada Summer Job Rejections appeared first on CCCC Blogs.