The potential loss of charitable status for religious charities might be the biggest sleeper issue in the federal election. The Liberal government proposed the change and only Conservatives opposed.
Last December, the House of Commons Standing Committee on Finance released Report 21, Pre-Budget Consultations in Advance of the 2025 Budget. The 300-page report included Recommendation 429: “No longer provide charitable status to anti-abortion organizations” and Recommendation 430: “Amend the Income Tax Act to provide a definition of a charity which would remove the privileged status of “advancement of religion” as a charitable purpose.”
The recommendations shocked religious charities, which are thought to comprise 40 per cent of Canada’s 85,600 charities. Disturbingly, the government neither consulted the affected charities, nor gave them a rationale.
Instead, the committee was persuaded by the B.C. Humanist Association, which called for both recommendations in July of 2024. The BCHA alleged that charitable status for religious worship was discriminatory, so $1.6 billion to $2.6 billion of annual tax breaks for religious institutions and their donors should stay in government coffers.
Last December, the Finance Committee at the time had six Liberal MPs, four Conservatives, one Bloc Quebecois, and one NDP. Only the Conservatives wrote a dissenting report, and later launched a petition calling on the government to reject Recommendation 430.
The loss of charitable status would have a devastating effect on the organizations involved. Their income would be taxed, and they would lose exemptions for Goods and Services Taxes (and Harmonized ones where applicable). They would also lose the ability to issue donation receipts. Municipalities would likely follow suit and apply property taxes also.
In a best-case scenario, Canada Revenue Agency (CRA) would annul the charities. The organizations would suffer the preceding consequences but keep their assets and continue their work as non-profit organizations.
Registration in error is one of the two reasons CRA may annul status, the other being a change in the law subsequent to registration. That latter criteria would apply to these religious charities if they lost status to a change of law.
The more devastating and more common scenario for former charities is that their status is revoked. Here a 100 per cent tax is applied on the fair market value of any property (including money) the charity has on the day the CRA issues notice of the intention to revoke and any income they receive during the following year. The only exemptions for revocation tax apply to assets and money used for charitable activities during the following year, used to pay debt, or transferred to a registered charity.
It’s entirely possible that the government would start with annulment and years later implement revocation. Then, in a move worthy of any Communist regime, every house of worship would be forfeited in a government grab.
If that seems unfathomable, consider. The Finance Committee ignored more than 30,000 religious charities across Canada on the advice of a single B.C. organization. So what other surprises might follow if Canada starts down this road.
Revocations are already common for any charity that fails to meet its obligations, including failure to file a Registered Charity Information Return within six months of its year end. In 2023, 340 Christian charities were created and 635 were revoked for a net loss of 295. However, some of these gave up status of their own accord, having run out of money after donations plummeted during the pandemic.
One needn’t be religious to see the harm in such uncharitable changes to Canada’s charitable sector.
Last November, researcher Mike Wood Daly wrote an article for the think tank CARDUS entitled, “Why Religious Tax Exemptions Benefit All Canadians.” The paper points out the numerous benefits religious congregations provide, such as providing space, often at cheap rates, for events. They often also house programs and services such as addiction recovery, counseling, and mental health services, childcare, refugee sponsorship, and settlement services.
The “Halo Effect” of the socio-economic impact of these congregations was found to be 10.47 times the value of tax exemptions received, including property, GST, and income taxes. Even after such tax exemptions are considered, the net positive contribution was found to be $16.5 billion.
“If the Halo Effect declined by 10 percent, the loss of tax exemption would accomplish no benefit to society, socio-economically speaking, since the tax revenue that came with it would be entirely offset by the Halo Effect decline,” Daly explains.
Canadian charitable donors receive a 15 per cent tax break on the first $200 of donations and 29 per cent on donations above that amount. Political donations receive a 75 per cent tax break. Unsurprisingly, the Finance Committee did not recommend an end to that.
Fortunately, Canadians can vote down this misguided attack on religious charities. Whether they do so is up to them.
