Tax Quarry

          Whether it is basketball, football, soccer, baseball, figure skating or hockey, for as far back as Canadian history goes sports have been an integral part of many young peoples’ daily lives.  However, in the new electronic age and an era where sports are treated as “extra-curricular” activities, families are putting less emphasis on physical activity.   Children are spending more time watching television, listening to music in their rooms on their IPODs, glued to their computer screens surfing the net or playing with their Sony Playstations, X-Boxes or Gameboys rather than spending time outdoors and playing with friends or joining a sports league.  For underprivileged children who can’t afford these gadgets, their time may be spent devising ways to obtain those things, sometimes legally, but other times by illegal means.  Experts have indicated that children who are involved in sports are more confident, focused and work better with others.  It has also been reported that girls who are involved in sports are less likely to get pregnant at a young age and young men are less likely to get involved in illegal activities.  As a result, many argue that since involvement in sports has a direct benefit for society all sporting organizations should be eligible to apply for charitable status under the Income Tax Act[i] (Canada) based on the common-law requirement that an organization must demonstrate a benefit to its community before it can be registered.  This, however, is not the government’s or the court’s opinion – at least as far as provincially run and operated amateur athletic associations are concerned.

          In A.Y.S.A. Amateur Youth Soccer Association v. CRA[ii], the taxpayer A.Y.S.A. was confronted with this issue.  A.Y.S.A. was established to promote amateur youth soccer in Ontario.  As one of its objectives the organization stated that it provided youth with an opportunity to develop pride in their abilities and soccer skills.  A.Y.S.A. believes that youth who take part in the program will develop a healthy appreciation for soccer, fitness and team building that would translate into improved life management skills.  A.Y.S.A also argues that youth that are involved in sports like soccer can focus on physical activity and team building rather than illegal activity.  Based on these objectives, the organization submitted an application for registration as a charity under the Act.  The Minister denied the taxpayer’s application on the basis that the activities of the organization were not charitable under the laws of Canada.  The taxpayer appealed.

          As defined under subsection 149(1) of the Act, a charitable organization is an entity that uses all of its resources in the support of charitable activities carried on by the organization.  In other words, if any of the organization’s resources are used to support non-charitable activities it will not be eligible for charitable status.  The Act also defines a registered charity under 248(1) as an entity that is resident in Canada and has been registered by the Minister as a charitable organization.  The Act, however, does not provide a precise definition of what constitutes a charitable activity.  The CRA has published Guidelines[iii], Interpretation Bulletins[iv] and policy statements to provide clarity and predictability about the appropriate interpretation.  The courts also provide guidance, as well.  For example, Vancouver Society of Immigrant & Visible Minority Women[v], the leading case on what constitutes charitable activities, provides the following categories of activities that can be registered by the Minister:

o       relief of poverty;

o       advancement of education;

o       advancement of religion; and

o       other purposes beneficial to the community

          Any activity that does not fit within one of these categories will disqualify an organization from registration as a charity.  However, there are additional requirements that must be met once an organizations is considered to fit within any of these categories.  In this case, A.Y.S.A. filed its application on the basis that the activities it engages in as an amateur sports association are beneficial to the community.  Although there is a clear benefit to society from being involved in sports, historically, sports have not been recognized as a charitable activity.  In fact, in response to a letter from a taxpayer to the CRA inquiring about the status of an application for charitable status, the Minister issued a response clearly stating this:

I would add as a note of caution that our courts do not recognize the promotion of a sport or sports as a charitable purpose.[vi]   

          The taxpayer argued that despite the Minister’s position, generally, on sports and the overwhelming common-law support for this position, given that one case has previously held that amateur sports in Ontario was eligible for charitable status[vii] this interpretation could apply to its application as well.