The Anti-terrorism Act

D. THE CHARITIES REGISTRATION (SECURITY INFORMATION) ACT AND THE INCOME TAX ACT: REFUSAL TO REGISTER AND DE-REGISTRATION OF CHARITIES (RECOMMENDATIONS 27 - 34)  

Charities are a vital component of Canadian society. They help the sick and the disadvantaged, they promote education and provide community facilities and they provide humanitarian assistance throughout the world. Accordingly, Canadian charities registered under the Income Tax Act (ITA) benefit from a number of tax privileges. Chief among these are exemption from tax under Part 1 of the ITA and the ability to issue tax receipts that allow donors to claim a corresponding tax credit or tax deduction. However, domestic law enforcement and intelligence agencies, as well as international organizations such as the UN Security Council and the Financial Action Task Force, have all documented the direct or indirect financing of terrorism through organizations that also have or claim to have charitable goals. In response, Parliament enacted the Charities Registration (Security Information) Act (CRSIA) as part of the ATA. The CRSIA allows the Government to make use of classified information in deciding whether an organization should be registered or continue to be registered as a charity under the ITA.

The Minister of Public Safety and the Minister of National Revenue may, after consideration of classified information, sign a certificate stating that it is their opinion that there are reasonable grounds to believe that an applicant or a registered charity has made, makes or will make resources available, directly or indirectly, to an entity that engages or will engage in any terrorist activity as defined in the Criminal Code. Once a certificate is issued, it is automatically submitted to the Federal Court for judicial review. Once a judge of the Federal Court, after hearing all of the evidence, determines that a certificate is reasonable, the certificate becomes conclusive proof that an organization is ineligible to become or remain a registered charity. Under the CRSIA, a charity can apply to have Ministers review their decision to issue a certificate on the basis of a material change in circumstances that led to the certificate action.

Taking into consideration the consequences of a decision to de-register or to refuse to register a charity, the Subcommittee recommended that such an outcome be precluded if it is established that the charity has exercised “due diligence” to avoid improper use of its resources and to limit refusal or de-registration to cases where the charity “knew or ought to have known” of the impropriety.

It should be understood that the process under the CRSIA is administrative. The CRSIA provides for an administrative measure (i.e. issuance of a certificate to permit the use and protection of classified information) resulting in an administrative remedy: revoking or refusing charitable registration, with the consequent lack of access to tax benefits. In addition, this approach is consistent with the ITA requirement that registered charities must control and remain accountable for the use of their resources. This requirement is lifted only when charities give their resources to a qualified recipient under the ITA.

Also, to maintain public confidence in the system of tax assistance for registered charities and to provide assurance to donors that charitable funds will be used exclusively for specified charitable purposes, the Government should make every effort to ensure that no benefit is extended to organizations that are linked to terrorism. To require in the CRSIA that an organization “knew or ought to have known” could, in some circumstances, effectively result in the Government of Canada providing a tax subsidy for resources tied to terrorism.

Further, incorporating a statutory defence of due diligence in conjunction with the establishment of detailed guidelines and a “checklist” to assess due diligence would make it possible for organizations with links to terrorism to use due diligence consultations to gain information about Canada's counter-terrorism measures and to structure their affairs so as to create a defence against the CRSIA regime.

The foregoing changes could also weaken Canada's conformity with the International Convention for the Suppression of the Financing of Terrorism and the Recommendations of the Financial Action Task Force.

Concerning judicial appeals under the CRSIA, the Government believes that further study is needed to assess the implications of recent judicial consideration of the provision governing access to appeals in the IRPA security certificate regime. There are also concerns that adding to the CRSIA a general prohibition on the publication of the identity of an organization, beginning from the time of investigation, and a general confidentiality ban on documents filed with the Federal Court, would depart from the principle of openness in court proceedings and would run a serious risk of contravening the Charter.

The Subcommittee has recommended that the words “at that time, and continue to be,” be removed from paragraph 4(1)(b) of the CRSIA so that Ministers are not precluded from taking action to refuse or revoke a charity's registration if the terrorist organization to which it has provided resources ceases its terrorist activity before the Ministers have become aware of the assistance or are able to sign a certificate. This was not the result intended by this provision and the Government can, therefore, support the proposed amendment.

Previous Page | Table of Contents | Next Page

Updated to April 1, 2008.