'A charity is a charity is a charity'--The Common Law and Income Tax Act Charity Regulation.

• Author: Broder, Peter

As I write this column, a major government report on a Canadian social innovation and social finance strategy is pending. Earlier this year, the federal Budget contemplated exploration of preferential tax treatment for certain types of journalism. In each of these fields, it has been suggested that means be found to give groups access to charitable foundation resources, if not to full charity status.

In the early decades of the last century, Parliament extended charity tax preferences under the Income Tax Act (ITA), which had earlier been available to a limited number of organizations. In doing so, it used the common law meaning of charity, rather than creating a statutory equivalent. This decision to use the common law methodology to determine what qualifies as a charity, rather than listing types of organizations or named organizations as eligible, has shaped the federal regulatory regime since its inception. Whether Parliament's choice was purposeful or more a consequence of convenience than forethought can be debated, but it has unquestionably complicated the work of both the federal charity regulator--the Canada Revenue Agency (CRA)--and the country's registered charities.

The common law tradition generally views any charity as a charity with the same privileges as any other charity and as subject to the same constraints as any other charity (i.e. 'a charity is a charity is a charity'). This view is held regardless of whether its objects mandate it, in the famous formulation set out in Commissioners for Special Purposes of the Income Tax v. Pemsel (Pemsel), to relieve poverty, advance education, advance religion or undertake other purposes beneficial to the community in a way that the law regards as charitable.

Among other tenets of charity common law is the requirement that a charity pursue exclusively charitable objects. This is an obligation that has been somewhat eased by case law allowing pursuit of ancillary and incidental endeavours (essentially work that on its face doesn't appear charitable, but is a means to achieving charitable ends) without offending the exclusively charitable requirement.

Yet another principle, also found in Pemsel, is that charity is not limited by political jurisdiction. So Canadian charities can carry on or fund work abroad, and foreign charities can fund or do work in Canada. The key common law limitation on this is that endeavours, whether foreign or domestic, cannot be illegal or contrary to public...