Case Comment: AYSA v. Canada Revenue Agency (2007)

Published October 11, 2007

Can Sport Organizations Register as a Charity?

It is not often the Supreme Court of Canada hears a case involving sport. Yet on 16 May 2007 it heard an appeal in the case of Amateur Youth Soccer Association (AYSA) v. Canada Revenue Agency (CRA).

The case is fundamentally about whether sport organizations are entitled to have charitable status under the Income Tax Act. There are many financial benefits associated with charitable status, thus this case may be of great interest to the sport community across Canada. [1]

AYSA is an organization that provides opportunities for youth to develop soccer skills through skill development camps, tournaments and scheduling games. Because its operations are limited solely to Ontario and are not national in scope, it does not fit within the definition of a "registered Canadian amateur athletic association," under the Income Tax Act. Organizations that do fit this definition can receive taxation benefits similar to those granted to a registered charity, including the ability to provide donors with receipts that can be used to claim tax credits.

As an alternative, AYSA applied to be registered as a charity. The Minister of National Revenue denied the application, maintaining the position that the promotion of sport is not recognized in Canada as a charitable purpose. AYSA appealed the decision of the Minister of National Revenue, relying on another case, which held that the promotion of amateur sport involving the pursuit of physical fitness could be considered a charitable purpose. [2]

The Federal Court of Appeal rejected AYSA’s appeal, saying that amateur athletic associations are already given preferential tax treatment. [3] It said that because Parliament created this opportunity for registered Canadian amateur athletic associations in 1970, it had to be presumed that Parliament did not want any other type of sport association to qualify as a charity, regardless of how the courts have defined a charitable purpose.

The Supreme Court of Canada has now heard the case and in due course will issue its decision. How the Court responds to the issue will be very interesting. It could take the view, as did the Federal Court of Appeal, that there are already taxation benefits for sport organizations in the Income Tax Act (even though such benefits are only available to organizations that offer services that are national in scope). On the other hand, it could take a much broader perspective and examine the activity of the organization as a means to achieve the charitable purposes of promoting health and active living within the community - regardless of the nature of the organization.

As noted by Susan Manwaring of the law firm Miller Thompson, [4] many community organizations that support soccer, baseball or hockey use sport as a tool to advance community purposes and provide activities for children and youth to learn and be active. Such activities are very similar to other charitable activities. Studies today show that members of the public benefit from exercise and a more active life style. Permitting organizations with these purposes to register would not be a significant departure from the current state of the common law.” [as reflected in the Laidlaw decision referenced in footnote 2.]

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[1] Charitable status may also be viewed as a two-edged sword, as with charitable status come additional obligations for record-keeping, reporting, transparency and accountability. Imagine Canada (formerly the Canadian Centre for Philanthropy) is presently in the process of updating its national standards for Canadian charities, both small and large.

[2] Re Laidlaw Foundation (1984), 48 O.R. (2d) 549, 13 D.L.R. (4th) 491

[3] A.Y.S.A. Amateur Youth Soccer Association v. Canada Revenue Agency (2006), 2006 F.C.A. 136, 267 D.L.R. (4th) 724

[4] Let’s Hope the Future of Amateur Community Sport as a Valid Charitable Purpose is Not Doomed. Charities and & Not-For-Profit Newsletter, Miller Thompson, May 2006.

Originally published: Centre for Sport and Law Newsletter (2007) Vol. 3(3)