Mr. Justice Markus Koehnen has dismissed the Muslim Association of Canada’s lawsuit against the Canada Revenue Agency. The MAC decision is available online: Muslim Association of Canada v. Attorney General of Canada, 2023 ONSC 5171 (CanLII) (PDF)  If the case is appealed, we hope to cover that as well.

Here is some media coverage: Judge expresses sympathy, but rules audit of Muslim charity should run its course.

 

The court noted in its overview:

[1] In this proceeding the applicant challenges the CRA’s decision to conduct an audit of the applicant and the CRA’s preliminary conclusion to suspend the applicant’s charitable status. The applicant says the decision to audit, the conduct of the audit and the recommendation to suspend its charitable status are based on discriminatory information, beliefs and conclusions that violate the applicant’s rights to freedom of religion, freedom of expression, freedom of association and freedom from discrimination under the Charter of Rights and Freedoms.

[2] While I am sympathetic to many, but not all, of the applicant’s arguments in this regard, I nevertheless dismiss the application on the grounds of prematurity. Prematurity reflects the idea that courts should usually not intervene in the process of a government body until that process has been completed, especially not where the government process includes and appeal procedure within its scope.

[3] At the moment, the process is not complete. CRA has issued preliminary findings and a preliminary recommendation that the applicant’s charitable status be revoked. The relevant legislation establishes a process that allows the applicant to respond to the preliminary findings and recommendation, allows dialogue between the parties to occur, has the CRA issue a final decision, allows the applicant to appeal the final decision internally within the CRA and then allows the applicant further rights of appeal to the Tax Court of Canada in the case of financial penalties and to the Federal Court of Appeal in cases of revocation of charitable status.

[4] There are both practical and principled reasons underlying the prematurity rule. As a practical matter, it ensures that courts are not required to deal with matters that might ultimately resolve themselves. It also ensures that courts deal with a final decision that has been refined and narrowed through a decision making and appal process rather than with a large variety of preliminary, partially formed views. This usually means that courts will have fewer and more focussed issues to deal with.

[5] From a principled perspective, the prematurity rule recognizes and respects the different roles of the legislative, executive and judicial branches of government. Governments bodies are, in principle, entitled to do their work. Courts are entitled to review certain government work or decisions. If courts intervene without restriction in the decision making process before it is completed, they are preventing the executive branch of government from carrying out its function. While there are exceptions to this principle, I am not persuaded that those exceptions apply here.

 

Here are some other particularly important paragraphs, but it is worthwhile to read the whole decision:

…

[22] MAC submits that, individually and collectively, these three publications paint a picture of terrorist financing as a problem that is foreign and associated with minority groups in Canada – predominantly Muslims.

[23] I am unable to accept that these submissions amount to a Charter violation on the record before me.

[24] The complaint is that these documents identify the risk of terrorist financing as foreign, and that violent Islamist extremism is the leading threat. That alone does not amount to a Charter violation. I have not been led to any information to suggest that the threat of terrorist financing is not foreign. Nor have I been taken to any information to suggest that “violent Islamist extremism” is not the leading threat. It is fair to say that, at least in the public consciousness, foreign terrorist organizations loom larger than domestic terrorist organizations. While this might not necessarily be accurate, the applicant has given me no information to suggest that focusing on foreign terrorist activity constitutes a security error of such a degree that it amounts to a Charter violation of Canadians who may also share the same nationality or religion as those of terrorist groups.

[25] Even if I accept that 12 out of 14 revocations of charitable status since 2008 related to Muslim charities, that does not necessarily mean that the “risk-based assessment” CRA claims to use unfairly targets Muslim charities. I have no information about the activities of the 12 charities whose status was revoked. I have no information about how the grounds for those revocations compare to grounds of revocation more generally either as found by the courts, contained in CRA guidelines or policies or as compared to the treatment of other, non-Muslim charities.

[26] One of the sad realities of the world we live in is that there are a wide range of terrorist groups that cloak themselves in the banner of certain nationalities, ethnicities or religions. They do not reflect those groups but pervert aspects of those identities for their own criminal ends. It is perhaps not surprising that agencies whose mandate it is to monitor terrorist threats would focus on the more prominent threats at any one time. In recent years, one major source of such threats has involved groups that pervert Islam and falsely cloak themselves in its mantle.

[27] I note that the documents the applicant challenges also refer to Sikh and Tamil terrorist groups. That comes as no particular surprise either given the history of ethnic conflict in India and Sri Lanka and the sizable Sikh and Tamil immigrant populations in Canada. In recent years Canada has attracted immigrants from Muslim countries whose civil strife has made Canada an attractive haven. Unfortunately, criminal or terrorist groups often try to channel money through safe foreign sources. While the overwhelming majority of those immigrants have nothing to do with and want nothing to do with terrorist organizations, there are inevitably a tiny number of Canadian residents (often Canadian born) who, wittingly or unwittingly, become involved with such organizations. There is nothing inherently improper in governments being alive to those threats and monitoring them. That does, however, mean that certain groups are more vulnerable to terrorist infiltration than others, depending on the nature of geopolitical risks at any one point.

 

(ii) RAD’s Referral to an Audit

[28] The second step of the process to which the applicant objects is RAD’s referral of the applicant to an audit. The referral is contained in an Audit Referral Analysis that sets out the various information RAD reviewed in arriving at the decision to have an audit conducted and extends to 65 pages.

[29] MAC objects that the referral letter is replete with references to what appear to be highly questionable sources including those of individuals whose public comments are racist and Islamophobic and cites purveyors of false conspiracy theories. While that appears to be the case, CRA explains that RAD sets out its complete analysis in the referral letter, including the dubious sources of information it has come across. In many cases the Audit Referral Analysis makes note of the unreliable nature of the sources.

[30] The analysis also contains more objective sources of information that were relied on in deciding to conduct an audit.

[31] It appears, for example, that MAC first came to the attention of RAD in part based on classified information that RAD received in 2009 from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). That information is redacted in the Audit Referral Analysis pursuant to s. 38 of the Canada Evidence Act.1 [1 Canada Evidence Act, RSC 1985, c C-5]

[32] The Audit Referral Analysis also relied on the following additional considerations to refer MAC to an audit:
i. MAC’s voluntary reporting indicates that it had received more than $4.5 million in donations from foreign sources between 2012 to 2014. This raised questions about whether the sources of foreign funding exercised influence over MAC.
ii. Some of the foreign funders, like the Qatar Charity Society, are believed to support the work of terrorist groups, notably Hamas, through its membership in the Union of Good which is part of Hamas’ fundraising network, and which the US Department of the Treasury designated as an organization “created by Hamas leadership to transfer funds to the terrorist organization…”
iii. RAD had concerns about the relationship between MAC and the Muslim Brotherhood which RAD understood to be a foreign political party. MAC’s website indicated its affiliation with the Muslim Brotherhood.
iv. Between 2009 and 2014, MAC’s assets, including real estate holdings, had grown from $16 million to approximately $47 million. According to RAD, the rapid accumulation of real property raised concerns that the charity was potentially pursuing property accumulation as an investment strategy, which is not a charitable purpose.
v. MAC appears to have allowed collection boxes for the International Relief Fund for the Afflicted and Needy (IRFAN) to be on display at some of its functions after the government of Canada had listed it as a criminal entity.

[33] I agree that much of the information listed in the previous paragraph might not support adverse audit findings against MAC. By way of example, redacted evidence that even I have not seen on a judge’s eyes-only basis would rarely amount to grounds for sanctions against MAC. The fact that a donor to a charity also donates money to illegal causes does not mean that the charity is involved in the illegal causes that the donor supports.

[34] In a similar vein, MAC explains that there is a distinction between the Muslim Brotherhood as a political party in Egypt (and some other countries) and the religious ideology of Imam Hassan al-Bann that led to the establishment of the Muslim Brotherhood as a religious and philosophical movement. A rough, directional analogy might be the distinction between Christianity and the Christian Democratic parties in certain European countries. MAC notes that adopting the religious philosophy of the Muslim Brotherhood is not the same thing as supporting the political ideology of the Egyptian Muslim Brotherhood. MAC submits that RAD has conflated these two separate concepts.

[35] It is important to remember, however, that at this stage of the analysis, the information in paragraph 32 above was only used to decide whether to initiate an audit of MAC. It was not used to impose any sanctions on MAC.

[36] The quality of information needed to justify an investigation is substantially lower than the quality of evidence needed to make findings. When considering whether to investigate, and even during an investigation, one can expect that an investigator would come across information of dubious reliability. When deciding to investigate, an investigator might also misunderstand information, like the distinction between the Muslim Brotherhood as a political party and the Muslim Brotherhood as a philosophical or religious movement.

[37] I was not directed to any authority about the standards an investigating body must meet to justify commencing an investigation or the point at which even the commencement of an investigation can amount to a breach of Charter rights. In these circumstances I am not prepared to find that the decision to refer MAC to an audit amounted to a breach of Charter rights.

 

(iii) The Audit and the Administrative Fairness Letter

[38] The RAD audit itself was carried out over 13 months. It involved 30 visits to MAC properties, 27 interviews, a review of approximately one million financial transactions in 60 bank accounts, a review of 415,874 emails, and a review of 63,523 other files.

[39] The audit led CRA to issue what is referred to as an Administrative Fairness Letter. An Administrative Fairness Letter is a document that sets out CRA’s preliminary findings and recommendations. In the case of the applicant, the Administrative Fairness Letter recommends that its charitable status be suspended.

[40] A charity that receives an Administrative Fairness Letter has the opportunity to respond to it. A charity’s response is then followed by a period of dialogue between the parties which will lead to a final determination of findings and sanctions by CRA. The charity then has a right of appeal to the Appeals Branch of CRA. If the Appeals Branch does not render a decision within 90 days or if the charity is unsatisfied with the decision of the Appeals Branch, it has a further right of appeal to the Tax Court of Canada with respect to any taxes or penalties and to the Federal Court of Appeal with respect to any notice of intention to revoke its charitable status.

[41] The applicant raises several objections to the Administrative Fairness Letter which it submits is rooted in Islamophobia and a profound misunderstanding of Islam. By way of summary, the applicant’s objections fall into three broad categories:
i. Issues surrounding the credibility of the applicant’s representatives.
ii. The applicant’s involvement with the Muslim Brotherhood.
iii. The use of resources for non-religious purposes.

[42] By way of context for the latter two objections, CRA takes the position that in order to maintain its charitable registration, a charity must, among other things, operate exclusively for the charitable purpose(s) for which it is registered. MAC is registered for religious purposes. 2023 ONSC 5171 (CanLII)

 

From paragraphs 57 – 90, there is extensive discussion of the prematurity principle.

 

We have covered this lawsuit before, including:

Muslim Association of Canada v. Attorney General of Canada – Ontario court sides with CRA and will not seal documents relating to allegations of charity misconduct (April 4, 2023)

 

CRA’s audit of the Muslim Association of Canada and the organization’s application in the Ontario Superior Court (July 5, 2022)

 

I have also covered the topic of CRA and Islamophobia here:

Office of the Taxpayers’ Ombudsperson releases report “Charity Begins with Fairness: More to Explore” (April 3, 2023)

Some recent developments on the allegations of CRA being Islamophobic (March 30, 2023)

CTV News article “Review of how CRA audits Muslim charities ‘inherently flawed,’ groups say in open letter to PM” (December 15, 2022)

Statement by the Canada’s Taxpayers’ Ombudsperson on CRA examination will be significantly hindered by the confidentiality provisions of the ITA relating to charities (November 28, 2022)

Canadian Taxpayers’ Ombudsperson to study CRA charity audits (February 28, 2022)