Prevention and Relief of Poverty - LawNow Magazine

Prevention and Relief of Poverty

Not for Profit Law Column

A couple of years ago, the refusal of the Canada Revenue Agency (CRA) to allow Oxfam Canada to include prevention of poverty in its objects if it wanted to retain its status as a registered charity drew widespread press attention.  The CRA took the position that relief or alleviation of poverty was a recognized charitable purpose, but that prevention of poverty was not.

Last June the Federal Court of Appeal  (FCA) upheld that position in Credit Counselling Service of Atlantic Canada v. Minister of National Revenue.  That case concerned the work of a group that provided research and education on credit-related concerns, as well as professional financial and debt counselling services.  The counselling services were available to the clients without evaluation of their financial circumstances, so potentially assisted people in avoiding rather than escaping poverty.

Ruling against prevention of poverty should not result in prevention of charity. 

The decision is clear authority for the proposition that prevention of poverty is currently not a recognized charitable purpose in Canada, and thus cannot be stated as the (primary) purpose of an entity eligible for registration.  With respect, however, the decision provides little clarity on some essential aspects of charity law in addressing poverty.  No doubt this stems in part from the facts the Court had to deal with – “prevention of poverty’ was a stated purpose of the organization – but, unhappily, the brevity of the analysis disposes of the matter without fully engaging with some important issues.

The 23-paragraph decision offers organizations that work to alleviate poverty little guidance on how to deal with some practical problems they face daily.  For example, a significant hurdle many such groups have to grapple with is the challenge of offering services without stigmatizing clients.  Related to this is the administrative burden placed on a charity to segregate those legitimately eligible for services from those that ought not to qualify.

In terms of stigmatization, this may be a less obvious consideration in credit counselling than in, for example, a school breakfast program.  Generally, such programs are made universally available to children in a particular locale, rather than having participants singled out and potentially embarrassed or shamed.  Even for credit counselling, an agency that is known to scrutinize clientele for impoverishment may scare away potential beneficiaries because they don’t want to be seen as poor.   So, leaving aside the human cost of demeaning people, stigmatization can impair a group’s efficiency.

Charity law permits some incidental benefit to those that are not disadvantaged when a charity is carrying out its work, so long as that benefit is reasonable and proportionate.  But there is little jurisprudence to assist in determining what is onside and what is not.  It seems self-evident that, if the occasional student who is less needy enjoys a free breakfast so that others participating in the program are not stigmatized, that ought to be an acceptable outcome and not negate the charitability of the broader undertaking.  The same approach could be used in determining the charitability of the credit counselling work.  However, the decision in the Credit Counselling case does not address this issue.

Also left unanswered is the question of what amount of incidental benefit to non-beneficiaries might be permissible before the organization was required to put in place a potentially costly and cumbersome screening process. The decision seems to assume that, as there was no screening process, a significant number of the users of the service would not be found eligible through such a screening.  The cost/benefit of screening is not addressed.

Lastly, those who work on poverty issues know that alleviating poverty is more complex than providing marginal additional resources to lift individuals or families beyond a financial threshold for a limited time period.  Sustainably enabling people to escape poverty often requires repeated or on-going support and investment.  To be effective, programming may need to help them stabilize themselves beyond the cusp of poverty.

..an agency that is known to scrutinize clientele for impoverishment may scare away potential beneficiaries because they don’t want to be seen as poor.  This again highlights the inadequacy of using a point-in-time monetary evaluation as the basis for providing services.  The United Kingdom has acknowledged the dynamic nature of poverty by including prevention of poverty in their Charities Act; an approach that was, ironically, used as a basis for the FCA’s holding that, in Canada, it is no longer open to the courts to determine that prevention of poverty qualifies as a charitable purpose, but must be left to the Canadian Parliament to be enacted through legislation.

Though research and experience suggest the approach in this area reflected in the United Kingdom statute is a sensible one, the possibility of legislation akin to the Charities Act being enacted in Canada in the near future appears remote. And the Credit Counselling decision seems to foreclose the possibility of either the courts or the CRA moving on such a change.

Without a change in the law or in how it is interpreted, some use might also be made of the permissibility of incidental benefit in dealing with different points along the continuum addressing poverty issues. But for that to happen effectively, at a minimum the courts need to provide more clarity than they have to date on assessing when it is that incidental assistance to non-beneficiaries may be permissible in alleviating or relieving poverty.

Given the decision in Credit Counselling, without further clarification there is a real danger that an unintended consequence of disallowing prevention of poverty as a charitable purpose may be thwarting other bona fide charity work.  Ruling against prevention of poverty should not result in prevention of charity.

Authors:

Peter Broder
Peter Broder is Policy Analyst and General Counsel at The Muttart Foundation in Edmonton, Alberta. The views expressed do not necessarily reflect those of the Foundation.
 


A Publication of CPLEA

For COVID-19 information: 
COVID-19 Alberta Law FAQ

Font Resize
Contrast