The key to understanding Redeemer

Faced with two different readings of the law and two different reading of the facts, one is inclined to read Redeemer Foundation v Canada (National Revenue), [2008] 2 SCR 643 [Redeemer], twice (if not more to write a commentary about it). At issue was whether “the Minister was required under s. 231.2(2) of the Income Tax Act, RSC 1985, c 1 (5th Supp), to obtain judicial authorization before asking the Redeemer Foundation (“Foundation”), a registered charity, for information about the identity of its donors in the course of a legitimate audit of the Foundation” (para 1). The judicial history and a summary of the majority’s reasons are documented in a previous submission here.

It is worth repeating that the Majority composed of McLachlin C.J. and LeBel J. (Fish and Charron JJ. concurring) held that “[r]egardless of whether the donor list was used by the CRA [Canada Revenue Agency] in pursuing its audits of the donors themselves, the CRA’s request for the donor information was made for the legitimate purpose of investigating the validity of the Foundation’s status as a registered charity.” Accordingly, “[t]he Minister was entitled to the donor information through the combined effect of ss. 230(2)(a) and 231.1 of the Income Tax Act, and the Minister was not required to obtain judicial authorization before requesting the information.”

The dissenting minority composed of Binnie, Deschamps and Rothstein JJ. (dissenting in part) held that “[t]he CRA is acting outside ss. 230 and 231.1 of the Income Tax Act when it seeks information other than to verify a taxpayer’s compliance with the Act through an audit of the taxpayer, and judicial authorization is required under s. 230.2(2) if the information it seeks pertains to unnamed persons.”

It is reasonably expected that judges may reach different conclusions when it comes to interpreting statutes and regulations. However, Redeemer showcases a situation where different interpretations of a statute were reached through different readings of the facts. On the one hand, the minority regarded the CRA’s request for the donor information as falling outside the ambit of auditing the Foundation. On the other hand, the majority took the view that the donor list is necessary for determining whether to revoke the Foundation’s registry as a charity. Based on this distinction, each camp professed a different interpretation of the statutory language.

The relevant provisions of the Income Tax Act are the following:

s. 231.1(1), an authorized person may, for any purpose related to the administration and enforcement of the Income Tax Act, inspect, audit or examine books and records of a taxpayer. The CRA may require any documents of the taxpayer and any other person that may relate to information that is or should be in the books and records of the taxpayer.
s. 230(1), every person carrying on business and every person required to pay tax shall keep records and books of account in such form and containing such information as will enable the taxes payable to be determined.
s. 230(2). Every registered charity is required to keep records and books containing information that will enable the CRA to determine if there are any grounds for revocation of the charity’s registration, a duplicate of each receipt for a donation containing prescribed information and other information as will enable the CRA to verify the donation for which deductions or tax credits are available.
s. 230(3), where adequate records and books have not been kept, the CRA may require that the books and records shall be kept as specified by it.
s. 231.2(1), the Minister may . . . for any purpose related to the administration or enforcement of this Act, . . . require that any person provide . . .
(a) any information or additional information . . . or
(b) any document.
s. 231.2 (2)The Minister shall not impose on any person (in this section referred to as a “third party”) a requirement under subsection 231.2(1) to provide information or any document relating to one or more unnamed persons unless the Minister first obtains the authorization of a judge under subsection 231.2(3).

As opposed to the majority, the minority considers that s. 231.2(1) provides the Minister with additional powers to obtain information, which is more than what was previously stipulated in  ss. 230 and 231.1. Reading s. 231.2(1) in any other way would render the provision unnecessary. While broad, this power is not unlimited and is subject to s.231.2(2). Together, ss.231.2(1) and 231.2(2) empower the Minister to obtain any information or any document for any purpose related to the administration or enforcement of the Income Tax Act, subject to judicial authorization. The minority warns that in the alternative view held by the majority,

[t]he CRA could always avoid s. 231.2(2) by requesting information pertaining to unnamed persons in the exercise of its audit power of the taxpayer it was asking to provide that information. That would leave to the discretion of the CRA whether it wished to proceed by way of audit or judicial authorization to obtain information or documents relating to unnamed persons. That would render s. 231.2(2), a taxpayer protection provision, at best, a feeble requirement and, at worst, totally ineffective (para 38).

Both camps agree that statutory provisions must be interpreted in a textual, contextual and purposive way. However, the majority did not find that that s.231.2 would serve no purpose if s.231.1 is read as authorizing the minister to obtain information on unnamed third parties in the context of auditing a taxpayer. The Minister after all may need this information outside the context of a formal audit. To respond to that, section 231.2 authorizes such an endeavor subject to a requirement for judicial authorization.

It becomes apparent then that the true distinction in interpretation is actually how each camp views the conduct of the CRA. The majority finds that the act of obtaining information about unnamed third parties during the audit of a taxpayer is a legitimate task under s.231.1. The minority however, finds that because the CRA formed the intention to ask for this information to verify the donors’ compliance with the Act, and not the Foundation’s, this conduct should be undertaken under the provisions of s.231.2, which requires compliance with s.231.2(2).

In the end, not much interpretation of the statute has truly occurred. The same cannot be said about interpreting the actions and intentions of the CRA. As it stands the end result is the same, “The CRA is Coming to Get Your Donation Records!”

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