{"id":54575,"date":"2026-08-31T17:12:22","date_gmt":"2026-08-31T21:12:22","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=54575"},"modified":"2026-08-31T17:12:24","modified_gmt":"2026-08-31T21:12:24","slug":"is-it-unconstitutional-for-ottawa-to-regulate-charities-a-constitutional-challenge-to-watch","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/social-impact\/is-it-unconstitutional-for-ottawa-to-regulate-charities-a-constitutional-challenge-to-watch\/","title":{"rendered":"Is it unconstitutional for Ottawa to regulate charities? A constitutional challenge to watch"},"content":{"rendered":"\n

Can the Federal Government regulate and revoke the status of registered charities? Or does that power belong exclusively to the provinces under the Constitution? That question is now before the courts, and every charity in Canada should be paying attention.<\/p>\n\n\n\n

In HR Canada Charitable Organization v. Minister of National Revenue, <\/em>2026 ONSC 2459 <\/a>(\u201cHRCC v MNR<\/em><\/strong>\u201d), a charity facing revocation of its status didn’t follow the usual appeal route through the Federal Court of Appeal (the \u201cFCA<\/strong>\u201d). Instead, it launched a constitutional challenge by way of a motion for an interlocutory injunction in Ontario’s Superior Court of Justice, arguing that section 168(1) of the Income Tax Act<\/em> (Canada) (the \u201cITA<\/strong>\u201d) encroaches on provincial jurisdiction over charities under section 92(7) of the Constitution Act<\/em>, 1867<\/em> (the \u201cConstitution Act<\/strong>\u201d). The Ontario Superior Court dismissed the motion, but the Divisional Court has since granted leave to appeal, and a parallel challenge is underway in British Columbia.<\/p>\n\n\n\n

What happened to HRCC?<\/h2>\n\n\n\n

HR Canada Charitable Organization (\u201cHRCC<\/strong>\u201d) was registered as a charity in 2019.<\/p>\n\n\n\n

In 2024, the Charities Directorate of the Canada Revenue Agency (the \u201cCRA<\/strong>\u201d) audited HRCC and raised a number of concerns with HRCC.<\/p>\n\n\n\n

After reviewing HRCC\u2019s responses, the CRA issued a notice of its intention to revoke HRCC\u2019s charitable status pursuant to s. 168(1) the ITA.<\/p>\n\n\n\n

The CRA advised HRCC that the revocation would become effective when CRA publishes the notice of revocation in the Canada Gazette.<\/p>\n\n\n\n

Why is HRCC v. MNR <\/em>noteworthy?<\/h2>\n\n\n\n

While HRCC\u2019s story seems familiar to most charities so far, there is a twist.<\/p>\n\n\n\n

HRCC could have responded to the CRA\u2019s revocation process in the usual manner. It could have responded to the notice of intention to revoke with its own notice of objection. It could have appealed the notice of revocation in the FCA pursuant to s. 172(3) of the ITA. However, HRCC instead brought a motion for an interlocutory injunction in Ontario\u2019s court of general jurisdiction\u2014the Superior Court of Justice\u2014and, with it, a constitutional challenge.<\/p>\n\n\n\n

At the Superior Court, HRCC sought to prevent the Minister of National Revenue from publishing the notice of revocation in the Gazette. As of this writing, the Divisional Court has not yet ruled on whether to overturn the Superior Court\u2019s decision to dismiss HRCC\u2019s motion for an injunction. To meet the first part of the three-part injunction test\u2014the existence of a serious issue to be tried\u2014HRCC argued that s. 168(1) of the ITA violates the Constitution Act because the provision encroaches on the provinces\u2019 jurisdiction to regulate charities.<\/p>\n\n\n\n

HRCC submitted that s. 92(7) of the Constitution Act gives the provinces, not the federal government, the exclusive jurisdiction to pass laws over matters relating to \u201cthe establishment, maintenance and management of \u2026 charities and [charitable] institutions in and for the province.\u201d<\/p>\n\n\n\n

In response, the CRA argued that s. 168(1) of the ITA relates to the taxation of charities and therefore falls under the Federal Government\u2019s taxation powers under s. 91(7) of the Constitution Act.<\/p>\n\n\n\n

What did the Court in HRCC v. MNR<\/em> decide?<\/h2>\n\n\n\n

Deciding on the procedural issue of whether to grant or deny HRCC\u2019s motion, the Ontario Superior Court did not rule on the merits of HRCC\u2019s constitutional arguments. The Court, however, addressed HRCC\u2019s constitutional challenge with skepticism.<\/p>\n\n\n\n

The Court pointed out that the FCA had already considered and upheld the constitutionality of s. 168(1) of the ITA in another decision, International Pentecostal Ministry Fellowship of Toronto v. Canada (National Revenue), <\/em>2010 FCA 51<\/a> (\u201cIPMF v. MNR<\/em><\/strong>\u201d).<\/p>\n\n\n\n

In IPMF v. MNR<\/em>, the FCA held that the ITA provisions governing charities relate solely to the tax treatment of charities and their donors. They do not impermissibly affect the affairs of charities in any other way, nor do they impede the provinces from otherwise regulating charities.<\/p>\n\n\n\n

The Ontario Superior Court rejected HRCC\u2019s argument that the FCA did not apply the correct analysis for determining the constitutional validity of a legislative provision in IPMF v. MNR<\/em>, noting that HRCC itself failed to provide any evidence relating to that analysis in the current motion.<\/p>\n\n\n\n

The Court ultimately dismissed HRCC\u2019s motion for an injunction, finding that it was not in the interests of justice that the injunction be granted.<\/p>\n\n\n\n

Is the constitutional challenge over?<\/h2>\n\n\n\n

The Superior Court\u2019s decision in HRCC v. MNR <\/em>is, however, not the end of the story.<\/p>\n\n\n\n

On May 22, 2026, the Ontario Divisional Court granted HRCC\u2019s leave to appeal the decision<\/a>.<\/p>\n\n\n\n

In doing so, the Divisional Court ordered in the interim that HRCC continue to suspend its practice of issuing tax receipts for donations, and that CRA refrain from publishing the notice of revocation in the Canada Gazette.<\/p>\n\n\n\n

It is also worth noting that HRCC v. MNR<\/em> is not the only active constitutional challenge launched by a charity against the federal regulation of charities \u2013 nor is it the first this past year.<\/p>\n\n\n\n

Before HRCC v. MNR<\/em>, in British Columbia, another charity brought a similar application in the province\u2019s court of general jurisdiction, seeking an injunction to restrain the Minister from revoking its charitable registration. The BC charity made similar arguments challenging the constitutionality of s. 168 of the ITA. Unlike the Ontario Superior Court in HRCC v. MNR<\/em>, the British Columbia Supreme Court ultimately granted an interim injunction<\/a> for 30 days to permit the BC charity to file a petition on the constitutional issues it raised on the injunction application. In March 2026, the BC charity filed its petition.<\/p>\n\n\n\n

Concluding thoughts<\/h2>\n\n\n\n

While the lawyers for HRCC may have very likely been inspired by the success of the BC charity and its playbook, HRCC v. MNR <\/em>shows that charities pursuing this approach face no guarantee that their home court(s) will be willing to entertain their constitutional arguments, at least in the first instance.<\/p>\n\n\n\n

As of this writing, the merits of the constitutional issues raised in both cases remain to be decided. We will continue to monitor these cases\u2014and their outcomes\u2014with great interest as they work their way through the courts and on appeal. Charities should do the same: the future of their regulation in Canada may depend on them.<\/p>\n\n\n\n

Have questions about this article? Need to respond to an audit or revocation notice? A lawyer from Miller Thomson\u2019s award-winning Charities and Not-For-Profit Group<\/a> can help.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Can the Federal Government regulate and revoke the status of registered charities? Or does that power belong exclusively to the provinces under the Constitution? That question is now before the courts, and every charity in Canada should be paying attention. In HR Canada Charitable Organization v. Minister of National Revenue, 2026 ONSC 2459 (\u201cHRCC v […]<\/p>\n","protected":false},"author":122,"featured_media":12324,"parent":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[535],"insight-format":[416],"class_list":["post-54575","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-social-impact"],"acf":[],"yoast_head":"\nIs it unconstitutional for Ottawa to regulate charities? 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