Redeemer Foundation v. Canada (National Revenue)

Redeemer Foundation v. Canada (National Revenue)
Collection
Supreme Court Judgments
Date
2008-07-31
Neutral citation
2008 SCC 46
Report
[2008] 2 SCR 643
Case number
31753
Judges
McLachlin, Beverley; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Charron, Louise; Rothstein, Marshall
On appeal from
Federal Court of Appeal
Subjects
Taxation
Notes
SCC Case Information: 31753
Decision Content
SUPREME COURT OF CANADA
Citation: Redeemer Foundation v. Canada (National Revenue), [2008] 2 S.C.R. 643, 2008 SCC 46
Date: 20080731
Docket: 31753
Between:
Redeemer Foundation
Appellant
and
Minister of National Revenue
Respondent
Coram: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Charron and Rothstein JJ.
Reasons for Judgment:
(paras. 1 to 29)
Reasons Dissenting in Part:
(paras. 30 to 58)
McLachlin C.J. and LeBel J. (Fish and Charron JJ. concurring)
Rothstein J. (Binnie and Deschamps JJ. concurring)
______________________________
Redeemer Foundation v. Canada (National Revenue), [2008] 2 S.C.R. 643, 2008 SCC 46
Redeemer Foundation Appellant
v.
Minister of National Revenue Respondent
Indexed as: Redeemer Foundation v. Canada (National Revenue)
Neutral citation: 2008 SCC 46.
File No.: 31753.
2008: February 28; 2008: July 31.
Present: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Charron and Rothstein JJ.
on appeal from the federal court of appeal
Taxation — Income tax — Administration and enforcement — Minister of National Revenue’s power to inspect, audit and examine taxpayers’ records — Whether Minister must obtain judicial authorization during course of legitimate audit of registered charity before asking charity to provide information that identifies its donors — Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 230(2) (a), 231.1(1) .
The appellant Foundation, a registered charity, operates a forgivable loan program that finances the education of students at an affiliated college. The Canada Revenue Agency (“CRA”) was concerned that some donations to the program were not valid charitable donations because the donors’ contributions were made solely to finance the education of their own children. CRA served the Foundation with a requirement to record the identity of each donor and the name of the student who received credit for each donation. In a subsequent audit, CRA requested the donor information, which the Foundation provided. CRA advised the Foundation that there might be grounds to revoke its charitable status and to reassess its donors. Notices of reassessment were sent to some donors. The Foundation applied for judicial review of the CRA’s request for donor information. The reviewing judge declared that the request was improper without prior judicial authorization, the donor information should be returned, and the Minister of National Revenue should be prevented from acting upon the information to reassess donors. The Federal Court of Appeal set aside the reviewing judge’s order and dismissed the application for judicial review.
Held (Binnie, Deschamps and Rothstein JJ. dissenting in part): The appeal should be dismissed.
Per McLachlin C.J. and LeBel, Fish and Charron JJ.: The 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 Minister has a broad power under s. 231.1 to inspect, audit and examine taxpayers’ records and any information that is or should be in the taxpayer’s books. The Foundation was required to collect the donor information pursuant to its record keeping obligations under s. 230(2) (a) because the information was necessary for determining whether to revoke its registration as a charity. Section 231.2 still serves a useful purpose if s. 231.1 is read as authorizing the Minister to obtain information on unnamed third parties during the audit of a taxpayer without judicial authorization, since s. 231.2 addresses circumstances where the Minister needs information about one or more taxpayers outside the context of a formal audit. [1] [12-13] [15]
Regardless of whether the donor list was used by the CRA 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. The CRA could not confirm whether the donors’ contributions were valid charitable donations without the requested information. The donor information is clearly the type of record that the Foundation is required to keep to verify the legitimacy of its donations and requiring the CRA to obtain judicial authorization before requesting it would be illogical and would serve no useful purpose. Furthermore, reassessment of donors is a logical consequence of a determination that a registered charity is not operating a valid charitable program. A donor can reasonably expect that his or her donation will be examined if the registered charity is audited and that his or her claimed tax credit will be non‑compliant if the charitable program is not valid. Requiring judicial authorization whenever an audit of a charity entails a possibility that its donors might be investigated and reassessed would be unworkable and, given the reciprocal nature of many tax arrangements, would potentially require judicial authorization in a variety of other circumstances. Lastly, there is minimal risk that the Minister will audit taxpayers who are not suspected of non‑compliance solely to investigate unnamed taxpayers for non‑compliance. [16-21] [26‑27]
The Federal Court does not have the jurisdiction to order the Minister to vacate tax assessments. Taxpayers should challenge evidence used for a reassessment before the Tax Court of Canada. [28]
Per Binnie, Deschamps and Rothstein JJ. (dissenting in part): The 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. While read in isolation ss. 230 and 231.1 might be interpreted as empowering the CRA to require a taxpayer to keep and provide information identifying unnamed persons, these provisions must be interpreted with regard to s. 231.2. In order for that section to be necessary and to have any meaning, it must provide the CRA with power in addition to what it is given under ss. 230 and 231.1. If the CRA could request information pertaining to unnamed persons under its audit powers, then it could avoid the requirement for judicial authorization and s. 231.2(2) — a taxpayer protection provision — would be ineffective. This is not an issue of reading down s. 231.1(1) to avoid redundancy, but rather an issue of reading ss. 230, 231.1 and 231.2 coherently. Whereas ss. 230 and 231.1 focus on the taxpayer’s compliance with the Act, s. 231.2 enhances the CRA’s power and may be used for additional purposes such as dealing with non‑payment and obtaining information about unnamed persons. [35-41]
Here, the CRA’s request was improper without judicial authorization under s. 231.2(2). As early as July 2000, if not before, the CRA intended to reassess the Foundation’s donors. This is not a case where its purpose was solely to audit the Foundation and the information was entirely within the Foundation’s records. The CRA sought information pertaining to the compliance of specific but unnamed persons and nothing in the Act required the Foundation to keep that information other than the CRA’s specific request under s. 230(3). In the circumstances of this case, the CRA could not require the information under its power to audit the Foundation or under s. 230(3) without obtaining judicial authorization under s. 231.2(2), nor could it avoid s. 231.2(2) by making a verbal or informal request for the donor information. Furthermore, the CRA cannot justify bypassing s. 231.2(2) with arguments based on reciprocity of tax treatment or taxpayers’ low expectations of privacy in their tax records. Because the authority of the CRA is so broad, it is required to follow the procedures provided in the Act rigorously. Section 231.2(2) was intended to provide some minimal restraint on the CRA’s broad, unilateral authority and judicial authorization under s. 231.2(2) is required when, in the course of an audit of a taxpayer, the CRA forms the intention to obtain information pertaining to unnamed persons. [41] [43] [46‑49] [54‑56]
The Federal Court did not have jurisdiction to vacate the donors’ tax assessments. Any issues as to the admissibility of evidence in respect of assessments should be made at the Tax Court of Canada. [58]
Cases Cited
By McLachlin C.J. and LeBel J.
Referred to: R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627.
By Rothstein J. (dissenting in part)
Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, 2005 SCC 54; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27.
Statutes and Regulations Cited
Federal Courts Act, R.S.C. 1985, c. F‑7, ss. 18.1(3) , 18.5 .
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), ss. 152(8) , 169(1) , 230 , 231.1 , 231.2 , 248(1) .
Authors Cited
Canada. Ministry of National Revenue. Audit Directorate. Requirement Guidelines. Ottawa: Ministry of National Revenue, July 20, 1995.
APPEAL from a judgment of the Federal Court of Appeal (Richard C.J. and Sharlow and Pelletier JJ.A.), [2007] 3 F.C.R. 40, 354 N.R. 147, [2007] 1 C.T.C. 280, 2006 D.T.C. 6712, [2006] F.C.J. No. 1492 (QL), 2006 CarswellNat 4821, 2006 FCA 325, reversing a decision of Hughes J., [2006] 1 F.C.R. 416, 281 F.T.R. 143, [2006] 1 C.T.C. 7, 2005 D.T.C. 5617, [2005] F.C.J. No. 1678 (QL), 2005 CarswellNat 3280, 2005 FC 1361, granting an application for judicial review of a decision of the Canada Revenue Agency to request third party donor information and documentation from the appellant. Appeal dismissed, Binnie, Deschamps and Rothstein JJ. dissenting in part.
Jacqueline L. King, Robert B. Hayhoe and Gerald Chipeur, for the appellant.
Gordon Bourgard and Christine Mohr, for the respondent.
The judgment of McLachlin C.J. and LeBel, Fish and Charron JJ. was delivered by
[1] The Chief Justice and LeBel J. — The issue in this appeal is whether the Minister was required under s. 231.2(2) of the Income Tax Act, R.S.C. 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. In our view, he was not required to do so. The Minister was entitled to information about the identity of the donors through the combined effect of s. 230(2) (a) and s. 231.1 . (The relevant provisions are reproduced in the Appendix.) Moreover, the Minister requested that information for a legitimate purpose — to investigate the validity of the Forgivable Loan Program (“FLP”) operated by the Foundation. For these reasons, we would dismiss the appeal and affirm the judgment of the Federal Court of Appeal.
I. Facts
[2] The Foundation is affiliated with Redeemer University College. The Foundation operates the FLP as a means of financing the education of students at the College. In October 1998, the Canada Revenue Agency (“CRA”) audited both the Foundation and the College in respect of the 1997 taxation year. The audit raised concerns regarding the Foundation’s compliance with the Income Tax Act . A central concern of the CRA was that many of the contributions to the FLP might not have been valid charitable donations because they were made by parents of students attending the College with the expectation that the money would be used to finance their child’s education. The CRA cautioned that it would consider disallowing deductions to parents on their individual income tax returns. Ultimately, however, the CRA determined that it required additional information to fully understand the transactions under investigation.
[3] In particular, the CRA expressed its concern that the Foundation had been unable to provide completed transmittal forms which recorded the identity of each donor and the name of the student who was to receive credit for the donation. It resumed its audit of the Foundation in 2001 for the 1998, 1999 and 2000 taxation years. Again, the Foundation could not produce completed transmittal forms and advised the CRA that the forms had not been preserved for those years. In response, the CRA served the Foundation with a requirement under s. 230(3) of the Income Tax Act asking it to maintain proper records, including the transmittal forms. The CRA decided to wait until the transmittal forms were available before pursuing its investigation into the links between donors and students.
[4] The CRA began a further audit in 2003 in regard to the 2001 and 2002 taxation years. In the course of that audit, the CRA’s representative made an oral request of the Foundation’s Executive Director for certain information, including a list of donors. The Foundation complied with this request. Upon its review of all of the information, the CRA advised the Foundation of its view that a valid charitable donation arrangement did not exist and that there might be grounds for revoking the Foundation’s charitable status as a result. Several meetings subsequently took place between the CRA and representatives for both the Foundation and the donors to discuss the implications of the CRA’s position on the charitable status of the Foundation and reassessment implications for the donors. In addition, the CRA contacted certain donors to advise them of its intention to disallow deductions for their donations to the Foundation and to request additional information. Notices of reassessment were eventually sent to some of these donors.
[5] During a follow-up meeting with the Foundation in June 2004, the CRA requested the donor lists for the 2002 and 2003 taxation years. The Foundation refused to provide the information, upon the advice that it would be improper to do so without the CRA having first obtained an order from the Federal Court pursuant to ss. 231.2(2) and 231.2(3) of the Income Tax Act . Section 231.2(2) of the Act states:
The Minister shall not impose on any person (in this section referred to as a “third party”) a requirement under subsection (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 (3).
[6] In September 2005, the Foundation brought an application for judicial review of the CRA’s 2003 request, with which the Foundation had complied by providing the CRA with the 2001 and 2002 donor lists and related information. The Foundation sought a declaration that the 2003 request was improper, that the information be returned and that the CRA be prevented from acting upon the information, such as by reassessing the donors identified by the information.
II. Judgments Below
A. Federal Court, [2006] 1 F.C.R. 416, 2005 FC 1361
[7] Hughes J. allowed the Foundation’s application for judicial review and ordered that any reassessments based on the information obtained as a result of the 2003 request be set aside. Hughes J. held that ss. 231.2(2) and 231.2(3) were “intended to protect third parties from having information relating to their activities obtained from other persons audited by the Minister, who then will use it for taxation purposes” (para. 14).
[8] Given that there was evidence that the CRA had used the information obtained from the Foundation to contact donors in respect of reassessment, in his view, the 2003 request fell within the scope of conduct covered by ss. 231.2(2) and 231.2(3) . He therefore held that the CRA’s request for and use of the information without prior judicial authorization was wrong.
[9] Hughes J. held that the Federal Court had the power to restrain the Minister from acting upon improperly obtained information by virtue of s. 18.1(3) (b) of the Federal Courts Act, R.S.C. 1985, c. F-7 , which includes the power to “set aside . . ., prohibit or restrain, a decision, order [or] act”. In his view, the word “decision” was “broad enough to include acts consequent upon the initial illegal act” (para. 22). It was on this basis that he set aside the reassessments.
B. Federal Court of Appeal, [2007] 3 F.C.R. 40, 2006 FCA 325
[10] Pelletier J.A., writing for a unanimous court, allowed the Minister’s appeal, set aside the order of the Federal Court and dismissed the application for judicial review. Pelletier J.A. looked to other provisions of the Income Tax Act to inform his interpretation of s. 231.2(2) . In particular, he relied on s. 230(1) , which requires taxpayers to keep records that will enable the Minister to determine taxes payable under the Act. In addition, he considered s. 230(2) , which identifies information that is specifically required to be kept by charities, and held that the information at issue was covered by this provision. When combined with the Minister’s general audit powers under s. 231.1(1) , Pelletier J.A. surmised that these provisions provided sufficient authority for the CRA’s 2003 request. As he explained:
If the auditor is entitled to obtain information by means of his own examination of the Foundation’s books and records, I can think of no principle which would require him to obtain a court order before asking for the Foundation’s assistance in obtaining the very same information. [para. 37]
[11] Pelletier J.A. rejected the CRA’s use of the information to reassess the Foundation’s donors as a valid concern. In his view, given the reciprocity of tax treatment between a charity and its donors, the CRA had a valid interest in reviewing the tax returns of the Foundation’s donors based on its audit of the Foundation and its conclusion that many donations were not eligible for deduction.
III. Statutory Interpretation
[12] The case before us, first and foremost, is one of statutory construction. The main section at issue is s. 231.1(1) which gives the Minister a broad power to inspect, audit and examine taxpayers’ records. This is the section that the Minister and the Federal Court of Appeal relied on as authorizing the Minister to obtain without judicial authorization the names of donors to the Foundation:
231.1 (1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act,
(a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer under this Act, . . .
[13] On its face, this section covers the situation at bar. It authorizes the Minister to examine “information that is or should be” in the Foundation’s books. The information at issue regarding third party taxpayers who had contributed to the Foundation was either in the Foundation’s books, or “should” have been in its books pursuant to the broad record-keeping requirements created by s. 230(2) :
230. . . .
(2) Every registered charity and registered Canadian amateur athletic association shall keep records and books of account at an address in Canada recorded with the Minister or designated by the Minister containing
(a) information in such form as will enable the Minister to determine whether there are any grounds for the revocation of its registration under this Act;
(b) a duplicate of each receipt containing prescribed information for a donation received by it; and
(c) other information in such form as will enable the Minister to verify the donations to it for which a deduction or tax credit is available under this Act.
The Minister led unchallenged evidence to the effect that the information it sought identifying the donors was necessary for determining whether the Foundation was issuing receipts not in accordance with the Act and, therefore, whether there were grounds to revoke its registration. It would seem to follow that by the combined effect of ss. 230(2)(a) and 231.1 of the Act, the Minister was entitled to information on those donors within the hands or power of the Foundation.
[14] The first argument of the appellant is that the principles of statutory construction require the Court to read s. 231.1(1) as not permitting access to any third party records without judicial authorization. It was raised that s. 231.2 would serve no purpose if s. 231.1 were read as authorizing the Minister to obtain information on unnamed persons (i.e. the contributors or “third parties” in this case). Therefore, s. 231.1(1) cannot be read as applying to information about unnamed persons, and a warrant is required before examining information about donors to the Foundation.
[15] Statutory provisions must be interpreted in a textual, contextual and purposive way, and all sections of a related group of provisions should be given coherent meaning if possible. But, we do not accept the argument that s. 231.2 serves no purpose if s. 231.1 is read as authorizing the Minister to obtain information on unnamed third parties during the audit of a taxpayer. The Minister may well need to obtain information about one or more taxpayers outside the context of a formal audit. Section 231.2 responds to this need, subject to a requirement for judicial authorization if the Minister is seeking information relating to unnamed persons from a third party record holder. It follows that the argument that s. 231.1(1) should be read down to avoid redundancy fails.
IV. The Purpose of Requesting the Donor List
[16] Another argument raised in support of the appeal is that judicial authorization was required because one of the purposes the CRA was pursuing in obtaining the donor list was to reassess the Foundation’s donors. In our opinion, however, the facts of this case confirm that the CRA needed the list to investigate its suspicions regarding the legitimacy of the FLP. The reassessment of the Foundation’s donors is just a logical consequence of the CRA’s suspicion that the FLP was not a valid charitable program.
[17] Upon concluding its audit in 2003 regarding the 2001 and 2002 taxation years, the CRA informed the Foundation of its findings as follows:
In our review of the Transmittal Forms, a list of donors and the list of students receiving the forgivable loans, we found that in the majority of cases the students solicited funds for the FLP from their own parents. The students then received 90% of the parents’ gifts under the FLP to pay for their tuition and related costs. The parents receive a charitable donation receipt for income tax purposes for 100% of the gift amount and their child-student receives a tuition receipt for the applicable portion of their loan . . . .
For the reasons listed above, there may be grounds to revoke the organization’s status as a registered charity. [Emphasis added; C.A. reasons, at para. 9.]
The above quotation confirms that the CRA reviewed the donor list, along with the transmittal forms and a list of students benefiting from the FLP, in order to assess the validity of the Foundation’s status as a registered charity. The CRA used the donor list to shed light on the links between donors and students, which were the very subject of its investigation of the Foundation and of the validity of the Foundation’s charitable status. Regardless of whether the donor list was used by the CRA in pursuing its audits of the donors themselves, the CRA clearly had a valid purpose in requesting and using the information to complete its audit of the Foundation.
[18] The position of the appellant would require the CRA to obtain judicial authorization whenever it has as even one of its purposes the reassessment of unnamed persons. This approach would compel the CRA to obtain judicial authorization to access the records of practically any charity it chooses to audit. When a charity is audited, we presume that it will generally be to review the validity of the organization’s charitable status and/or the legitimacy of the donations it receives. Such a review will always entail a possibility, depending on the outcome of the initial investigation, that the donors will be investigated and, ultimately, reassessed. It is therefore unclear under what circumstances the CRA would be able to audit a charity without having to obtain judicial authorization to review information pertaining to the charity’s donors. We find it hard to imagine how this test would be workable in practice other than by requiring the CRA to obtain judicial authorization every time it audits a charity.
[19] In addition to audits of charities, this approach would potentially require judicial authorization in a variety of other circumstances. Given the reciprocal nature of many tax arrangements, where a suspicion arises that one taxpayer is not complying with the Act, there may often be a corresponding suspicion that there are others who are not complying in regard to the same transactions. Presumably, the CRA may, in auditing the first taxpayer, obtain information pertaining to other taxpayers, and it may reassess those other taxpayers as a result. Judicial authorization would therefore be required.
[20] Returning to the issue of charities, we share the concerns of the Federal Court of Appeal regarding the ability of the CRA to review the records that charities are legally required to maintain. Section 230(2) , as mentioned, requires registered charities to keep certain records. Section 230(2) (c) specifically requires a registered charity to keep records containing
other information in such form as will enable the Minister to verify the donations to it for which a deduction or tax credit is available under this Act.
Under s. 230(3), where adequate records have not been kept, the Minister may require a charity to keep such records, as was done in this case. The donor list was used, in conjunction with the records the Foundation was specifically ordered to keep by the CRA, to assess the validity of the FLP. In our opinion, the donor list was clearly the type of record the Foundation was required to keep pursuant to s. 230(2) . In the words of Pelletier J.A.: “The maintenance of books and records would not assist in monitoring compliance with the Act if the Minister was not able to consult those books and records” (para. 31). It would be illogical to require a charity to keep records to enable the CRA to verify the legitimacy of its donations, but then require the CRA to obtain judicial authorization in order to review those records. Judicial authorization would not serve any useful purpose in such circumstances.
[21] In the instant case, another difficulty resulted from the fact that it was apparently necessary to identify the donors in order to assess the validity of the charity itself. The CRA suspected that the FLP was not a valid charitable program because of the relationship between the donors and the beneficiaries (the students). This suspicion could not be confirmed without obtaining records indicating the identities both of the donors and of those benefiting from their donations.
[22] The s. 231.2(2) requirement should not apply to situations in which the requested information is required in order to verify the compliance of the taxpayer being audited. Regardless of whether or not there is a possibility or a probability that the audit will lead to the investigation of other unnamed taxpayers, the CRA should be able to obtain information it would otherwise have the ability to see in the course of an audit. The argument was made that if, during an audit, the records of the taxpayer record the identity of the other party to a transaction and the CRA requires nothing further, there is no need to resort to s. 231.2(2) . However, it must be kept in mind that, in the instant case, the Foundation had not been keeping proper records. The illogical implication is that merely because the charity was not keeping proper records, the CRA is required to obtain judicial authorization even though those records, which would have included the very information the CRA is seeking, are ones that the CRA would ordinarily be able to review during an audit.
V. The Appellant’s Policy Argument
[23] Another argument relied on by the appellant and accepted by Justice Rothstein is that reading s. 231.1(1) as conferring the right to obtain information about third parties in the course of an audit may lead to misuse of the audit power. Instead of seeking judicial authorization to obtain information about unnamed persons from a third party record holder, the Minister would simply audit the record holder.
[24] As mentioned above, s. 231.1(1) is broadly worded. It allows access to “information that is or should be in the books or records of the taxpayer”. It thus gives access to information about third parties that is required to be kept by the taxpayer, as well as information that may not be required to be kept but happens to be in the taxpayer’s records.
[25] It is true that the broad wording of s. 231.1(1) provides a powerful tool that may reveal a great deal of information about transactions between the taxpayer under audit and third parties. However, this is business information. Taxpayers have a very low expectation of privacy in their business records relevant to the determination of their tax liability: R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627.
[26] The third party information at issue is directly tied to the operation of the Foundation and its status as a charity, receiving donations from third parties for which tax benefits are sought. The information was obtained by the Minister as part of a bona fide audit of the Foundation. A person who contributes to a charity can reasonably expect that if the charity is audited, the donor’s contribution may be examined. Such a review will always raise the possibility that the donors will be investigated and ultimately reassessed.
[27] There remains a concern that the CRA may attempt to investigate unnamed taxpayers under the “guise” of an audit. Use of the word “guise” implies that the taxpayer being audited is not really suspected of non-compliance and that the unnamed persons are the real targets. However, if an organization’s charitable program is not valid, then both the charity and any of its donors who claim tax credits are non-compliant. The CRA has a valid interest in investigating both. The same would be true of any other relationship involving reciprocal tax treatment. In our view, the risk seems minimal that the CRA would use its authority to audit a taxpayer who is not personally suspected of non-compliance merely to investigate other unnamed taxpayers for non-compliance.
VI. Remedy
[28] Given our conclusion that the CRA was not required to obtain judicial authorization in requesting and obtaining the donor list and related information, it is, strictly speaking, unnecessary to consider the issue of remedy for the purpose of disposing of this appeal. However, we feel that some comment is warranted on the Federal Court order granted by the applications judge, which vacated the reassessments of any donor who was identified to the CRA only by means of the information obtained as a result of the 2003 request. We agree with Rothstein J. that the Federal Court does not have the jurisdiction to order the Minister of National Revenue to vacate tax assessments. Where a taxpayer has concerns regarding certain evidence being used against him for the purposes of reassessment, the proper venue to challenge its admissibility is the Tax Court of Canada.
[29] For these reasons, we would dismiss the appeal with costs.
The reasons of Binnie, Deschamps and Rothstein JJ. were delivered by
[30] Rothstein J. (dissenting in part) — I have read the reasons of the Chief Justice and LeBel J. but I am unable to concur. In my respectful view, s. 231.2(2) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp .), was intended to provide some restraint on the broad unilateral authority of the Canada Revenue Agency (“CRA”). The relevant provisions of the Act should be read in a manner that gives meaning to that section. I would allow the appeal. The relevant provisions of the Act have been reproduced in the reasons of the majority.
[31] There is no doubt that broad power has been conferred on the CRA in respect of its audit of taxpayers. (Under s. 248(1) of the Income Tax Act , the definition of “taxpayer” includes “any person whether or not liable to pay tax” and this includes charitable organizations such as the Redeemer Foundation (“Foundation”).) Under 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.
[32] Under 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.
[33] The requirement on charities to keep records and books is specifically dealt with under 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.
[34] Under 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.
[35] Read in isolation, these provisions might be interpreted as empowering the CRA, in addition to conducting an audit of a taxpayer at any reasonable time, to require such information to be kept as would enable the CRA to obtain the names of unnamed persons. However, these provisions must be interpreted having regard to other relevant provisions of the Act. In Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, 2005 SCC 54, at para. 10, the Chief Justice and Major J. stated:
The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. [Emphasis added.]
[36] Here the other relevant provision is s. 231.2. Under 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.
Section 231.2(1) must be interpreted as providing the CRA with additional power to what it is given under ss. 230 and 231.1. If it did not provide additional power, it would be unnecessary. Parliament does not intend to enact pointless legislation. As stated in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 27,
a label of absurdity can be attached to interpretations which defeat the purpose of a statute or render some aspect of it pointless or futile . . . .
[37] The CRA’s audit and inspection powers under ss. 230 and 231.1 cannot be as wide as the majority asserts because such interpretation would ignore and give no meaning to s. 231.2. However, the additional power given to the CRA under s. 231.2(1), although very broad, is not itself unlimited. It is made subject to s. 231.2(2) which provides that the CRA shall not under s. 231.2(1) impose a requirement for information or documents relating to unnamed persons unless it first obtains judicial authorization.
[38] Under the majority’s interpretation and that of the Court of Appeal, the 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.
[39] At para. 15, the majority states that the argument that s. 231.1(1) should be read down to avoid redundancy fails. With respect, the notion of reading down is misplaced. What is required is to interpret provisions of the Act that bear upon each other to be coherent when read together. The question here is whether, in the exercise of its authority to audit, the CRA may avoid s. 231.2(2) . The majority’s approach would eliminate the need for s. 231.2(2) entirely whenever the CRA is auditing a taxpayer. Nothing in the Act suggests such a restricted application of s. 231.2(2) .
[40] I think the difference between ss. 230 and 231.1 on the one hand and s. 231.2 on the other is that under ss. 230 and 231.1, the focus is on the taxpayer’s compliance with the Act and the ability of the CRA to ensure that under a self-reporting system, it may seek and obtain information that will enable it to ensure such compliance or determine non-compliance by the taxpayer. Under s. 231.2, the information and documents sought by the CRA, with a judge’s authorization when necessary and otherwise without it, may be seen as enhancing the CRA’s audit power of the taxpayer, but may also be for other purposes such as dealing with non-payment and obtaining information about unnamed persons.
[41] Where the CRA seeks information or documents for a purpose other than compliance by the taxpayer with the Act that may be determined through audit, it is acting outside ss. 230 and 231.1. If what the CRA seeks pertains to unnamed persons, judicial authorization is required.
[42] As a result of the audit of the Foundation and Redeemer University College for the 1997 fiscal year, which apparently raised concerns for the CRA, letters were written on July 10, 2000 to donors to the Foundation proposing to reassess and disallow credits for donations associated with the Forgivable Loan Program (“FLP”) for students of the College. It would thus appear that as early as July 2000, if not before, it was the CRA’s intent to reassess donors associated with the FLP. During subsequent audits, books and records were required under s. 230(3), and information and documents were requested to enable the CRA to reassess donors for subsequent years.
[43] In my opinion, once the CRA wished to obtain the names of and information about unnamed persons, it was required to first obtain judicial authorization under s. 231.2(2) . It could not avoid the necessity of obtaining that authorization by issuing a requirement under s. 230(3). Further, I agree with Hughes J., the applications judge, that the necessity of judicial authorization could not be avoided by making a verbal or informal request for the information ([2006] 1 F.C.R. 416, 2005 FC 1361).
[44] Whether information and documents were required for the sole purpose of obtaining information about unnamed persons, or the dual purpose of auditing the Foundation and obtaining information about the unnamed persons, the CRA was obligated to comply with s. 231.2(2) .
[45] The CRA argues that the Foundation was required to maintain the information it sought for purposes of its audit. It says it would be unreasonable and impractical to require the CRA to have to obtain judicial authorization just because there may be a chance that unnamed persons may be disclosed in the information of the taxpaye