Blackmore v. R. – TCC: Polygamous Mormon Group Cannot Benefit Under Section 143 (the “Hutterite Rule”)

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Blackmore v. The Queen[1] (August 21, 2013) is a fascinating, scholarly decision dealing with whether the well-known dissident polygamous Mormon group based in Bountiful, B.C., can benefit from the “communal trust” rules in section 143 of the Income Tax Act[2] which were historically introduced to deal with the religious practices and beliefs of Hutterites.  The appellant, Winston Blackmore, was the leader of the community and was reassessed in connection with his 2000-2006 taxation years:

[4]            The outcome of these appeals is entirely dependent upon whether the Appellant and the community of Bountiful can bring themselves within section 143. Although the Appellant was audited and reassessed pursuant to subsection 15(1), paragraph 6(1)(a) and section 5 of the Act to add additional income of approximately $1.8 million, he objected to the reassessments on the basis that section 143 ought to apply. So how would section 143 apply to lessen or erase the Appellant’s tax liability?

[5]            Section 143 is located in Division F of Part I of the Act, which is titled “Special Rules Applicable in Certain Circumstances”. It affords separate tax treatment to those communal religious organizations that can bring their community within the statutory definition of “congregation” contained in subsection 143(4). The term “congregation” is employed in the opening words of the provision:

143(1) Communal organizations.  Where a congregation, or one or more business agencies of the congregation, carries on one or more businesses for purposes that include supporting or sustaining the congregation’s members or the members of any other congregation, the following rules apply:


“Business Agency” is also a defined term and, if it is a corporation that carries on business within the community on behalf of the members, the congregation must own the capital stock of the corporation throughout a calendar year. The Appellant’s argument is that he meets all four tests of the definition of “congregation” and that the shares of J.R. Blackmore & Sons Ltd. (the “Company”) held in the names of the Appellant, Kevin, Guy and Richard Blackmore, were beneficially owned on behalf of the members of the congregation.

The test the appellant had to meet was to establish that the Bountiful Mormon community was a “congregation” as that term is used in subsection 143(4) of the Act:

[22]        The primary issue is whether the community of Bountiful meets the definition of “congregation” pursuant to subsection 143(4) of the Act, namely, whether the members of the community:

(a) live and work together;

(b) adhere to the practices and beliefs of and operate according to the principles of the religious organization of which it is a constituent part;

(c) do not permit any of the members to own any property in their own right; and

(d) require the members to devote their working lives to the activities of the congregation.

After a 21 day trial[3] and after holding the matter under reserve for more than a year the court issued a 335 paragraph judgment ruling against the appellant on all issues, including the imposition of penalties:

[326]   These appeals introduced unique and novel legal and factual issues that are not normally before this Court.

[327]   The issues centered around section 143 of the Act, which provides special tax treatment to those religious communal congregations that operate within cultural and property norms distinct from the mainstream milieu.

[328]   To be eligible for this tax treatment, a community must satisfy all of the four tests set out in the definition of “congregation” established by Parliament. Any community that meets these four criteria may seek this specialized tax treatment.

[329]   My conclusion is that the community of Bountiful does not meet any of the four criteria, despite some innovative and thought-provoking arguments by Appellant Counsel.

[330]   Even if the Appellant had been successful in meeting the four tests, he failed to provide any indication of how the provision would be applied to Bountiful in terms of who would qualify as members of the congregation at the end of each taxation year. It becomes a question of “who is in and who is out” as a member of the community in respect to each taxation year in order to ascertain the group to which such tax treatment might apply.

[331]   With respect to penalties, I conclude that the Respondent satisfied its onus and that the Appellant was grossly negligent and therefore responsible for the imposition of the assessed penalties. Being unsuccessful in the issues in these appeals, the Appellant offered little explanation in respect to why he made such massive misstatements in his income reporting in tax returns for successive years.

This is the only reported decision on section 143 since it was introduced in 1977 and it is probably unlikely that there will be many others (apart from possible appeals of this decision).  In addition, the decision is heavily fact based.  Thus the case will probably not be of too much interest to the tax community as a whole.  Nevertheless this decision is an important example of the application of rules of statutory interpretation to a very obscure provision of the Act as well as demonstrating a careful and balanced treatment of extremely complex and arcane expert evidence.

[A companion decision deals with the admissibility of, and limits upon, the evidence of three experts, one for the appellant and two for the Crown.] New Window

[1] 2013 TCC 264.

[2] R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act).

[3] A very lengthy trial by Tax Court standards.