Children’s Clean Air Network Society v. R. – TCC: Court Rules Non-Profit’s Activities 30% Commercial

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Children’s Clean Air Network Society v. The Queen[1] (October 24, 2013) involved a non-profit organization that operated in four fiscal periods:

April 25, 2009 – April 30, 2009

May 1, 2009 – April 30, 2010

May 1, 2010 – April 30, 2011

May 1, 2011 – April 20, 2012

During the first two periods it was a not-for-profit organization (“NPO”) but in the last two periods it changed its status to a registered charity.  The problem at issue in this appeal was the status of the organization for GST purposes:

[1] … CCAN filed its Goods and Service Tax (“GST”) returns on the basis it collected and remitted Harmonized Sales Tax (“HST”) on funding it received from sponsors: it also claimed Input Tax Credits (“ITC”). The Minister of National Revenue (the “Minister”) assessed on the basis that CCAN collected HST in error, was not entitled to ITC’s as it carried on no commercial activity, but the Canada Revenue Agency (“CRA”) did allow the public service body rebate for the periods that CCAN was a charity.

The purpose of the organization was the reduction of greenhouse gasses particularly through the education and involvement of children:

[2]             CCAN commenced its activity in 2009 as a NPO and operated as such until obtaining registered charity status in July 2010. The following is taken from its website:

The Children’s Clean Air Network is a network of like-minded partners promoting “IDLE-FREE for our kids”. Their goal is to help “North America turn off its tailpipe” – reducing needless vehicle emissions, ultimately saving billions of dollars in fuel and cutting millions of tons of greenhouse gas.

Partner organizations include schools, businesses, media outlets, and health and environment organizations.

Needless vehicle emissions impact the health and future of children and are a significant waste of resources. The Children’s Clean Air Network seeks to inspire the public and empower children to be heard on this issue.


To reduce greenhouse gas and improve air quality by reducing vehicle emissions.


Excess vehicle emissions will become as socially unacceptable as second hand smoke.


To empower kids to transform driver behavior. Kids need a voice on climate change and poor air quality.


To partner with business, schools and media to inspire through simple and consistent messaging.

[3]             Mr. Collins, the former secretary-treasurer, testified on behalf of the Appellant and described in more detail its operations. According to Mr. Collins, CCAN obtained funds from donations or sponsorships. Donations were just that, monies received from donors for the general benefit and good purposes of the organization, used at CCAN’s sole discretion. Sponsorships involved funds received from a business with a specific project identified for the funds, the project providing some degree of advertising for the sponsor as part of the project. So, for example, MicMac Mall would agree to sponsor a school event where CCAN would use the sponsors’ monies to acquire signage, posters, tailgate magnetic stickers etc., and make a presentation at the school regarding IDLE-FREE. Mr. Collins produced one of the tailgate magnets (approximately 8¨ x 4¨) which displayed in large letters: “IDLE-FREE For our kids.” and in smaller letters CCAN and MICMAC MALL.

[4]             Using the MicMac Mall example, CCAN would account for the $4,000 received from this sponsor as $3,478 funding and $522 GST. CCAN would purchase goods (for example the magnets, signs, banners etc.) for $3,642 including $420 HST and would realize a margin, as Mr. Collins called it, of $358.00. CCAN would then claim an ITC of the $420 and would remit $122 to the CRA. It filed on this basis for three periods and this filing was accepted.

CRA took the position that none of CCAN’s activities were ever commercial in nature.  Thus while it was entitled to a rebate during its registered charity phase it was not entitled to any GST input tax credits during its NPO phase.

The Tax Court concluded that a portion of its activities were commercial in character:

[12]        Firstly, dealing with the NPO, this is where the concept of commercial activity becomes important, as to a claim for ITC’s. To claim ITC’s the goods acquired by CCAN while a NPO must have been acquired for “consumption, use or supply in the course of commercial activities” and then only to the extent (percentage wise) of such use. Using the tailgate magnets as an example, they were bought to hand out at CCAN’s IDLE FREE campaign at a school. These magnets have the sponsor’s name on them. Were they used or consumed in the course of CCAN’s commercial activity? This begs the question as to what was CCAN’s commercial activity.

[13]        The CRA argues CCAN had no commercial activity, yet CCAN charged a sponsor not just the cost of supplies for the IDLE FREE campaign but built in something extra, which Mr. Collins called margin. If its commercial activity was selling advertising, then buying the tailgate magnets with a sponsor’s name on them can be readily viewed as being consumed as part of that commercial activity.

[18]        How does one put a percentage on the commercial use versus what I will call the charitable use? From a common sense perspective, CCAN’s mission, its purpose was a charitable cause, and the commercial sponsor arrangement was a way to accommodate this purpose. I find the majority of the use, therefore, of the supplies was non-commercial. This is an Informal Procedure case and I see no need, on balance, to recall the Parties to attempt to justify what a minority percentage of commercial use should be. I simply find a reasonable percentage to be 30%.

[23]        In summary, the Appeal is allowed for the two periods during which CCAN operated as a NPO and the matter is referred back to the Minister for reconsideration and reassessment on the basis that during these periods CCAN is entitled to claim ITC’s of 30% of the tax paid by CCAN for goods and services acquired by it for use in its sponsorship programs.

However the court rejected a fairness-based argument that the rebate it received as a registered charity was less than full input tax credits:

[22]        Secondly, CCAN maintains that the treatment, as assessed, puts the charity in a worse position than had it been a for profit enterprise, as well as providing the CRA with a windfall. With respect, I disagree. What Mr. Collins appears to ignore in his analysis is the fact that a business serves as a conduit of the tax; it is not the end user. The charity as neither fish nor fowl, not wholly conduit nor end user, is given something of a compromise approach under the regime set out in section 225.1 of the Act. It is not appropriate in any fairness argument to compare the charity and the commercial business.

Comment:  This decision seems to be a balanced approach to an issue not without a degree of complexity.

[1]2013 TCC 352.