Ottawa plan puts religious institutions’ tax status at risk

Proposal would affect religious institutions across Canada

WINNIPEG — A new report warns that Ottawa is considering changes to federal tax law that would strip religious institutions of their charitable status, a move that could affect churches, mosques, synagogues, temples and other faith-based organizations across Canada.

The report, Revoking the Charitable Status for the Advancement of Religion: A Critical Assessment, was published by the Frontier Centre for Public Policy and written by senior fellow Pierre Gilbert. It examines the House of Commons Standing Committee on Finance’s 2025 pre-budget report, which proposes redefining what qualifies as a charity.

Charitable status allows organizations to issue tax receipts for donations and exempts them from paying income tax. For many congregations and faith-based charities, it is a key source of stability. Donors would also lose the ability to claim tax credits if the status were revoked.

The report says the change could also trigger a one-time “revocation tax”—equal to the fair-market value of an organization’s assets minus its liabilities. That could mean a congregation losing its building, bank accounts and other property unless the assets were quickly transferred to another registered charity. The Canada Revenue Agency can collect the tax or seize assets if it is not paid within a year.

The financial impact extends well beyond the tax. The report estimates religious organizations contribute $16.5 billion annually to Canadian communities through programs such as food banks, shelters, education and cultural activities. By comparison, the federal government foregoes between $1.7 billion and $3.2 billion a year in tax revenue through charitable exemptions for religion.

Groups such as the Salvation Army—which provides housing, food banks and emergency relief to millions of Canadians each year—would lose the ability to issue charitable receipts and could face new taxes on their assets. Smaller congregations, the report warns, would be at greater risk of insolvency.

Municipalities could also move to end property tax exemptions for places of worship. The report cites examples including a 2018 case in Nova Scotia when parts of church properties used for childcare were taxed, and a 2022 decision in Iqaluit requiring local churches to pay annual property taxes.

Charitable status for religion in Canada dates back to English common law in 1601 and was codified federally in 1917 through the Income War Tax Act. Today, four categories of charitable purposes are recognized: relief of poverty, advancement of education, advancement of religion and other purposes beneficial to the community.

Supporters of revocation, including the BC Humanist Association, argue Canadians should not be required to subsidize religion through tax policy. The association has also called for ending property tax exemptions for places of worship, phasing out funding for religious schools and directing government support toward secular programs.

Opponents, highlighted in the report, say removing charitable status would create financial hardship for faith-based organizations and reduce services to vulnerable populations. The report also raises constitutional concerns, noting Section 2(a) of the Charter of Rights and Freedoms guarantees freedom of conscience and religion. Collective religious practice, it argues, often depends on the resources charitable status helps sustain.

The government has announced it will table Budget 2025 on Nov. 4. The report suggests the committee’s recommendations on charitable status are likely to resurface in that process.

If the measure is adopted, options for religious institutions could include applying for charitable status under other categories such as advancement of education or transferring assets to other registered charities. Many smaller congregations, the report says, could face insolvency without charitable recognition.

The report urges religious groups to monitor the policy debate, educate their members and engage with MPs before changes are enacted. It warns that silence could be seen as acquiescence.

| News Desk