Sports Philanthropy at an Inflection Point: Will the Pandemic Change How We Fund Community Athletics?

Read an excerpt of Senator Ratna Omidvar’s comments on the need to update the Canada Revenue Agency’s qualified donees list to help address the funding issues experienced by sports organizations.

In a brief presented to the Senate’s special committee on the charitable sector in 2018, Rogers argued that the federal government should widen the rules governing charities to recognize sports as a charitable purpose. “There is a crisis in sport funding in Canada,” the brief stated. “Even though the government has declared sport a priority, Canadians and sports organizations have indicated that one of the major barriers in access to, promotion of, and programming in sport is a lack of funding.”

The Senate’s final report, however, stopped short of urging the federal government to take this particular step. Rather, as Senator Ratna Omidvar points out, the committee recommended that a proposed charitable sector advisory group work with federal officials on updating or expanding the Canada Revenue Agency’s qualified donees list to include “new categories” of groups that can issue tax receipts. “As you can imagine every sector in Canada has its own issues,” she says. “It was never going to be possible to address each of these.”

The most commonly expressed concern about charitable status for local sports organizations is that the tax exemption doesn’t end up allowing parents to defray the cost of signing their kids up to do sports by donating to the club and getting a tax receipt. “You have to make sure the money flows to the community and is not self-interested,” says Erin Kasungu, a former official with Community Foundations of Canada who oversaw its sports philanthropy program. “I think there’s a lot of work that has to be done around sport for development.”

Other OECD countries have tackled these questions and seem to be far less reticent when it comes to recognizing certain types of sports-related activities as charitable objects. In a 2003 review, for example, the UK’s Charity Commission ruled that organizations that promote community participation in healthy recreation or the advancement of physical education for young people not in the school system can be recognized as charitable.

While the Commission took care to point out that “the promotion of any particular sport for its own sake isn’t a charitable activity,” efforts to get young people involved should quality. “We have taken account of the enormous public interest in sport as a means of promoting health and the vital role that sport plays in improving the health of the nation,” the authors noted. “We have concluded that, within the law as it stands, we can properly recognise as charitable bodies that set out to encourage community participation in healthy sports.”

Fifteen years later, the sports sector has seen the benefits of this decision. According to a 2018 assessment of charitable giving, about 2% of the £10.3 billion raised philanthropically that year went to sports and recreation groups. That works out to about C$350 million, or $5.25 per capita. (That level of giving would generate about $173 million in Canada.)

Both the US and Australia also use a broader definition. In the US, organizations involved in delivering sports education to youth or preventing “juvenile delinquency” through sports participation qualify for 501.3c status. Down under, the Australian Sports Foundation, which raises money for high-performance athletes, distributed almost 40% of its fundraising to grassroots organizations, according to its 2016 financial statements. What’s more, the ASF board authorized a strategic plan in 2016 to boost its donations to sports groups by $100 million by 2020. One of its key goals was to “increase donations to mass participation sports” with a new philanthropy option called “Community Giving.”

Efforts to broaden the definition of charitable objects to include sports-related activities certainly predate Rogers’s testimony to the Senate committee. In the early 1980s, the Laidlaw Foundation went to court to challenge a decision by Ontario’s public trustee to disallow about $260,000 in donations to various amateur athletic organizations. The Ontario Superior Court upheld Laidlaw’s donations, and the ruling served to widen the definition of charitable object in Canada. (A decade later, the federal government responded by establishing the RCAAA designation.)

In the mid-2000s, several groups, including the McConnell Foundation and the Canadian Centre for Philanthropy, sought intervener status in another court challenge that ended up going to the Supreme Court. In that case, AYSA, a local amateur soccer association, applied for charitable status and was turned down by the CRA, which ruled that RCAAA status only applied to national organizations. While the justices upheld the CRA’s decision in their 2007 verdict, they hinted that Ottawa could create a designation allowing sports-oriented groups to register as charities, but that this policy shift would have to come from Parliament, and not the courts.

Omidvar concedes the point. “In reading through the ruling,” she says, “I must agree with the logic of the court. Sport may have an ancillary benefit that is societally charitable but that does not qualify every sports organization for charitable status.” The federal courts that hear CRA appeals don’t weigh evidence, and only make decisions about whether tax officials applied existing rules in a reasonable way, she points out. “Canada is out of step with other jurisdictions which increasingly allow appeals de novo.”

Read the full article on The Philanthropist’s website