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Introduction: Canadian Charity Law, CRA Revocation, and Constitutional Jurisdiction
The British Columbia Supreme Court decision in Coram Deo Foundation v MNR, 2026 BCSC (S260171), is a significant Canadian charity law and Canadian tax litigation ruling addressing interim injunctive relief, CRA revocation of charitable status, and constitutional limits on federal jurisdiction. The case is particularly relevant for registered charities, non-profit organizations, and their directors facing CRA tax audits, proposed revocation of charitable registration, and reputational risk. It also raises novel constitutional questions concerning the division of powers between Parliament and the provinces under the Constitution Act, 1867, with a specific focus on the regulation and management of charities.
Background: CRA Tax Audit, Penalties, and Proposed Revocation of Charitable Registration
Coram Deo Foundation was a registered charity engaged in a broad range of charitable activities, including making grants to community churches, schools, immigrant support organizations, and mental health support organizations. The foundation also administered a scholarship program intended to assist students experiencing financial hardship. Certain operational aspects of the scholarship program, including project evaluation, administrative coordination, and communication with qualified donees, were carried out by a third-party entity, SC.
The CRA conducted a tax audit of the foundation for the 2021 and 2022 taxation years. Following the tax audit, the CRA concluded that the foundation failed to operate exclusively for charitable purposes, as required under the Income Tax Act, by delivering non-incidental private benefits to SC. The CRA also determined that the foundation failed to issue official donation receipts in compliance with statutory requirements. Based on these findings, the CRA proposed penalties of $245,030 for failing to operate for exclusively charitable purposes and $283,851 for improper donation receipting.
The CRA invited the foundation to respond to the tax audit findings. Approximately four months after receiving the foundation's response, the CRA notified it of the CRA decision to revoke its charitable registration under subsection 168(2)(b) of the Income Tax Act.
On January 12, 2026, the foundation applied to the British Columbia Supreme Court for an interim injunction preventing publication of the CRA notice of revocation. The foundation advised that it intended to bring a constitutional challenge, asserting that federal regulation of charities through the Income Tax Act was ultra vires Parliament under section 92(7) of the Constitution Act, 1867.
Key Issues Before the British Columbia Supreme Court
Jurisdiction to Grant Injunctive Relief in CRA Charity Revocation Cases
A primary issue was whether the Federal Court of Appeal had exclusive jurisdiction to grant relief delaying publication of a CRA notice revoking charitable registration. The CRA argued that subsection 168(2)(b) of the Income Tax Act confined such relief to the Federal Court of Appeal. The court rejected this position. It held that the Income Tax Act does not explicitly grant exclusive jurisdiction to the Federal Court of Appeal in all circumstances, particularly where a charity challenges the constitutional validity of the CRA revocation regime itself. Because the foundation was not appealing a tax assessment but challenging the scope of federal authority exercised by the CRA over charities, the British Columbia Supreme Court retained jurisdiction to consider the injunction.
Interlocutory Injunction Test: Serious Issue, Irreparable Harm, and Balance of Convenience
Applying the established interlocutory injunction test, the court found that the proposed constitutional challenge raised a serious issue to be tried. The court further concluded that publication of the CRA revocation notice would cause irreparable harm, including damage to the foundation's reputation, disruption to charitable operations, harm to scholarship recipients and donees, and reputational harm to directors and senior management.
On the balance of convenience, the court acknowledged the public interest in CRA oversight and enforcement of the Income Tax Act as it applies to registered charities. However, there was no evidence that charitable donations had been misappropriated, lost, or diverted to non-charitable purposes. In these circumstances, the court found that the harm to the foundation outweighed any potential harm to the public interest from temporarily delaying publication of the CRA revocation notice.
Implications for Registered Charities and Non-Profit Organizations in Canada
This decision has important implications for Canadian charities and non-profit organizations facing CRA tax audits, tax reassessments, penalties, and proposed revocation of charitable status. It confirms that CRA revocation decisions may be subject to constitutional scrutiny and that provincial superior courts can grant interim relief where the challenge goes beyond the correctness of a tax assessment.
The case also reinforces the importance of strong governance, operational independence, and careful structuring of relationships with third-party administrators. Charities involved in scholarship programs, grant-making activities, or shared-services arrangements must ensure that any private benefits are incidental and defensible and that donation receipting practices strictly comply with the Income Tax Act.
Pro Tax Tips for Charities Facing CRA Audits and Revocation Risk
Charities should regularly review their governance and operational structures to ensure continued compliance with the requirement to operate exclusively for charitable purposes and to avoid conferring non-incidental private benefits.
Donation receipting practices should be periodically reviewed against statutory requirements and CRA administrative guidance, as receipting deficiencies alone can lead to penalties and charitable status revocation following a CRA tax audit.
When the CRA proposes revocation of charitable registration, early engagement with an experienced Canadian tax lawyer and an experienced tax litigation lawyer for CRA disputes is critical. In appropriate cases, interim injunctive relief may be available to prevent irreversible reputational and operational harm.
FAQs on CRA Revocation of Charitable Status and Injunctions
Can a charity stop the CRA from publishing a notice of revocation?
In limited circumstances, yes. Where a charity raises serious constitutional or jurisdictional issues and demonstrates irreparable harm, a provincial superior court may grant an interim injunction delaying publication of the CRA notice of revocation.
Does this case restrict the CRA's power to revoke charitable status?
No. The decision does not eliminate the CRA's authority to enforce the Income Tax Act. It confirms that constitutional challenges and procedural fairness concerns may justify temporary relief in appropriate cases.
Why is reputational harm relevant in CRA charity revocation cases?
Reputational harm can undermine donor confidence, disrupt charitable activities, and negatively affect directors and officers. Courts may recognize such harm as irreparable where supported by evidence.
Conclusion: Constitutional Oversight and CRA Enforcement of Charity Rules
Coram Deo Foundation v MNR is a notable Canadian charity law decision confirming that interim injunctive relief may be available where CRA revocation of charitable status raises constitutional concerns. For charities, directors, and advisors, the decision highlights the importance of proactive compliance, careful governance, and timely advice from an experienced Canadian tax lawyer when facing CRA enforcement actions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
