Sports and charitable registration

Policy statement

Reference number
CPS-027

Effective date
April 30, 2009

1. Purpose

This document outlines the policy of the Canada Revenue Agency (CRA) on sports activities carried out by registered charities and by organizations applying for registration.

This policy does not apply to Canadian amateur athletic associations or applicants seeking registration as Canadian amateur athletic associations. For more information, see Policy statement CPS-011, Registration of Canadian amateur athletic associations.

2. Implementation

This policy explains when applicants carrying out activities that include sport can potentially qualify for charitable registration. The guidelines in this policy also apply to all registered charities that engage in sports activities.

An applicant organization may only qualify for charitable registration if all of its purposes are charitable at law. Although the promotion of sport per se is not recognized as a charitable purpose^{Footnote 1}, there are circumstances in which sports activities can be used to further a charitable purpose. This policy includes examples of such purposes and the sports activities that can be used to further them, as well as criteria for determining the acceptability of sports activities.

3. Determining eligibility for charitable registration

To qualify for registration, all of the purposes of the applicant organization must be charitable at law. Being charitable at law also means that the organization must be established for the benefit of the public.

Charitable purposes are those that the law regards as charitable, and they fall into one or more of the following four categories:

relief of poverty
advancement of education
advancement of religion
other purposes beneficial to the community and that are considered to be charitable at law ^{Footnote 2}

The requirement of public benefit involves two parts. There must be a tangible benefit and it must be directed to the public or a sufficient section of the public. Any private benefit arising from the purposes and supporting activities being undertaken by a registered charity can only be incidental. For further details about public and private benefit, see Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test.

The courts have not recognized the promotion of sport as a charitable purpose.^{Footnote 3} This means that an organization whose purpose is to promote one or more sports for its own sake cannot be registered as a charity. Groups such as minor hockey leagues or amateur soccer clubs^{Footnote 4} , for example, are not eligible for this reason.

However, when a recognized charitable purpose is furthered through activities that include sport, or where sport is an incidental and ancillary activity only, the organization can potentially qualify for charitable status.

3.1 Furthering a charitable purpose through sports activities

For an organization with sports activities to be registered, the sport activities should relate to and support exclusively charitable purpose(s) and be a reasonable way to achieve them. If the purposes or activities of the organization are only (or even collaterally) to promote sport(s), or where it is not shown how all the sport(s) activities clearly further one or more of the organization's identified charitable purposes, it is unlikely to qualify for registration as a charity under the Income Tax Act.

The applicant needs to show in detail how the sports activity carries out the recognized charitable purpose to demonstrate clearly that the charity's resources are being devoted to exclusively charitable purposes.^{Footnote 5} For example, the applicant organization must be able to show that particular sport activities are chosen with the charitable purposes and public benefit as primary considerations. Typically, this will mean that factors such as the effectiveness of a particular sports activity in achieving a charitable purpose, accessibility to the public, and participation levels will be considered.

Whether or not a sports activity will be acceptable will depend on the facts of each case and the charitable purpose the activity is intended to further. Some activities may be acceptable for one purpose and not for another. For example, military and paramilitary exercises may be acceptable activities for the recognized charitable purpose of increasing the effectiveness and efficiency of the Canadian Armed Forces^{Footnote 6} or the police^{Footnote 7} but would generally not be acceptable for any other charitable purposes, such as advancing religion or relieving poverty.

3.2 Ancillary and incidental sports activities

If an organization's sports activities do not themselves further a charitable purpose, it may still be registered if it can demonstrate that its sports activities are ancillary and incidental to its otherwise charitable purposes. Sports activities are considered ancillary and incidental when only a very small portion of the organization's total resources (personnel, funds, and property) are devoted to the sport activities in question.

4. Sport and the four categories of charity

This section is broken down into the four categories of charitable purposes, and gives examples of sports activities that may qualify as furthering a recognized charitable purpose, as well as purposes and activities unlikely to be recognized as charitable. These examples are not intended to be read as an exhaustive list.

4.1 Relief of poverty

This category of charitable purposes includes the provision of basic necessities of life and simple amenities to those who are experiencing poverty. Assisting individuals living in poverty by alleviating financial or other barriers to participation in, and increasing access to, physical activity could potentially qualify as relief of poverty.

These activities could include, for example, providing subsidies for children of low-income families so they can participate in sports activities in their community. Making new or used sports equipment available to low-income participants through a "lending bank" would also be an acceptable activity. (See the discussion in section 5 about how certain organizations can better demonstrate that they meet the public benefit requirements.)

Summer camps with a sports component, and operated for low-income participants, could also potentially qualify in this category of charity.

For more information, see Guidance CG-029, Relief of poverty and charitable registration.

4.2 Advancement of education

This category of charitable purposes typically includes programs that train the mind and advance the knowledge and abilities of participants. Programs that include sport and clearly further an educational purpose can qualify under the advancement of education. For example, youth groups, like Guides and Scouts, where sport is one component of an overall educational program, can be charitable at law.

The courts have held that sport as part of a school curriculum or program is charitable as advancing education^{Footnote 8} , recognizing it as being necessary to the development of a well-balanced student. The courts have held this to be the case even when the sports activity is carried out under the auspices of, or supported by, a separate entity, but forms part of a school's educational program. ^{Footnote 9}

A school program structured in an alternative manner may qualify for registration. For example, an educational institute set up to help young athletes-in-training pursue their academic studies in the morning and undertake physical training in the afternoon might qualify, as long as the main purpose of the organization is simply to facilitate completion of academic requirements by ensuring that the athletes have access to flexible course schedules. The focus of the organization must be on meeting academic standards and requirements, with the athletic success of the student and the promotion of sport remaining incidental by-products of the program.

The courts have not recognized as charitable the selection and training of individuals with a view to developing professional athletes for a career in sport. ^{Footnote 10} For more information on the advancement of education, see Guidance CG-030, Advancement of education and charitable registration.

4.3 Advancement of religion

This category of charitable purposes generally includes promoting the spiritual teachings of a religious body. These organizations sometimes carry out sports activities that are ancillary and incidental to the purpose of advancing religion.^{Footnote 11} For example, many religious summer camps offer some sports activities in addition to the main activity of religious instruction. However, it must be clear that the sport element has not become a collateral non-charitable purpose. ^{Footnote 12} For more information, refer to Guidance on Advancement of Religion (under development).

4.4 Other purposes beneficial to the community

This category of charitable purposes contains those purposes that the courts have held to be charitable, but that do not fall within the first three categories. Organizations using sports activities to further these purposes can potentially qualify for registration. Some of the recognized charitable purposes in this category include:

addressing specific problems faced by youth at risk
relieving conditions associated with aging or disability
social rehabilitation, such as rehabilitating prisoners or those suffering from addiction
increasing the effectiveness and efficiency of the Armed Forces or the police
promoting health
providing and operating public recreation grounds/community centres^{Footnote 13}

4.4.1 Assisting youth at risk

Organizations that address specific problems faced by youth at risk (for example, delinquency, addictions, or mental illness) have been recognized as charitable. For more information, see Guidance CG-020, Charitable purposes and activities that benefit youth.

It is important for applicants to relate the sports activity to the purpose it is intended to achieve. For example, it could be charitable to provide a program for youth designed to build self-esteem, prevent addictions, or assist in the recovery from addictions, which includes leadership skills and team building, as well as some sports activities.

An organization that simply provides sports equipment, or opportunities for youth to play sports, would be unlikely to qualify, without establishing how these activities accomplish a charitable purpose (for example, how the program specifically contributes to delinquency prevention for kids at risk, rather than a more general purpose of keeping youth off the street).

All programs should have a selection process to ensure that participants are indeed youth in need of such assistance. It is not necessary that only these youth participate, but they should be the focus of the program. In some cases, the community location of the program(s) offered may be sufficient to show there is a sufficient focus on youth in need of the program, such as a program established in a remote community with high rates of substance abuse and delinquency among youths.

4.4.2 Relieving conditions associated with aging

Organizations delivering sports programs to help address conditions normally attributable to old age, such as maintaining health, fitness, or mobility and relieving isolation, could qualify for registration. This could include, for example, activity centres for the aged that provide access to sport or programs such as weight training to help build bone density and reduce the risk of health problems or injury.

4.4.3 Relieving conditions associated with disabilities

Sports activities used as a means of relieving distress and suffering, or alleviating conditions associated with disabilities, may be charitable. However, the organization's activities must be widely accessible and encourage participation of all, regardless of their skill level or experience. The following are examples of the kinds of activities that could potentially qualify.

4.4.3.a Improving functioning, adjustment, or self-esteem

Acceptable programs that use sport for therapy or rehabilitation purposes could include the following:

wheelchair sports programs for people with spinal cord injuries to assist with overall rehabilitation through physical activity
therapeutic riding programs for persons with disabilities, to improve balance, co-ordination, mobility, sensory awareness, and/or self-confidence
martial arts programs for people with attention deficit disorders, as part of an overall treatment program, to encourage focus and concentration

4.4.3.b Removing barriers to participation

Persons with disabilities often face barriers to participating in publicly available sports activities that promote health. Organizations that provide opportunities for persons with disabilities to be integrated into such activities or opportunities to participate in team sports and physical activity designed to be accessible are all potentially charitable. Some examples of accessible sports include wheelchair athletics, sports for participants with intellectual or physical disabilities, and specifically designed sports such as goal ball (for people who are blind or visually-impaired).

A program could also provide adaptive equipment or financial and practical assistance for travel and accommodation for participants with disabilities. For example, an organization that helps persons with disabilities go alpine skiing, by providing adaptive equipment or transportation to a ski hill for instance, could potentially qualify for registration.

4.4.4 Social rehabilitation

Sports as a means of social rehabilitation may be charitable. For example, sports structured as part of an addictions treatment program or a reintegration program for prisoners leaving custody can be charitable.

4.4.5 Increasing the effectiveness and efficiency of the Armed Forces or the police

Increasing the effectiveness and efficiency of the Armed Forces^{Footnote 14} or the police^{Footnote 15} is a recognized charitable purpose. Likewise, using sports as a means of achieving this purpose would be considered charitable.

4.4.6 Providing public recreation grounds and community facilities

Organizations that provide facilities to the community at large for physical recreation can be registered as charities.^{Footnote 16} An organization established to provide or promote access to sports/recreational facilities or equipment may qualify for registration provided that the facilities are open to the general public and not limited to specific individuals, organizations, or teams. Examples include community centres with facilities like gyms, squash courts, and swimming pools, and recreation areas with space allocated for sports like baseball, soccer, hiking, or cross-country skiing.

When the primary purpose is to provide a facility, it would be acceptable for the facility to also organize sports as an incidental activity.

4.4.7 Promoting health

The promotion of health is a recognized charitable purpose. The CRA will consider the promotion of physical activity in the general sense to promote health. The focus of an organization might be to:

inform the public about ways to improve their health and fitness levels through physical activity
encourage public participation in healthy physical activity—for example, to practise any healthy sport—based on the beneficial effects of becoming more physically active
provide fitness and recreation opportunities that directly promote or preserve health, such as programs designed to develop fitness, stamina, agility, or strength directly, as opposed to indirectly, or in the form of a by-product^{Footnote 17}

If the activities also entail a risk of injury (for example, in a contact sport), this must be taken into account in assessing any beneficial impact to health when participating in that sport. An organization may need to include information in its application on the steps it takes to reduce the risk of injury. When the risk associated with the activity will be so great that it will outweigh any positive benefit that might result, the applicant organization will not qualify. ^{Footnote 18}

When an organization is an intermediary or umbrella organization, it will not be possible to show a direct health benefit. However, it may be possible to show that an indirect health benefit is achieved through the facilitation of the activities of the member or affiliated groups. For more information, see Policy statement CPS-026, Guidelines for the registration of umbrella organizations and title holding organizations.

4.5 Elite competitive sports activities

The promotion of success or excellence through competition for athletes is not a charitable purpose, not withstanding that there may be health and fitness benefits derived from participation. Therefore, activities that require participants to first demonstrate a certain skill level, for example through a qualifying time or a winning record, do not qualify as charitable activities. These are generally referred to as elite competitive sport activities.

Registered charities may only carry out such non-charitable activities if they are ancillary and incidental to their charitable programs. For example, registered charities using sports to provide relief of conditions associated with a disease or a disability may only support participation in such elite competitive sport activities when they are ancillary and incidental to their charitable activities. A determination of whether an organization's purpose is charitable will be made by taking into account the following considerations:

the proportion of the organization's expenditures related to activities open to all levels of skill relative to the expenditures related to elite competitive sport activities
the number of people participating in activities open to all levels of skill relative to the number of people participating in elite competitive sport activities
the amount of financial support for elite competitive athletes and the relative amount of resources allocated to them in excess of the basic or average amount of resources allocated to other participants
whether the organization presents itself as primarily providing activities open to everyone served by the charity's programs, regardless of their level of ability, and conducts outreach to recruit participants regardless of level of skill

5. Restricting benefit

For organizations to be eligible for registration under any of the recognized charitable purposes, anyone who could benefit from the program(s) must be eligible to do so. Restrictions placed on the community served are always unacceptable when they are unrelated to the nature of the undertaking (for example, a seniors' fitness program restricted to individuals practising a certain religion). ^{Footnote 19}

Public participation, regardless of an individual's ability or skill, should be the focus of the sports activities. If training is provided, it should be available to any interested participants. This may include promising athletes, but coaching or other assistance should not be directed toward these participants to the detriment of those who are less skilled.

While competition may be a component of the sports activities, opportunities to participate should not exclude less skilled teams or individuals from participating equally (for example, when teams or individuals who lose a match are disqualified, and only the winners have continued opportunities to play).^{Footnote 20} The opportunity to play all positions in a team sport would also be an indicator that public participation is the focus.

Generally, restricting access to a specific group of people is only acceptable if the reasons for the restrictions are justified by the purposes. There must be a logical link between the purposes being advanced and any restriction on the community being served. This could include a unique need or the fact that offering wider availability does not make sense given the nature of the service. For more details, see section 3.2.2 of Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test.

Organizations that address the needs of Aboriginal peoples by teaching, organizing, and/or playing traditional sports (for example, Northern Games) as a means of preserving their cultural traditions could be considered to have an acceptable restriction. Providing opportunities for Aboriginal peoples to maintain their heritage, instil cultural pride, and promote the social cohesion of Aboriginal communities have all been recognized as charitable purposes. ^{Footnote 21}

When there are valid reasons for limiting participation in sports programs (for example, to individuals with the same or similar disabilities), such restrictions may be acceptable.

Organizations that offer programs only to those who are able to afford them (for example, sports with prohibitive costs, fees, or other limiting criteria) will need to demonstrate that they confer a benefit to the community at large. Public benefit is often more apparent when organizations provide broad access to their programs, including subsidies and equipment-lending plans, and more difficult to substantiate when services are likely to exclude those with limited incomes. ^{Footnote 22}

Restrictions based on geographical criteria can sometimes be justified (for example, because of limited resources). Organizations should be prepared to show why any geographic limitation to program access is reasonable, based on their circumstances.

Restrictions based on the age of participants may be justified if they are consistent with, and actually further, the organization's charitable purposes (for example, relief of conditions associated with aging or addressing specific problems faced by youth at risk). Age restrictions could be acceptable if the organization is able to show that, given the nature of the activity, it is reasonable to limit it to certain age groups. For example, it may not be reasonable to have significant discrepancies in the size and/or physical maturity of individuals playing a sport.

Similar to restrictions on age, gender restrictions can sometimes also be justified, depending on the purposes, sport, or activity. Organizations will need to show that, given the nature of their programs, restricting participation by gender would be reasonable, rather than arbitrary. If a charity's purpose for which it is registered is not specifically restricted to men or women, the charity must show why it cannot allow both genders to participate in its sports activities. Alternatively, the charity may choose to provide comparable, but separate, activities for each gender.

6. Organizations restricted to one particular sport

In the absence of evidence to the contrary, an inference can be drawn that an organization whose sports activities are restricted to a particular sport is, in reality, set up to promote that sport and is consequently non-charitable. ^{Footnote 23}

There are all types of organizations such as clubs, leagues, golf courses, etc. whose activities promote physical activity for their members or customers by way of concentrating on a particular sport, or on a limited range of sports as hobbies, pastimes, or entertainment. While the health benefits for regular participants in an organized sport are often evident (especially those requiring fitness, agility, stamina, and/or strength), most such organizations are not established to advance or further a recognized charitable purpose, such as promoting the health of the public at large. ^{Footnote 24}

It still may be possible for an organization whose sports activities are restricted to a particular sport to qualify if it is able to rebut or address the inference that it is set up to promote that sport. To do so, it will have to show that the limitation to the particular sport:

is reasonable, as opposed to arbitrary, considering the nature of the recognized charitable purpose it intends to further ^{Footnote 25}
will not deter or exclude a substantial proportion of those that could be served by the charity
is the most practical use of the charity's resources, at least as a starting point, for reasons such as expertise, effectiveness, and financial consideration

Organizations that meet the criteria for registration outlined in this policy can apply for charitable status by going to Apply to become a registered charity. If you need more information, contact the Charities Directorate.

Appendix A

The following table outlines some indicators that an organization's sports activities are acceptable or not.

Acceptable and not acceptable sports activities
Acceptable:	Not acceptable:
the sports activities themselves directly advance a recognized charitable purpose	any charitable purpose or benefit to the public is secondary or not a consideration
the sports activities are ancillary and incidental to carrying out a charitable purpose	the sports activities are the main focus of the organization's efforts, and they do not themselves carry out a charitable purpose
the sports activities are not restricted by age or skill level; fees and equipment costs are nominal (or subsidized for low-income participants)	access is limited in some manner (for example, by exclusive membership criteria, skill requirements, prohibitive costs, etc.)
emphasis is on participation, that is, getting as much of the public involved as possible	emphasis is on assisting individuals to succeed in competition, advance in standings, etc.
anyone served by the charity's programs, regardless of ability, is given an equal opportunity to participate	priority is given to gifted or promising participants (promotion of excellence)
token, non-monetary rewards for participation	participants may receive monetary benefit
no cost to spectators (occasional fundraising through admission fees would be acceptable)	spectators charged an entrance fee
more than one sports activity may be used to carry out the organization's charitable programs	the organization always restricts itself to one particular sport, regardless of circumstances

Footnotes

Footnote 1

A.Y.S.A Amateur Youth Soccer Association v. Canada (Revenue Agency), 2007 SCC 42 "The trend of the cases supports the proposition that sport, if ancillary to another recognized charitable purpose such as education, can be charitable, but not sport in itself." Justice Rothstein, for the majority decision, at paragraph 40, page 15.

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Footnote 2

Income Tax Special Purposes Commissioners v. John Frederick Pemsel, [1891] A.C. 531 (P.C.)

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Footnote 3

A.Y.S.A. supra note 1; In Re Nottage [1895] 2 Ch. 649 the Court of Appeal held there was no authority that a gift that encourages mere sport is charitable. In Inland Revenue Commissioners v. McMullen [1981] A.C. 1 (H.L.) Lord Hailsham noted: "the mere playing of games or enjoyment of amusement or competition is not per se charitable."

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Footnote 4

A.Y.S.A., ibid. note 1

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Footnote 5

A.Y.S.A., ibid. at para. 42: "The organization, in substance, must have as its main objective a purpose and activities that the common law will recognize as charitable."

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Footnote 6

Re Gray, [1925] Ch. 362. Examples of activities in support of this purpose include those conducted by a cadet organization, an educational institution, or a service association authorized under sections 46-48 of the National Defence Act.

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Footnote 7

See Tudor on Charities, p. 96: "a trust the main object of which is to promote the efficiency of the police is obviously charitable: and this was the view of the House of Lords in IRC v. City of Glasgow Police Athletic Association." ([1953] AC at 391)

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Footnote 8

Waters' Law of Trusts in Canada (2005) at page 726 notes: "physical health has long been recognized as a necessary complement of the mental well-being which education requires of its students." Also, see for example, Re Mariette, [1915] 2 Ch. 284; Re Mellody, [1918] 1 Ch. 228; Kearins v Kearins, [1957] S.R. (N.S.W.) 286.

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Footnote 9

For example, recognition of a sports league limited to school-aged and university students, as an adjunct to their formal education, was viewed as charitable because it focused on their physical education and development. (See IRC v. McMullen [1981] A.C. 1 (H.L.).)

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Footnote 10

See Re Patten [1929] 2 Ch. 276, where a fund for teaching and coaching young (low-income) cricketers to enable them to earn their livelihood by becoming professionals and for furthering interest in cricket as a national game was not found to be charitable.

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Footnote 11

See Trustees of the City of Belfast Young Men's Christian Association (Y.M.C.A.) v. Commissioner of Valuation for Northern Ireland [1969] NI 3, CA

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Footnote 12

Fuaran Foundation v. Canada (Customs and Revenue Agency) (2004 FCA 181), at para. 12 and 16, and A.Y.S.A. supra note 1.

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Footnote 13

There are other recognized fourth head charitable purposes that are not specifically discussed here, such as the promotion of racial equality, promotion of industry and commerce for public benefit, protection of human life or animals, protection of property, and protection of the environment.

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Footnote 14

Supra note 6

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Footnote 15

Supra note 7

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Footnote 16

Re Hadden, [1932] 1 Ch. 133; Re Morgan, [1955] 2 ALL ER 632

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Footnote 17

However, as stated by Justice Rothstein's decision for the majority in A.Y.S.A., supra note 1, at para. 41: "The application also mentions "physical fitness" ... But these are clearly by-products of its main objective, the promotion of soccer. The fact that an activity or purpose happens to have a beneficial by-product is not enough to make it charitable. If every organization that might have beneficial by-products, regardless of its purposes, were found to be charitable, the definition of charity would be much broader than what has heretofore been recognized in the common law."

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Footnote 18

For more information, see Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test

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Footnote 19

IRC v. Baddeley [1955] AC 572

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Footnote 20

Incidental competition (such as an end of season play-off in team sports) would be acceptable.

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Footnote 21

See Native Communications Society of British Columbia v. M.N.R., 86 DTC 6353. See also Sport Canada Policy on Aboriginal Peoples that stems from The Canadian Sport Policy.

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Footnote 22

For more information, see section 3.2.5 of Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test

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Footnote 23

A.Y.S.A., ibid.; Also, the Charity Commission's 1989 decision with regard to the Birchfield Harriers notes that there was (quoted in Smith, "Charity and a question of sport," page 140) "a 'thin but discernable line' between gifts whose main purpose was to improve the health and welfare of the public at large by the provision of recreational facilities for the community as in Re Hadden and gifts whose main purpose was to encourage competitive sport for the benefit of the spectators or the enjoyment of the participants." Picarda (1999) on page 126 notes "the Birchfield Harriers had restricted membership, and the main emphasis was on competitive sport: registration as a charity was refused."

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Footnote 24

A.Y.S.A., supra note 1, at para. 41; Also, professional sports teams clearly do not qualify as charitable, given their primary purpose of entertainment and the promotion of sport, as well as the private benefit that results for owners and players.

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Footnote 25

For example, there could be an independent medical opinion on file to show that a particular sport has demonstrated therapeutic benefits on a particular medical condition that an applicant charity wants to address, while other sports do not benefit from such evidence.

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