Amateur sports organizations acting as charities is a grey area for the City of Ottawa.
As a result, it’s a topic that the city’s audit, budget and finance committee discussed recently.
The committee voted to phase out a property tax rebate over four years for 15 amateur sports organizations in the city because they were not technically eligible for it.
The rebate was kept for four federally created organizations such as the Canada Council for the Arts in order to avoid a court battle, according to an article in the Ottawa Citizen.
The committee’s decision to withdraw the rebate is a good one that will save the city money and force these sports organizations to become more independent.
The rebate is legislated under section 361.1 of the Municipal Act of 2001.
The act is a provincial law meaning that the rebate comes from both city and provincial money.
The section allows “eligible charities” to receive a 40-per-cent rebate in property taxes.
The organization pays the full amount of tax and the rebate is given once they have a registered charitable number from the
Canada Revenue Agency and a city form is completed.
City staff debated about the tax because the city is trying to save money. Ottawa had its fair share of budget issues – not limited to transit – during the economic downturn.
If full council agrees to the removal of the rebate it would save the city thousands of dollars per year.
Many organizations have come to depend on the rebate. As a result, it could mean huge changes to organizations such as Gymnastics Canada and the Canadian Cycling Association.
Now they have four years until they no longer receive a property tax rebate. This allows them time to re-work their budgets.
They may need new sources of funds but given that sports organizations do not technically fall under the category of an “eligible charity,” it wasn't right for them to receive the rebate in the first place.
The federal Income Tax Act defines a “charitable organization” as one in which “all the resources of which are devoted to charitable activities carried on by the organization itself, (and) no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor.
The organizations have been deemed ineligible by the city and while they may have a charitable number, they don’t act like charities under the definition.
While the organizations don’t act like charities, they are also lacking in concrete jurisdiction as the laws are both provincial and federal.
Since the money comes out of the provincial budget as well as the city’s budget, jurisdiction regarding the rebate is foggy at best.
The City of Ottawa is phasing out the rebate for organizations that have their headquarters here, but it is interesting to note that in other provinces, these sports groups may not have received a rebate at all.
It’s understandable that a Canadian organization would have their headquarters in the nation’s capital but it comes at a cost.
With both city and provincial taxpayers on the hook for the rebate, these organizations need to find a new way to save money that won’t cost taxpayers.
The committee discussed the issue of amateur sports organizations and decided that it would mean great savings to the city but one argues that it should not have taken this long to decide the rebate should be phased out.
The question of rebates for these organizations should not have been such a difficult one. Just because these organizations have their headquarters in Ottawa does not mean that the city should be footing the bill.
Sports is a business.
Any organization that depends on city rebates to thrive needs to rethink its finances.
Amateur sports organizations should not come at a cost to taxpayers.