01/04/2012 03:45 EST | Updated 03/05/2012 05:12 EST

Amateur Sports Canada: Feds Back Down On Tax Changes After Outcry

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OTTAWA - Amateur sports groups crying foul over proposed changes to the way they're regulated have prompted the federal government to back off.

Ottawa had sought to bring the treatment of registered Canadian amateur athletic associations closer in line with how charities are governed, proposing a series of strict new rules in the last federal budget.

It's part of an overall crackdown on the charitable sector aimed at preventing abuse of the tax system, which has included a series of audits that's resulted in several sporting groups losing their ability to give tax receipts for donations.

The government was poised to make several changes to the way sports groups were regulated, but it was the desire to amend the definition of what it means to be a registered Canadian amateur athletic association, or RCAAA, that saw sporting groups throw down a red flag.

The change would have seen groups defined as RCAAAs only if their "exclusive" purpose and function was the promotion of amateur athletics.

That's impossible, argued Skate Canada.

"We are being told by the government to operate in a more business-like manner and to reduce our reliance on public funding," the group said in a submission to the government, obtained under the Access to Information Act.

"In this case, we must invest in diverse initiatives beyond simply the development of our sport."

To run a serious sport development program in Canada requires major efforts on the sidelines, like fundraising activities, which could be forbidden under the new definition, the organization argued.

"Any restrictions on ... the current ability to issue tax receipts for donations is very detrimental to our operations," they argued.

There are over 100 groups that claim RCAAA status in Canada, ranging from those focused on singular sports to foundations set up in the wake of major sporting events, like the 2010 Winter Olympics.

They too were worried about the new rules, according to a submission filed by their lawyer.

The 2010 Games Operating Trust, which runs former Olympic venues, had been originally set up so it wouldn't be taxable.

But under the new rules, it feared it could lose its RCAAA status because the venues are used for other activities besides high-performance athletics.

As a result of the consultations, the government realized some tweaks were necessary, a senior finance official said.

When the federal budget was passed mid-December, it contained two qualifiers to the new definition: RCAAAs could carry on a "related business" and activities involving the participation of professional athletes.

"We appreciated the feedback we received from numerous Canadians in a co-operative and constructive manner," said Mary Ann Dewey-Plante, a spokeswoman for Finance Minister Jim Flaherty.

Without the provision to allow professional athletes, NHL players, pro golfers or pro tennis players could have been shut out of events run by amateur groups, said Vancouver lawyer Blake Bromley.

The government needs to recognize the impact those events have on the sport system as a whole, he said.

"There's a Chariots of Fire mindset of a few noble amateurs who are competing for the Olympic gold," said Bromley, who had filed a submission on the changes on behalf of several sports groups.

"But if we're going to succeed as a country in getting Olympic gold, we're not going to succeed unless we take a much more holistic view of sport."

The changes still raise questions, said Skate Canada's chief executive officer, William Thompson.

"It's better but I don't know that it completely makes it clear," Thompson said, adding the issue now is how the new rules will be interpreted.

But he said he has broader concerns about why the changes were needed in the first place.

"I don't know where it came from and I don't know what really the point was because I don't really believe there was abuse in the system," he said.

Other new rules for RCAAAs include the ability for the Canada Revenue Agency to publish some information from the associations' financial records. Even obtaining a list of how many RCAAAs exist in Canada wasn't possible under the old system.

The transparency is important, said Toronto lawyer Mark Blumberg, who specializes in charity law.

"We think sports people are heroes and they do wonderful things and all that and I think that maybe in beginning there was a thought that these guys would be very responsible with it, but a few of them fell off the rails," he said.

At least seven groups have lost their RCAAA designation over the last few years, some because of their involvement in an illegal tax shelter scheme.

One, Biathlon Canada, went to court to try to stop the Canada Revenue Agency from posting a notice of their status revocation, arguing it would cause them irreparable harm.

They lost the case.

The changes could be a wake-up call for the sport community, Blumberg said.

"Hopefully this is enough to fix the problem but if it isn't, anything is possible in the future, including taking away the status of RCAAA completely," he said.

"It's not a God-given right to have tax benefits."

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