A recent ruling by the Divisional Court dismissed an appeal by a Foundation seeking to be exempt from municipal taxation under the Assessment Act. In the previous decision of the Ontario Superior Court of Justice, it was held that the premises used by the foundation were not exempt from municipal taxation, as the premises were occupied by a tenant of the hospital, not by the hospital itself, and there was not a sufficient identity between the Hospital and the Foundation so as to conclude that they should be treated as the same entity for the purposes of exemption. The appeal by the Foundation to the Divisional Court was dismissed and the court held that the Application judge made no error in finding the foundation was a tenant within the meaning of the Act. This case reminds us that while there are benefits of a hospital establishing a fundraising foundation, there are a number of complexities and disadvantages to a hospital having a separate foundation.
Here is a brief excerpt from the Court’s decision:
“The application judge carefully considered the relationship of the Foundation and Hospital and concluded that there was not a sufficient identity or patrimony to allow the Foundation to benefit from the public hospital exemption. First, he noted the Foundation and Hospital were separate corporate organizations, and the Foundation operated as an independent corporation, with its own Board of Directors and source of funding. He was aware that the Hospital is involved in respect of the Foundation’s distribution of funds, but those funds are deliberately treated as the Foundation’s own funds. Second, he distinguished the Buanderie and UHN cases, where entities had been created “to rationalize and reduce the costs of the hospital establishments” (at para. 32), and those entities were paid out of operating budgets (at para 35). Third, he distinguished Wheatley, on the basis that the Foundation was not simply carrying out activities of the Hospital, nor is it sufficiently controlled by it as to create an identity of patrimony. Moreover, on dissolution the Foundation’s assets do not revert to the Hospital.”
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.