1.1.2 The accumulation of real property

MAC Summary Response:

As stated in our letter of August 12, 2021, at no point does the AFL raise any evidence to support that MAC was not meeting its disbursement quota, that it had contravened the ITA provisions concerning the accumulation of property, or that any rental income fell outside what is permissible as a related business. As well, the AFL states that MAC appears to have expended significant resources in the accumulation of real property, but never identifies in proportion to what percentage of resources these constitute in a given fiscal period. The AFL simply vaguely concludes that because real property was pursued that this amounts to the advancement of an unstated purpose without referencing any provision of the ITA or the common law that is being violated.

For example, the AFL notes at page 33 that MAC’s assets grew over 400% in a 9-year period. However, MAC’s revenue also grew over 450% during this period. As well, over the same period the population of the Muslim community in Canada has also grown indicating a need for mosques and community centres. For example, 35% of 37 identified sites in the AFL are related to Olive Grove School expansion in Mississauga, Halton and Toronto. 43% of the resources invested are for these properties. Olive Grove School has a waiting list of over 1000 students. Families wait for 4-5 years at times for a spot for their child and many are never accepted. The community demand is clearly exhibited and warrants the resources invested to find new properties to serve the community.

It is also unclear how the CRA can conclude that the purpose of real property is in advancement of a non-charitable purpose when 4 of the purposes of MAC set out in its certificate and articles of continuance dated July 17, 2014 relate to the acquisition of land, i.e.,

• “To acquire and hold land for places of worship, residences for its religious leaders, burial grounds or cemeteries, theological seminaries or similar institution of religious instruction for the religious purposes herein;”

• “To operate schools and/or libraries for the educational purposes herein;”

• “To acquire and hold land for schools and/or libraries for the educational purposes herein;”

• “To establish and operate community centres providing education. workshops, programs, athletics, drama, art, handicrafts, hobbies and recreation for the benefit of the general public;”

The AFL also suggests that a number of properties were purchased with the intent to earn rental income. In this regard, on page 37 the CRA states that it, “… identified several current properties where the rental income is essential to balancing budgets and maintaining operations”. However, intent is only one factor in determining whether an activity is a business activity or not, which would then lead into whether the activity is permitted as a related business or not. The AFL does not suggest that MAC carried out any unrelated business.

Further, in 2015, annual rent accounted for $871,409 of $21,049,771 in operational revenue. Of this amount, $309,999 is from Ecole Dar Al-Eman, a qualified donee, that rents a MAC building and a portion of CCL for a daycare. The remaining $561,410 accounts for many types of revenue (lease space, gym rentals, community hall rentals, etc). Nevertheless, this amount represents only approximately 2.66% of MAC’s operational revenue. This percentage is nominal and does not represent in any way revenue that is strategically being prioritized.

As well, the AFL states at page 37 that, “In a 2014 PowerPoint presentation, The Organization also explained its strategy for ensuring that one-third of the Organization’s operating budget came from sources other than donations.” However, this does not exclusively mean rental income. Other sources of revenue include service revenue – such as day camp revenue (March break camp, summer camp, winter-break camp, etc.), school fees, day care fees, etc.

MAC Additional Detailed Response:

The Organization has expended significant resources on the search for properties

Page 43 of the AFL states, “Since the beginning of the audit period, the CRA analysis indicates the Organization has expended significant resources in pursuit of 35 properties that it failed to purchase. This is in addition to the 11 real estate transactions the Organization was able to successfully close.” Based on this the CRA concludes “In the review of the Organization’s books and records related to the purchase of real property, the CRA noted significant resources devoted to the process of acquiring properties, many of which, the Organization failed to procure. The pursuit of real property has become such a focus for the Organization and has consumed so much of its resources that such activity appears to be advancing a non-charitable collateral purpose.”

The Charity rejects the conclusion of CRA and in fact argues the opposite. As indicated in the AFL, MAC considered 46 properties during the Audit Period and successfully purchased 11, which for a charity is a highly effective outcome. In fact, an organization looking for a single property may easily consider over 46 available properties on the market and place multiple offers, until a successful purchase is made.

Nevertheless, looking at multiple sites is a necessity of due diligence. If the Charity had looked at a minimal number of sites before purchasing, such practice could be perceived as not demonstrating diligence over community donations.

Community Growth

As noted above, the allegations in the AFL also do not consider the growth of the Muslim community during the Audit Period and afterwards. According to the 2011 census, slightly more than 1 million Canadians identified as Muslim (3.2% of the Canadian population), nearly doubling the number from the survey done a decade prior.2 In this regard, approximately two-thirds of the Canadian Muslim population reside in the provinces of Ontario and Quebec.3

Despite not having a recent official government number on Muslims, it is evident that this demographic is growing. Population projections by Statistics Canada infer that the number of people who will affiliate with non-Christian religions, which includes Muslims, will continue to see an increase even though it will remain a modest number compared to the rest of the population.4 According to “A New Life in a New Land: The Muslim Experience in Canada”, a media project that attempts to provide accurate information on Muslims in Canada, the two main reasons for continued growth are a high birth rate among immigrant women and the symbiosis of new immigrants.5

Inspecting these 2011 census numbers closely, the Canadian Muslim demographics are unique. Approximately 30% of Canadian Muslims are native-born, highlighting a demographic shift of a new generation (mostly second) that has grown up in Canada’s multicultural society.6 Within this plurality of Canadian Muslims are more than five dozen ethnic groups, signifying a heterogeneous community.

The Muslim community leadership has strongly developed by responding to the numerous issues pertaining to fellow Canadian Muslims as well as to the wider community. The Charity has played a particularly important role in providing infrastructure to the growing Muslim community including Mosques, schools and community centres. Beyond these services, the Muslim community has also been demanding mental health services, Muslim chaplaincies in universities, shelters and safe havens for women who have suffered from domestic violence or falling into homelessness. But these are just a few examples of the growing needs of Canadian Muslims.

Growth of Mosques in Canada

The following table demonstrates the approximate growth of mosques across Canada from 2006 to 2015.

In this regard, the Muslim community across Canada was significantly investing in institutions – Mosques and community centres – to support an immigration of Muslims to Canada. As a result, the Charity’s acquisition of property was similar.

Therefore, CRA’s allegation that the Charity’s growth in acquisition was “beyond the norm” and for this reason is extremely misleading.

The Charity’s operational budget does not support CRA’s allegations. If the charitable programming budget increased by 618%, far more than the growth of assets, then it is clear that the asset acquisition was used for the Charity’s charitable purposes.

Moreover, in comparison to other charities the Charity is consistent with the norm and that the AFL is incorrect to allege that this acquisition of property was beyond the norm. These examples are set out below:

Based on a sample of 675 churches, educational institutions, camps, senior homes and other ministry types from over 8,000 properties acquired and established by the United Church of Canada faith communities, 7 the above chart highlights the growth of the United Church between 2005 and 2018. On average, the United Church of Canada community established 18 churches a year. In 2009 alone 57 churches were established. More recently in 2017 and 2018, 23 and 69 churches were established respectively. This is far higher than the Charity’s growth of mosques during such years.

In fact, the United Church of Canada has incorporated a real estate corporation called The United Property Resource Corporation (UPRC) to provide professional real estate expertise to communities of faith.8 It is clear that the United Church of Canada is prioritizing the utilisation of its properties and dedicates resources to development of its assets across Canada including expertise in real estate purchasing, development, and financial vehicles to acquire property.

The Canadian Coptic Diocese of Mississauga, Vancouver & Western Canada and of Ottawa, Montréal and Eastern Canada from 2005 to 2016 established 32 new churches. This community is far smaller than the Muslim community in comparison to the Charity which established 20 new mosques during the same time period.

According to the National Synagogue Directory (2008-2009) published by the Canadian Jewish Congress, the Jewish community in Canada had 262 synagogues as of 2008. According to the Charity’s analysis, the establishment of synagogues and centres has increased at an estimated average pace of 11 per year, which is comparable to the growth of Mosques in the Muslim community, despite the fact that the Jewish population is smaller in number. MAC’s contribution to the Muslim community, as well as the expansion of its religious institutions and places of worship, indicate that they are within the normal range of other communities’ development.

The AFL alleges at page 34 that “The list also excludes properties in which the Organization was approached by other community groups for assistance in the purchase of the property.” This is in fact evidence that there existed, and still exists, a demand from the wider Muslim community to rely on the Charity to assist them with purchasing, operating, and overseeing institutions in the Muslim community.

Investment of Resources to Purchasing of Properties

A number of factors should be considered by the CRA as it relates to Charity’s search of properties:

• As noted above, four of thirteen of the Charity’s purposes are related to purchasing and operating property for the purpose of places of worship, schools and community centres.

• It is the Charity’s policy to purchase property based on pre-identified needs of the community in a particular place (mosque, community space, recreational space, school services, etc.).

• The local chapter of the Charity is required to demonstrate the local community demand analysis and how the community will raise the funds.

• The Charity would work with an appointed real estate agent to monitor the market.

The CRA has stated at page 34 that, “However, the CRA observed what appeared to be significant human resources, including paid employee and volunteer hours, devoted to researching available properties, meeting and communicating with real estate agents, driving to the properties and arranging property inspections and property tours, and preparing and reviewing purchase and sale agreements and letters of intent.”

However, the AFL does not provide any evidence or support, quantify or qualify its statement that “significant human resources” were used, yet draws this conclusion. In this regard, below are comments by the Charity that provide some perspective on human resources.

• On average 3-4 volunteers would visit a site for a property viewing. In terms of human resources, the Charity estimates a total of 5 hours maximum of volunteer or employee hours. If an offer is prepared for a site, an additional 5 hours is estimated.

• The Charity does not actively search all the time. Many times, real estate agents will bring forward a property when there is an opportunity that could match the needs identified by the Charity. Many times, these proposals are immediately rejected. In Appendix O the AFL listed 37 properties that the Charity was informed about, rejected, visited, or placed an offer. Of these 10 projects were never acted upon and had no resources invested.

• When viewed annually, the sites visited per year on average are 7 and 44 hours of volunteer and/or staff hours across the whole country. For an organization with over 500 members, over 1000 employees, and thousands of volunteers that services over 100,000 Canadians, this number of invested resources is not significant, contrary to CRA’s allegation.

• Of the remaining 27 properties (removing those never acted on) listed by the CRA in Appendix O, 12 were visited but no further action was taken. This is a minor investment required to determine the feasibility of a property and whether it meets the criteria.

• As such only 15 properties had a letter of intent, offer, or government bid submitted.

Nevertheless, when the resources are analysed per city and per project, it becomes absolutely clear that reasonable and responsible amount of resources are invested to find a property that sufficiently meets the needs of the Muslim community (see table on the following page).

It should be noted that it may take up to five years to find a suitable property. Many factors are at play to place an offer that include lot and building size, readiness, location, zoning, current usage, financial purchase options, among others.

• The average number of visits for a site for a particular project are 2.

• Each project that has had search activity in the CRA’s Appendix O has clear community demand.

The AFL also states at page 34 that “The properties consisted of land, schools, churches, and commercial buildings.” However, the Charity has never looked for churches or commercial buildings to be used for those purposes. In either case, the properties are intended to be re-zoned for a mosque, community centre, or school – charitable purposes within MAC’s purposes.

The CRA also states on the same page that, “In addition, it appears that the Organization also pursued the purchase of a rural property for the potential use as a future campground.” However, this ignores that the Charity organized, just in Ontario, at least 20 camps per summer for children, youth, adults, members and community. There are significant costs incurred in camp site rental fees. The demand for MAC operated camps to have their camp location exists. It is for this reason the organization has maintained interest to consider available camp locations. It is also fairly usual for charities such as churches but also other charitable organizations, such as Girl Guides of Canada and Scouts Canada, which are registered charities, to own campgrounds.

As noted above, 35% of the 37 sites are related to Olive Grove School expansion in Mississauga, Halton and Toronto. 43% of the resources invested are for these properties. Olive Grove School has a waiting list of over 1000 students. Families wait for 4-5 years at times for a spot for their child and many are never accepted.

The community demand is clearly exhibited and warrants the resources invested to find new properties to serve the community.

The 37 sites in fact represent 12 projects being considered.

• Edmonton MAC Islamic School

• Edmonton Mosque

• Halton Mosque

• Olive Grove School (Mississauga Expansion, Halton Location, Toronto Location)

• ICCO

• Al-Otrojah Project

• Cemetery

• MAC Camp Site

• Ottawa Islamic Centre

• Masjid Toronto

• Scarborough Mosque

• Vancouver Mosque

The CRA concludes, however, on page 35 that “Given that the Organization’s records indicate a large amount of its resources (including funds, time, employees, and volunteers including board members) are spent on pursuing potential properties where the intention of the use of space in charitable activities is unclear, and that the Organization consistently and continuously undertakes activities related to the rental/leasing of significant real estate space (see section 1.1.2.3 below), and purchasing properties to be held for use in a mix of charitable and non-charitable activities in the future (see section 1.1.2.2 below), it is the CRA’s preliminary position that the Organization pursues property acquisition activities that further an unstated non-charitable purpose.”

While the majority of this conclusion will be responded to in further sections of this letter, the Charity unequivocally rejects this conclusion. In interviews with CRA, the Charity was asked about every property that was purchased and the Charity’s representatives consistently explained the community’s charitable use, without exception. Floor plans were shared to demonstrate the use and locations were visited. The Charity does not purchase property identified primarily for rental/leasing or for a mix of charitable and non-charitable activities.

Comments Related to Solicitor Client Privilege

The AFL also states at page 35 that, “Due to limited information, the CRA could not quantify financial costs related to the potential purchase of properties such as legal, inspections, assessments, architects, and consultants.” and that “It should be noted that because the Organization redacted its invoices for legal services, the CRA cannot determine the extent to which legal services were used to purchase buildings that it otherwise failed to acquire.” In this regard, this is an example of the CRA previously indicating that it takes solicitor-client privilege seriously, while then going on to use the fact that the Charity asserted privilege with respect to these invoices against it. This is wrong at law and entirely unfair for the Charity to be criticized for exercising its legal rights with respect to solicitor-client privilege.

Moreover, in all of the 37 examples that the CRA has highlighted, there are no financial costs. None of these properties involved real estate costs or legal costs. Real Estate agents receive their commission on purchase, and legal fees are only incurred when conditions on a purchase agreement are cleared.

The CRA claims that invoices and financials could not be determined for 11 projects. This is not correct. All invoices, whether redacted or not, associated with the purchase of a building are capitalized as property costs and these are included in the financial statements. The CRA downloaded all transactions and should have been able to easily extract the total costs incurred in the purchase of a property.

Nevertheless, such costs are consistent with market rates and no different than any charity purchasing a property.

The Organization purchased properties that are entirely or partially not used in charitable activities

The Charity does not agree with the CRA’s statement that its “acquisitions have not yielded any, or little additional charitable benefit to the public.” The Charity also rejects the percentages in Appendix C to the AFL for activities deemed non-charitable, empty/not used building space, and income generating activities – rental units as well as the approach it has used to come to these calculations. The Charity will respond to each project. Even though the Charity has demonstrated compliance with the ITA, it is open to a constructive dialogue with the CRA in order to become more compliant with the requirements of being a registered charity.

The AFL claims that the CRA looked at the, “careful analysis of the Organization’s books and records, financial accounts, electronic communication, and social media”, to determine the public benefit of MAC’s projects. However, its assessment of the percentages of total non-charitable use has not considered the Charity’s plan, reporting, outcomes, and financial reporting for that matter, which would demonstrate revenue and a budget that reflects active use of the Charity’s properties for charitable purposes.

The AFL also stated at page 35 that “we note several purchases where properties were purchased for some distant, yet to be determined, unknown charitable purpose.” However, no specific example to support this allegation was provided in the AFL.

The AFL further alleges on the same page that, “In other instances, there may be a charitable intent for a purchased property but due to the segregated nature of each project’s financial resources, a project does not necessarily possess the capital to fulfill its vision at the time of the acquisition. Thus, the project is required to engage in, and expend significant resources, towards extensive fundraising over an extended period of time during which the properties sit unused.”

Despite explaining the Charity’s financial oversight and controls in interviews with the CRA, the above allegation does not reflect these explanations and instead the AFL seeks to frame the Charity’s controls as concerns. In this regard, the Charity would point out the following:

• The Charity maintains a strict policy that community donations designated for a specific project are to be treated as restricted funds. This is a primary financial control, as failure to comply with the community’s expectations to donate to a specific project will result in a deterioration of donor trust and charity compliance.

• A local chapter is required to engage the community to fundraise for the purchase of a new property. Since the property will operate for the charitable purpose of a specific community, they are responsible to fund the capital, renovation and operational cost.

• MAC Head Office provides financial options to support the capital project in order to provide the local chapter the support and timeline to raise the total cost. These may include internal loans or Shariah compliant bank loans.

• Inter-project loans are strictly controlled and local chapters are required to pay back the loans in a timely manner.

• The Charity has never defaulted on any capital purchase and has successfully paid back inter-project loans in a timely manner. This is evidence of strong financial controls and oversight.

• If the Charity had taken the CRA suggested approach, the Charity would have potentially been exposed under provincial common law to claims concerning the misuse of restricted funds.

The following are important assumptions that support the Charity’s view of its charitable use of its properties and the respective public benefit offered.

• The Charity has demonstrated a consistent ability to identify strategic properties that meet the community’s needs and purchase them well under market value, providing the community with the financial responsibility expected of the Charity.

• The Charity has consistently prioritized offers that provide financial options to provide the correct balance between the funding needed to pay the long- term capital cost and short renovation costs, with the objective of reaching operations in the shortest time frame.

• The Charity has developed a high degree of community trust in delivering major capital projects, and as such the Charity has been able to successfully fundraise for all of its projects from the local community, with the exception of some international grants.

• There are several examples in which local communities have approached the Charity and offered a $0 gift agreement to transfer its property under the Charity’s ownership, governance, and operation. This is a clear example of the wider Canadian Muslim community’s trust in the organization and its ability to provide public benefit through its charitable purpose.

• The CRA has assumed that a purchase of a property must go from acquisition to full operation to meet 100% charitable use. This is unreasonable and a completely unrealistic expectation. Even a corporation with unlimited funds takes years to go from acquisition to operation.

• A project, especially in the charitable sector, can take anywhere from 1 year to 5 years at minimum to bring the property to full operation. During this period the Charity ensures all space that is usable is available to the community for activities.

• The delay in operation is tied to available funding for capital cost and renovation cost. But funding is not the only factor for delay. Even with the funding, a property will require at least:

  • • 1 year of architectural/engineering/environmental activities, 1 year of city permits and zoning, and

    • 2-3 years of renovations. These timelines vary.

• During the first minimum 5 years of a project the CRA should not evaluate square footage that is empty/non-used as non-charitable.

• The CRA has assumed that youth activities are non-charitable. The Charity rejects this as set out later in this submission.

• The Charity takes the position that all of the Charity’s youth programs are religious programming. All of the youth group activities highlighted in section 1.4.5 of the AFL have a primary religious, or training/mentorship component aligned with the Charity’s charitable objectives.

• The CRA has assumed that Multi Purpose or Community Hall spaces are not charitable when they are not in use.

• The ITA permits related business activities and few religious organizations in Canada ensure 100% use of its space 7 days a week from 9 am to 11 pm.

• The CRA has assumed that basements and storage space need to be used for charitable activities. As such the CRA has accounted for these spaces towards non-charitable use.

• Usable space for charitable purposes should not include basements, storage space, lobbies, stairwells, elevators, escalators, ventilating shafts, attics, concourses, washrooms, rooms for garbage containment, janitor rooms and mechanical rooms.

• The Charity not only assesses the current community need but it also looks to the 5 to 10 year growth of the Muslim community and favors real estate options that meet the long term growth. This is not always possible to find given the availability of land and properties in major cities, but when it is this is considered investing in the long-term charitable activities of the community.

• This should not be confused with real estate investment. Many charities have surplus funds and purchase assets as investments.

• All properties are fully used for charitable purposes unless the Charity has been able to buy a property with excess square footage to accommodate growth. This applies to Windsor Rose City Islamic Centre, Edmonton MAC Islamic Centre and Vancouver MAC Islamic Centre.

• Sometimes the space is left unused and other times it has been rented.

Rental Space

• • • The AFL calculated rental space as non-charitable in its percentages. The CRA suggests that “generating income from properties it owns is an important part of the Organization’s goals”, therefore, “the rental space appears to be beyond what the CRA would consider to be ancillary and incidental.”

    • Rental units are only found in 4 of its 15 properties and represent minimal square footage, and are often inherited leases during the purchase.

    • Properties are not purchased for rental income and the AFL does not demonstrate this to be the case.

Furthermore, the Charity only purchases properties that meet a charitable purpose and serve the community’s needs. The Charity will demonstrate that in its specific response to each property highlighted in the AFL.

1. Aboubaker Mosque

The AFL alleges in Appendix C that the Aboubaker Mosque is a 100% Empty/Not used building space because the operations “are not considered to be the Organization’s own activities. As such, the CRA has determined that the Organization does not conduct any charitable activity at this location.” This property has been discussed in prior correspondence, including our letters of September 1, 2017 and December 21, 2018 attached as Schedules “3” and “4”, and will be discussed further in this submission. However, as the CRA was made aware following the Audit Period and prior to the AFL being issued, the Charity has since undertaken ownership and operation of this facility entirely by the Charity. Nonetheless, the Charity would point out as follows:

• The Charity purchased the building for the community to be used for charitable purposes of advancing religion.

• MAC never transferred funds to Centre Culturel Aboubakerseddik (“CCA”). However, CCA was allowed to use the real estate space provided to it provided that CCA understood and agreed to use this resource for the specified charitable activities, as documented by the charity in the agreement.

• The Charity maintained direction and control of its activities conducted on its behalf and the use of its resources, the building, by hiring an employee to oversee the use of the space and report back to the Charity. MAC Member [REDACTED] was hired to monitor the activities of the CCA to ensure compliance with charitable purposes.

• The CCA had previously, for several years, operated Aboubaker mosque in the space under a lease agreement with the former owner of the building. The CCA had a history of offering religious services and community activities that were consistent with the Charity’s goals and charitable purposes. Furthermore, the CCA had a positive reputation and credibility with the local community (the beneficiaries) in serving their religious needs. As such, the Charity was able to reasonably expect the non-qualified donee to use the resources for the intended charitable activities.

• In accordance with the CRA’s guidance concerning the use of an intermediary, the Charity must be able to intervene in any decision of the intermediary. The Charity maintained this right by including in the agreement the right to terminate at any time if the CCA was not compliant.

• This property was never empty as the CRA claims. It was an active mosque serving the needs of the community and congregation.

• At the time of the purchase there was an existing lease for the 1st floor which had to continue until the end of its term. The second and third floors were 100% used as a mosque, a charitable purpose.

• As indicated in our letter of December 21, 2018, the Charity terminated the agreement over three years ago and took over the operation of the mosque and management of the building.

2. Al-Azhar Academy

The AFL alleges in Appendix C that the Al-Azhar Academy centre is a 100% Empty/Not used building space because the operations “are not considered to be the Organization’s own activities. As such, the CRA has determined that the Organization does not conduct any charitable activity at this location.”

This viewpoint is not correct. The facts are as follows:

• This property was acquired as a gift by MAC from Al-Azhar Academy of Canada for Educational Activities and Social Service (“Al-Azhar”). Al-Azhar is a registered charity with BN# 898762216RR0001. The gift of the property to MAC was made by a gift agreement dated November 20, 2013, which included an annexed offer to lease agreement, both at which were included with our letter of September 1, 2017. The basic rent outlined in the lease agreement is below fair market value, but Al-Azhar is a qualified donee and therefore no private benefit is accruing the Al-Azhar.

• A school operated in the building until 2016.

• Once the school was no longer in operation, MAC bought out the lease significantly below market value.

• As explained above, every property MAC acquires or owns must operate for a charitable purpose. MAC explored the community demand to further operate a school and determined that there was a lack of demand for this service.

• Furthermore, the building needed over $1 million in renovations.

• As such MAC ended the lease and placed the property for sale and with an agreement in place to be closed in August 2021. The property is conditionally sold on zoning requirements and the closing is in March 2022.

• Although the sale of the property has taken more time than desired, the sale of a school building is not a quick sale, the market has been slow but ultimately the agreement in hand is for a significant value.

As such the Charity disagrees with the CRA. The organization should not be penalized for when a property remains on the market to be sold.

Furthermore, in this specific case the property was donated to MAC rather than being purchased.

3. Canadian Institute of Islamic Civilization (CIIC) 

The CRA has alleged that the CIIC centre is:

• 24% non-charitable because 85% of the second floor is used for administration, family nights and meeting rooms and all of the fourth floor is used for youth, offices and washrooms, which are not used in charitable activity.

• 60% empty/ not used building space because of the empty basement, and the fifth and sixth floors were to be used as the future museum but unused at the time of the audit, and

• 1% income generating activities because of a portion of the first floor that has been rented out for a wellness center.

The viewpoint of the CRA is not correct. The following are the facts:

• When the building was purchased in 2013, the rental unit had an existing lease which could not be broken. When the lease term was done, the Charity did not renew.

• The building was purchased for $4.7 million, significantly under market value of $7 million.

• The basement is a storage space. The first floor is a stairway and an entrance lobby, with the exception of a single office. The CRA also counts the washrooms as unused space. All of these are examples of unusable spaces that should not be included in the CRA’s square footage analysis.

• The second, third and fourth floors were used as the mosque. The sixth floor was used for community meeting space.

• The fifth floor was designated to be used as a museum, a charitable purpose, but this was in the planning phase during the time of the audit. This is normal progress for an important project that required thorough planning and funds. Furthermore, this was clearly explained in the interview on May 30, 2016

• Since the audit the property has become fully used for the community’s services. In fact, the building has qualified for municipal property tax exemption because the property is used fully for charitable purposes.

As such, the Charity disagrees with the CRA and instead asserts that:

• The property was 100% used for charitable purposes and that the only unused space on the fifth floor was in progress and since the audit is now in use.

• The 1% office on the first floor was rented out per an inherited lease and was not renewed since the term ended. This space is now used by the organization for charitable purposes. As such, it was clearly incidental.

4. Centre Communautaire Laurentien (CCL)
   The CRA has alleged that the CCL centre is:

   • 25% non-charitable because the space used in the basement for youth games, weight room and taekwondo, the main floor youth area and the second floor outdoor garderie play area are non-charitable. In addition, the community hall has been considered not used in charitable activity approximately 50% of the time.

   • 11% income generating activities because of a portion of the space rented to an accounting office and a day care.

The viewpoint of the CRA is not correct. These are the facts:

• The basement is normally unusable space; however, it has been repurposed for youth programming.

• The CRA has incorrectly labelled the foyer entrance with a stairwell that leads into the Mosque.

• The main floor has an office for the local chapter, the centre manager, the secretary, a multi-purpose room, and a meeting room for volunteers and youth classes. As such the CRA is correct when it says the first floor is being used as a youth area. These are all charitable activities.

• The CRA cannot expect the community hall to be used 100% of the time. 20-30 % is a very successful rate of use. Considering community usage hours are after 6 pm during weekdays and the weekend, the reality is that the community hall space is being maximized for charitable purposes.

• The accounting office rental space was a request of the donor which the Charity honored. Nevertheless, both the accounting office and the day care are minimal space relative to the overall building and the Charity argues are incidental.

• As for the 11% of rented space, this percentage is correct. However, it is rented to a registered charity that operates a daycare that is aligned with the charitable objects of the Charity. Ecole Dar Al- Iman is the same charity that rents one of the Charity’s other buildings to run a school.

As such, MAC disagrees with the CRA and instead asserts that the building is 100% used for charitable purposes given the rental space is incidental.

5. Islamic Centre of Verdun (ICV)

The CRA has claimed that the centre is 12% non-charitable due to a multi- purpose room occupying 75% of the basement, and used approximately 50% of the time for non-charitable activity.

The viewpoint of the CRA is not correct. The following are the facts:

• The basement should not be considered usable space for the CRA’s calculation as discussed earlier. However, the Charity has repurposed it to maximize the public benefit.

• However, the CRA cannot expect the community hall to be used 100% of the time. 50% is a very successful rate of use. Considering community usage hours are after 6 pm during weekdays and the weekend, the reality is that the community hall space is being maximized for charitable purposes.

As such the Charity disagrees with the CRA and instead asserts that the building is 100% used for charitable purposes.

6. MAC Islamic Community Centre of Cold Lake

The CRA has claimed that the centre is 31% non-charitable due to space used by a hair salon.

The viewpoint of the CRA is not correct. The following are the facts:

• The building was donated to the Charity by the community for $0.

• At the time of donation, a lease agreement existed for the hair salon and could not be terminated.

• Nevertheless, this rental space is incidental. The building is used fully for charitable purposes.

As such MAC disagrees with the CRA and instead asserts that the building is 100% used for charitable purposes given the rental space is incidental.

7. MAC Islamic Centre Edmonton
   The CRA has claimed that the centre is

   • 7% non-charitable because of space designated for youth activities, and

   • 46% income generating activities because of rented space The viewpoint of the CRA is not correct. The following are the facts:

   • Youth activities and programming space for youth are charitable purposes.

   • The building when purchased had space leased to a public library which is repurposed to the mosque. However, the Charity inherited tenants whose leases could not be terminated. Some of the leases have not been renewed.

   • Two of the tenants are daycares, which offer a public benefit.

   • In the interview the representative was very clear, yet the CRA has ignored the response.

Julianne Myska: Was the building purchased with the intent of renting a porting of it out? Is there plans to rent additional space in the future?

B: No, never the intention, but there were existing tenants that we took on.

AL: Which gave us the idea, but wasn’t [the] original intent [to purchase a building for rental purposes]. The building fit our purpose and had the tenants already.

Julianne Myska: Any plans to rent additional space in the future? Some are currently vacant?

No, we are using them for our own needs.

• The square footage used by the Charity is beyond sufficient for the community needs which includes the mosque, weekend school, youth space for boys and girls, community room and administration.

• However, MAC disputes that 46% is correct. In accordance with the attached Notice of Assessment at Schedule “5″, Edmonton MAC Islamic Centre Notice of Assessment confirms that only 36% is designated for commercial purpose and the remaining 64% of the building is used for religious/charitable purposes.

As such, the Charity disagrees with the CRA and instead asserts that the building is 100% used for charitable purposes given the rental space is incidental.

8. Islamic Community Centre of Ontario (ICCO)
   
   The CRA has claimed that the centre is:

   • 75% empty/ not used building space because a portion of the space is unused and waiting on renovations

The viewpoint of the CRA is not correct. The following are the facts:

• The ICCO was purchased in 2013 during the audit period. In its first year the architectural team actively worked on its design. The location allowed zoning as a place of worship. However, it took two years to complete the city permit approval as minor variances were required.

• The designs and the marketing material demonstrate that the property usage was designated full for charitable purposes.

As such, the Charity disagrees with the CRA and instead asserts that the property was in its early phase of preparation and this should not be considered unused space in the context of non-charitable activities.

9. Kitchener Masjid

The CRA has alleged that the centre is:

• 53% non-charitable because of square footage of gym/multi-purpose room and storage area

The viewpoint of the CRA is not correct. The following are the facts:

• Gym and multi purpose rooms used for youth activities and programming space for youth, as well as community use, are charitable purposes.

• Storage area should not be considered usable space for the CRA’s calculation as discussed earlier.

• The mosque has served significant public benefit to its community.9

As such, MAC disagrees with the CRA and instead asserts that the property is used 100% for charitable purposes.

10. Kitchener Masjid Residential Property

The CRA has alleged that the centre is 100% empty/not used building space because the home was purchased for an expansion to a parking lot but was currently being rented out to Syrian refugees.

The viewpoint of the CRA is not correct. The following are the facts:

• The community growth has resulted in a need for increased parking space.

• Behind the mosque there are 4 homes that separate the mosque from a side street.

• The homes were seen as a solution and an opportunity to expand the parking lot as they were placed on sale.

• The Charity purchased three of the homes, as each one came on sale. However, the expansion of the parking lot is pending the purchase of the fourth home and the financial capacity to begin the parking construction.

As such the Charity disagrees with the CRA and asserts that these properties were purchased for charitable purposes, and in the interim the properties were used in support of new refugee families, rather than income generation.

11. Islamic Centre of Waterloo (ICW)
    
    The CRA alleges that the centre is:

    • 100% empty/not used building space because the property is not operating out of this location due to ongoing zoning issues with the City of Waterloo.

The viewpoint of the CRA is not correct. The following are the facts:

• This property was purchased in 2011 with an understanding with the city that rezoning will be allowed.

• Local community concern resulted in a delay in the rezoning process.

• The building was being used for community charitable activities until the building was damaged by a fire in 2015. The building fixes took place and the building began temporary operation once again in 2017.

• In 2017 the city approved the zoning. Following this an anti-Muslim group challenged the decision and the zoning approval was appealed for review. This resulted in a delay of operation.

• The permit was finally issued and the property was opened for full operation in 2019.

As such the Charity disagrees with the CRA and instead asserts that the property was purchased completely for charitable purposes. Despite having municipal support for rezoning, the Charity could not have foreseen an Islamophobic campaign against the mosque’s establishment. Nevertheless, the Charity worked with the municipality to ensure interim charitable use until the zoning matter was resolved.

12. Southdale Project

The CRA has alleged that the centre is:

• 100% empty/not used building space because it is a vacant land that the Organization obtained on November 5, 2012.

The viewpoint of the CRA is not correct. The following are the facts:

• The land was purchased for $1 million dollars. The land was discounted for $900,000 from the market value and today is valued at $8 million. This was an opportunity for the Charity to respond to a current demand and long term forecast growth of the community.

• The land was purchased to build a Mosque and community centre.

• The first 3 years involved architecture and engineering work as well as submissions to the municipality.

• There have been significant delays with the City of London on connections into the drains and water service city.

• The cost of a temporary solution to install a septic tank was deemed unfeasible.

• Furthermore, until permits are completed the organization is working on financial options to begin the construction.

• In the interim, the site is being used by Goodwill to collect charitable donations. This is a charitable purpose.

As such, the Charity disagrees with the CRA and instead asserts that this land was not purchased for investment and kept undeveloped intentionally, although many charities in Canada do this for long term planning purposes or revenue generation without issue from the CRA. The Charity’s immediate documented efforts to develop architectural designs and submit permit applications to the city, as well as actively fundraise in the community for construction, is evidence that this land is designated for charitable purposes.

13. Rose City Islamic Centre (RCIC)
    
    The CRA has alleged that the centre is:

    • 12% non-charitable because approximately half of the building is being used in a mix of activities including non-charitable youth and gym activities, and

    • 50% empty/ not used building space because approximately half of the building is not being used and requires significant renovations.

The viewpoint of the CRA is not correct. The following are the facts:

• RCIC is a large building and a previous school offering 144,000 square feet. The property was purchased for $1.175 million with significant land. At the time the market value significantly exceeded the purchase price and today it was worth more than $15 million.

• Purchasing a much smaller building in Windsor at the time would have cost more than $1.175 million.

• This property is one example in which MAC purchased a site for community need at the time but also able to respond to community growth in the future.

• As such, while at the moment the property offers more square feet than the community requires, it is an added charitable value to plan forward, especially when the building was purchased at far below market value.

• Furthermore, the gym and multi purpose rooms used for youth activities and programming space for youth, as well as community use, are charitable purposes.

As such the Charity disagrees with the CRA and instead asserts that MAC had made very good use of donor funds and purchasing property with surplus square footage to account for community growth does not deem the space as non-charitable.

14. MAC Community Centre Vancouver
    
    The CRA has alleged that the centre is:

    • 25% non-charitable because square footage of the ground floor is not used in charitable activities including storage, kitchen, and lobby.

    • 16% income generating activities because of square footage of rental units.

The viewpoint of the CRA is not correct. The following are the facts:

• CRA has counted storage space, a kitchen and lobby space as non- charitable use. All of these are examples of unusable spaces that should not be included in CRA’s square footage analysis.

• When the building was purchased, the property was primarily a banquet hall with a partial second floor. The frontage on the main street had three rental units.

• These units remain rented because at this time the main floor and second floor are sufficient square footage for the needs of the community.

• Nevertheless, this rental space is incidental. The building is used fully for charitable purposes.

As such the Charity disagrees with the CRA and instead asserts that the building is used completely for charitable purposes and the rented space is incidental.

15. MAC Youth Centre

The CRA has alleged that the centre is 37% income generating activities because of square footage leased to two tenants.

The viewpoint of the CRA is not correct. The following are the facts:

• When the building was purchased, the tenants were there and had long term leases that could not be terminated.

• The building was purchased to serve as a youth centre which the community wanted because existing places of worship did not have additional space for youth programming.

• However, the building was also used for chapter and community programming.

• Despite being 37%, the rental space is incidental. The remainder of the building is used fully for charitable purposes.

As such the Charity disagrees with the CRA and instead asserts that the building is fully used for charitable purposes.

Purchasing Property With the Intent to Generate Rental Income

The AFL alleges at page 36 that “A review of the Organization’s records and publicly available information suggest that generating income from properties it owns is an important part of the Organization’s goals and strategic plans.”

As demonstrated above, it is evident that income generation is not a priority for the Charity and that its properties are used first and foremost, and without compromise, for community needs.

Property Income generating activities – Rental Units

** MAC Islamic Centre – Based on a November 2014 City of Edmonton Notice of Assessment as of January 2014 the percentage used for rental was 36% and in September 2014 this was reduced to 26%.

The CRA’s Double Standard in Its Rental Income Non-Charitable Application With MAC

It is widely known that many charities in the sector rely on rental space in their properties. Churches often advertise available space for rent. Many churches design their facilities to allow for rental space to support the charity with its operational costs.

Most charities that own campsites use their campsites for 2-3 months of the year and rent it out completely for the remaining 75% of the year, or rent it for 50% of the year and close it for the remaining 25% of the winter season. If the CRA applied its methodology of unused space and rental space as non-charitable, most of these charities would not be able to maintain their charitable status and would need to shut down.

MAC mosques are used every day of the week, 5 times a day, for prayer, with active classes and community programs. If the CRA applied its analysis of unused time to properties owned by other faith groups, as it has on the Charity’s mixed purpose or community halls to other places of worship, few charities would be able to live up to this standard in maintaining their charitable status.

As explained above, the Charity has never advertised, listed, or searched for a tenant to rent space to. The Charity does not promote rental space on its website. As can be seen below, there are thousands of examples of Canadians charities that do. These are just a few examples of charities that do:

• Countryside Camp and Conference Centre https://ontariochristiancamp.ca/rentals/ 

• Maple Grove Christian Retreat Centre https://maplegrovecrc.com/

• Sunnyside Christian retreat Centre https://sunnysidecamp.org/book/ 

• New Vision United Church http://newvisionunited.org/welcome/92-2/

• Harcourt Memorial United Church https://harcourtuc.ca/space-resources/rental- space/

• Spring Park United Church http://www.springparkunitedchurch.ca/rent-a-space 

• Christ first United Church of Canada https://christfirst.ca/rentals/

• Aylmer United Church https://www.aylmerunitedchurch.ca/rent-our- spaces.html

• Manor Road United Church http://manorroadunitedchurch.com/rentals/ 

• Saint Andrews United Church http://www.standrewshfx.ca/rentals/ 

• Cornerstone Community Church https://cornerstonechurch.ca/rental/ 

• St. George’s Church https://www.stgeorgecadborobay.ca/info/rentals

• Trinity Presbyterian Church https://www.mytrinity.ca/facilities-rental.html 

• Holy Trinity Toronto https://holytrinity.to/rental-space/

• Bloordale Church https://bloordale.ca/rentals/

• Grace Toronto Church https://www.gracetoronto.ca/building

• Grace Church Scarborough https://gracechurchscarborough.com/rent-our- facilities/

• Humbercrest United Church https://www.humbercrest.ca/rent-our-space/ 

• Grace Church on-the-hill https://www.gracechurchonthehill.ca/rent-space 

• Church of the Redeemer https://theredeemer.ca/our-space/renting-space/ 

• Trinity Saint Paul United Church https://www.trinitystpauls.ca/rentals/ 

• Leaside United Church http://www.leasideunited.org/rentals/

• Canadian Unitarian Council https://cuc.ca/congregations-leaders/legal-issues-reporting/rental-policies- rites-passage/

• Yellowknife United Church https://www.yellowknifeunitedchurch.ca/facilities- rentals/

• Beth Jacob Synagogue https://www.bethjacobsynagogue.ca/plan-an- event/rental-fees/

• Machzikei Hadas Synagogue https://www.cmhottawa.com/events/rentals

• Jewish Community Centre of Peterborough https://jccpeterborough.com/rent-the- space/

• Beth Israel https://www.kingston–bethisrael.ca/facilities-rental-and- catering.html

• Congregation B’nai Israel https://jewishstcatharines.com/facility-rentals/ 

• Shaar Hashomayim synagogue https://www.shaarhashomayim.org/facilities

Islamic Concept of Waqf

The AFL alleges at page 36 that “Records collected from the Organization appear to indicate that purchasing or renovating buildings, with the intent to generate rental income, has been a focus of the Organization since at least 2004.” As well, the AFL alleges on the same page that “The “Business Plan and Site Usage and Sustainability” section of the document states that the project should be self- sustainable by the income it generates.”

The AFL also highlights a number of discussions and presentations related to acquisition proposals that include potential income generating ideas. The CRA uses these examples to allege at page 37 “the Organization appears to be using a significant number of charitable resources with the expressed purpose of generating rental income—something that the CRA considers to be a non- charitable purpose.” However, the AFL does not support how it has measured the charitable resources that have incurred towards generating rental income. When a chapter of MAC submits a proposal for a project, it is required to demonstrate how it will raise the capital and operational cost. This is the minimum expected management due diligence.

In fact, the goal of financial stability and self-sufficient operation is an Islamic concept called a “waqf”. Waqf is a special kind of philanthropic deed in perpetuity. It involves designating a fixed asset, or a partial amount of a fixed asset, to produce a financial return or provide a benefit. The revenue or benefit generated then serves the community beneficiaries. Historically, a waqf has served educational, health, and other social needs such as alleviating structural causes of poverty. The waqf is a central concept in Islamic history. Ultimately a waqf is an integral tool for providing a public benefit through local trusts.

As such, it is not surprising that the Charity’s leadership have encouraged additional revenue generating ideas that could be incorporated into project implementations in order to fulfill the Islamic concept of a waqf in a manner that is incidental and would not compromise the Charity’s ability to ensure public benefit through its charitable purposes.

Rental Income is Essential to Balancing Budgets

The CRA has highlighted in Appendix D to the AFL the five projects listed above that currently have rented square footage. The CRA attempts to argue that all five rely on the rental income to balance the budget and cover operational expenses.

This is illogical. The Charity’s projects are mandated to break even, e.g. not contributing to the deficit for the organization. For projects that have additional square footage or inherited leases, these projects benefit from incoming revenue. As a result, the projects complete their budgeting and identify the necessary annual donations to break even.