The Canada Revenue Agency (CRA) is facing dual pressures: a legal battle launched by a pro-Israel media watchdog's charitable arm and a sharp rise in service complaints over processing delays.
HR Canada Charitable Organization (HRCCO) filed challenges in the Ontario Superior Court of Justice and the Federal Court of Appeal after federal auditors threatened to revoke its charitable status.
Auditors alleged the group acted as a funding conduit for HonestReporting Canada (HRC), an unregistered entity, and was not carrying out charitable activities.
The CRA audit letter stated the organization appeared to accept donations for HRC and issue receipts on its behalf, then use resources to pay for HRC's operations.
HRCCO's executive director, Michael Fegelman, called the revocation a "draconian measure" and argued the audit was driven by antisemitic bias.
Human rights advocates who requested the audit welcomed the enforcement, accusing HRC of targeting journalists with harassment campaigns.
Just Peace Advocates and Writers Against the War on Gaza Toronto said the request was grounded in law and evidence, and criticized the use of tax dollars for activities they described as doxing and misinformation.
Legal representatives for the charity argue that under the Constitution Act, charitable organizations fall under provincial jurisdiction.
Separately, Taxpayers' Ombudsperson François Boileau reported a 27% spike in service complaints against the CRA in the 2025–26 fiscal year due to severe processing backlogs.
Boileau noted that complex T1 adjustment requests now take up to 50 weeks, far exceeding the 20-week target.
The ombudsman said the delays affect rights under the Taxpayer Bill of Rights and prompted a systemic investigation into the agency's workflow.
Boileau acknowledged the CRA is under pressure but emphasized that delays cause real issues for taxpayers seeking redress.
The investigation aims to understand root causes and what the CRA is doing to meet service standards.
The ombudsman's office requested the CRA encourage online filing of T1 adjustment requests to speed processing.
The report also criticized the growing complexity of the tax code, citing personal tax account issues, call center inaccuracies, and administrative gridlock despite a 31% workforce expansion.
Boileau described the Income Tax Act as "completely nuts" and called for simplification before automatic tax filing can proceed safely.
Tax specialists expressed surprise at the severity of backlogs, with accountant Tom Laios noting that routine online submissions using the "Change my return" function have a two-week standard, but complex files face extended delays.
