A federal tax court judge has rejected appeals of tax assessments by Winston Blackmore, a leader in the polygamous enclave of Bountiful, B.C., concluding the community does not meet the requirements of a congregation set out in the Income Tax Act.
But the question of whether Mr. Blackmore and others in Bountiful could face criminal charges related to polygamy and other alleged offences, including sexual exploitation of minors, remains unresolved as a provincial special prosecutor reviews a police investigation into the community.
In her August 21 decision, Justice Diane Campbell found Mr. Blackmore and Bountiful – home to members of a polygamous sect, the Fundamentalist Church of Jesus Christ of Latter-day Saints (FLDS) – do not fit provisions in the act that were designed to accommodate communal organizations such as Hutterite colonies.
Judge Campbell dismissed tax appeals for six taxation years between 2000 and 2006 – 2005 was not included – that found Mr. Blackmore had understated his income by $1.8-million.
The judge also levied "gross negligence" penalties of nearly $150,000 in relation to four of the taxation years, citing "astronomical" differences between reported and actual income.
"The Appellant ought to have known that ignoring the astronomical magnitude of the differences between the reported income/benefits and the amount of benefits assessed, ranging from 884 per cent to 1,326 per cent, over a number of years, would attract some type of tax consequences," Judge Campbell wrote in her decision.
"This is the type of 'cavalier attitude' discussed in DeCosta. It is behaviour reflective of an indifference as to whether there is or is not compliance with the law. The Appellant headed a community and a company that had business activities in a number of locations in British Columbia, Alberta and the United States. However, even if he had no such business experience and background, I would still conclude that, due to the staggering amounts of unreported income and benefits, he was grossly negligent in ignoring these amounts over a number of years. Therefore, I must conclude that the Appellant's actions exceed simple carelessness and that he willfully misrepresented the true state of the Company's activities so that gross negligence penalties are justified."
The decision follows hearings that were held between January and May of last year and that cast a spotlight on the business and personal affairs of the residents of Bountiful, which has been a thorny problem for B.C. lawmakers and police for decades.
In a landmark 2011 ruling, B.C. Supreme Court Chief Justice Robert Bauman found that Canada's criminal prohibition against polygamy should be upheld because the practice results in harm to women, children and society.
During last year's hearing, Mr. Blackmore was questioned about his wives, their living arrangements and his business interests.
Under the tax act, a congregation must meet four requirements, including that members live and work together and not own property individually.
The judge found Bountiful did not meet those requirements on several counts, including members who worked outside the community and owned cars and used credit cards.
Over the past few decades, B.C. has made several attempts to tackle allegedly illegal activity in Bountiful, with limited success. Polygamy charges against two leaders, including Mr. Blackmore, were quashed on technical grounds in 2009.
In the most recent initiative, B.C. appointed a special prosecutor for Bountiful last year. In July, the province announced that the special prosecutor, Peter Wilson, had received and was reviewing an RCMP investigation into Bountiful.
As part of any charge assessment, Mr. Wilson is considering – if the evidence supports it – "the possible prosecution of sexual exploitation and other alleged offences against minors by individuals associated with the community of Bountiful, from the early 1980s to the present," the province said in July.
The community is located in southeastern B.C.