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| Nick Leeson |
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| Justin Burt |
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| Christa Croos |
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| Riley Brennan |
That is the reality behind Canada’s little-known charity flow-through (CFT) share scheme. While it offers wealthy Canadians and institutional donors enormous tax breaks for “gifting” mining shares to charities, the public dollars behind those incentives may also be underwriting resource exploration that ignores Indigenous rights and sovereignty.
A growing number of Indigenous governments are challenging this status quo. In Gitxaala v. British Columbia, 2023 BCSC 1680 (Gitxaala), First Nations are taking the province to court for allowing mineral claims to be registered on their territories without notice or consent — highlighting the legal and ethical cracks in Canada’s mining regime. In this context, CFT may be fuelling projects on Indigenous lands without consent, oversight or consequence.
How charity flow-through works
CFT is a niche variant of Canada’s broader flow-through share regime. It is a tax strategy used primarily by wealth management professionals and tax advisers on behalf of high-income clients or donor institutions. Rather than writing a cheque to a charity, a donor purchases “flow-through shares” in a mining exploration company — shares that come with mining-related tax incentives. The donor then gifts those shares to a charity that same day, receiving an additional charitable donation tax credit. The charity immediately resells the shares to a back-end buyer — usually at a predetermined discount arranged by an intermediary broker.
This results in “stacked” tax credits — one for investing in resource exploration and another for charitable giving — amplifying the financial advantage for the donor. According to leading CFT promoters, this
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The key issue: nobody involved — not the donor, the charity or the broker — is required to ask whether the company has obtained free, prior and informed consent (FPIC) from the Indigenous nation on whose land they are exploring.
While donors, charities, mining companies and brokers all benefit from this scheme, there is no legal requirement to determine whether FPIC has been secured. CFT is using public money to subsidize early-stage mining projects on Indigenous territories — without consent, without transparency and without meaningful accountability.
Tax incentives should support Indigenous rights
FPIC is a core part of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and a foundational commitment under Canada’s United Nations Declaration on the Rights of Indigenous Peoples Act (UNDA). By passing UNDA in 2021 and adopting its UNDRIP Action Plan, the federal government affirmed that FPIC of Indigenous nations must be respected in decisions involving resource development on Indigenous territories — including during early-stage mineral exploration.
Yet, in practice, Canada’s mineral tenure regime continues to operate under a 19th-century legal framework: the “free-entry system.” Under free entry, anyone can acquire mineral claims and begin exploration work on Crown lands without prior notice to, or consent from, the Indigenous nations who hold inherent and constitutionally protected rights to those lands.
Free entry was originally designed to accelerate colonial settlement and resource extraction. Today, it remains embedded in most provincial and territorial mining regimes, incentivizing speed and investor certainty over Indigenous governance. In many cases, the Crown does not meet even its basic legal duty to consult with affected Indigenous governments before granting exploration rights — let alone obtain their consent. Ongoing legal challenges, such as Gitxaala, illustrate the growing resistance to this regime and its incompatibility with modern constitutional and international obligations.
The CFT scheme builds directly on this outdated model. It allows donors, charities and financial intermediaries to benefit from stacked tax credits while remaining agnostic to whether a project has obtained Indigenous consent. No statutory mechanism ensures that FPIC has been obtained before public tax dollars are used to subsidize exploration activity. In effect, Canada’s tax policy treats projects with Indigenous consent and those without as equally deserving of public financial support.
This disconnect causes real harm. When FPIC is sidelined, Indigenous governments are denied the opportunity to exercise their jurisdiction and shape development on their terms. Yet where FPIC is meaningfully pursued, many nations choose to support exploration through agreements that deliver employment, infrastructure and revenue benefits. These agreements could form the ethical and legal benchmark for any publicly subsidized mining investment — but under the current tax framework, there is no requirement to meet that standard.
Without reform, CFT continues to entrench the free-entry status quo. It offers financial advantages to donors and developers while imposing social, legal and environmental costs on Indigenous nations — often without their knowledge, much less their agreement.
Charities as passive enablers: Fixing blind spots
The lifeblood of charities is the donations that fund their charitable activities. The CFT scheme has been a boon to many organizations: donors are effectively giving a thin slice of cake, while the Canada Revenue Agency (CRA) heaps on two thick layers of tax credit icing. But for charities — especially those focused on environmental protection, sustainability, health, poverty or social justice, including justice for Indigenous Peoples — using this scheme uncritically can lead to outcomes that directly contradict their stated missions.
Consider this scenario: An environmental justice charity is approached by a CFT broker with a proposal to raise significant funds for the charity by facilitating a donation of mining exploration shares. The charity has recently committed to reconciliation with Indigenous Peoples and publicly campaigned against environmental racism in Indigenous communities. Yet the charity makes no further inquiry into the company at the centre of the CFT arrangement — and accepts a generous donation, significantly enhanced by tax incentives.
Meanwhile, the company in question is operating without:
- obtaining the FPIC of the impacted Indigenous nation on whose lands they are exploring;
- providing any form of benefit to that nation or its members; and
- demonstrating care for the environmental or social impacts of its operations on Indigenous lands and rights.
If the charity had looked more closely before accepting the donation, it would be difficult to justify how supporting a company that undermines environmental justice and Indigenous rights aligns with its mission or commitment to reconciliation.
When decision-makers are provided with better information, they tend to make better decisions — ones that align with their values and responsibilities. Charities are currently benefitting from a system that enables the violation of Indigenous rights. Rather than remain passive, they should take initiative to fully understand the nature of the donations they receive through CFT. Failing to ask basic questions about FPIC or project impacts risks turning charities into unwitting enablers of extractive activity that contradicts their own values and harms Indigenous communities.
Respectful, reconciliation-based tax reform needed
While charities have a role to play, so, too, do the federal government and the CRA. Public policymakers must align Canada’s tax incentives with UNDRIP, FPIC and the principles of reconciliation.
Transparency reform is a critical first step. The CRA already collects and publishes data on charitable donations; it could go further. On any tax filings related to the donation of flow-through shares in a mining exploration company, the donor and the charity should be required to disclose:
- which exploration project(s) the donation relates to; and
- whether evidence of FPIC was obtained from the impacted Indigenous nation(s).
Publishing this information would not eliminate the issue entirely, but it would place a clear onus on donors and charities to ask critical questions — and would remove the excuse of wilful ignorance when Indigenous rights are bypassed.
More fundamentally, eligibility for both the mining exploration tax credit and the charitable donation tax credit should be conditional on evidence of FPIC. This would align the CFT regime with UNDRIP, deliver true social benefit and support long-term certainty for both industry and Indigenous nations. Canada should not be rewarding projects that ignore Indigenous rights. Tax policy should be designed to incentivize early, meaningful partnerships with Indigenous governments — not those who treat them as an afterthought.
Charity flow through firms and brokers should promote reconciliation
Reconciliation is an ongoing process — one that requires meaningful participation from all parts of society to repair and rebuild relationships with Indigenous Peoples. Brokerage firms that specialize in processing CFT donations — by connecting donors, charities and mining companies and then financially benefitting from the transaction — should not be exempt from this responsibility.
As key orchestrators of the CFT system, these firms are uniquely positioned to promote reconciliation by:
- supporting Indigenous-led charities or governments as the preferred recipients of these donations;
- ensuring that donors are informed about whether a company has obtained FPIC before they commit to purchasing flow-through shares; and
- marketing FPIC-aligned projects as a positive differentiator for socially conscious charities and donors.
Conclusion: End the lack of consent loophole
Canada’s tax system should reflect what we value as a society. Right now, the CFT scheme sends the wrong message.
It says: consent is optional. Rights are negotiable. Tax breaks come first.
This is not about being anti-mining or anti-charity. It is about insisting on accountability, transparency and respect for Indigenous rights. It is about fixing a tax system that quietly enables public money to fund private gain on Indigenous lands — without consent, without benefit and without justice.
Maintaining the status quo undermines reconciliation. It erodes trust. It invites conflict.
Policymakers, charities, brokers and mineral exploration companies all have a role to play in ensuring that CFT donations do not leave Indigenous nations behind. We can no longer look away while tax shelters fuel the erosion of Indigenous sovereignty.
The CFT regime must be reformed to reward projects and proponents that respect FPIC and engage with Indigenous nations from the outset. Public funds should never subsidize exploration that ignores or overrides Indigenous rights.
Until these changes are made, one of Canada’s most generous tax shelters will continue to quietly underwrite a system that disregards Indigenous consent — in the name of philanthropy.
Nick Leeson is senior counsel with Woodward LLP. His practice is based out of British Columbia, where he practises law for Woodward across Canada, representing Indigenous clients and interests from coast to coast to coast.
Justin Burt is a freelance lawyer associated with Woodward LLP. His practice is based out of Alberta, where he practises law for Indigenous clients across Canada.
Christa Croos is an associate for Woodward LLP. Her practice is based out of Ontario, where she represents clients in the Northwest Territories and in Ontario on matters related to lands, governance and natural resources.
Riley Brennan is an associate with Woodward LLP. Her practice is based out of British Columbia, where she practises law for Indigenous clients across Canada.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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