Environmental Defence. PEN Canada. Amnesty International Canada. The Canadian Centre for Policy Alternatives. Canada Without Poverty. The David Suzuki Foundation.
What do these organizations have in common — aside from all doing great work?
All are registered charities.
All have been publicly critical of Stephen Harper’s government.
And all are undergoing audits of their political activities by the Canada Revenue Agency (CRA).
What’s this about? Here’s what you need to know.
When organizations seek charitable registration from government in order to entice donors who would like tax receipts, they necessarily accept oversight by a government agency that, in an atmosphere as poisonous as Canada’s these days, can overreach.
Laws regulating charities are incredibly complex: there is no easy definition of what is charitable. Instead, CRA relies upon court decisions, many hundreds of years old, both here and in England, to formulate its views.
Those court decisions forbid any political activities by charities, insisting that charities must devote all of their resources to pursuing exclusively charitable activities.
There are court decisions stating that a charity may not promote a point of view or attitude of mind, advocate in favour of one side of a controversial social issue, or create a climate of opinion.
Typically, an Ontario judge in 1987 cautioned that the Toronto Humane Society’s involvement at that time in a campaign to outlaw the use of abandoned animals from pounds for research indicated “a tendency to proceed at the outer edge of what is legally permissible. It is not the proper attitude for a public institution supported by donations and bequests from members of the public.”
Many charities though, see political action as a necessary part of their work to realize their charitable goals: health charities, properly, want to encourage government policy that improves health, and environmental charities want to encourage government action on pollution.
The federal government has turned a blind eye to that kind of political action for years, and even formally legitimized it in its 1985 amendments to the Income Tax Act, specifically permitting political activities by charities, subject to specified limits. CRA has recognized that there is significant public benefit to allow charities to speak out, within limits, and has published extensive guidelines on what activities are political, and what are not.
Fundamentally, a charity’s purposes and activities must still be charitable, and political activities must be only “ancillary and incidental” to the charitable purposes.
CRA has clarified that up to 10 per cent of the charity’s resources can be used for political activities and advocacy provided they do not support a particular political candidate or party, and are:
- “connected with, and subordinate to, the Charity’s charitable purposes, and
- based on well-reasoned positions.”
The rub is determining when political activities become so significant a part of an organization’s activities that they cease to be ancillary and incidental.
Not surprisingly, CRA auditors tend to draw the line much more strictly than most charities would expect. Because an appeal from an adverse CRA decision lies with the Federal Court, which mostly deals with income tax matters, the courts have not tended to disagree with CRA’s approach.
It’s a problem.
A different approach in Australia and the U.K.
A lot of the difficulty stems from the Canadian courts’ archaic view of what is charitable.
In a marked departure, an Australian court recently agreed that Aid/Watch, an organization that “campaigns for changes to the ways in which foreign aid is delivered,” that promoting public debate on political issues is, by definition, in the public benefit, and therefore charitable.
In essence, silencing charities was an unwarranted restriction on freedom of political communication.
Aid/Watch, a small charity, with less than $100,000 annual income, had been subjected to similar challenges to those we’re seeing in Canada for its activities critical of the conservative coalition that governed Australia from 1996 to 2007.
It mounted an impressive fight not just in the courts, but in the media and with the public, supported by all of the major charities in Australia.
As a result of its win, the Australian counterpart of the CRA issued this statement:
“following the High Court’s decision in Aid/Watch … an entity can be charitable if it has a purpose (including a sole purpose) of generating public debate with a view to influencing legislation, government activities or government policy in relation to subject matters that come within one or more of the [recognized types] of charity.”
England, too, has a very different approach, placing charity oversight in the hands of an independent Charity Commission, answering directly to Parliament, instead of the agency responsible for raising tax revenue. That commission has adopted far clearer views of what is charitable and what is not, as is evident from this refreshing excerpt:
Our experience is that some charities have been overly cautious, and inclined to self-censor their campaigning activity. We want all charities to be confident about what they can legitimately do if they decide to. Therefore, although the basic legal position as regards charity campaigning has not changed, this guidance focuses first on the freedoms and possibilities for charities to campaign, and only then on the restrictions and risks that trustees must bear in mind.
While there’s little hope that Harper will change his tune, perhaps the leadership shown by the Australians and the United Kingdom will inspire the Canadian public to insist that his successor fix the mess Harper created.
Brian Iler is a lawyer at Iler Campbell in Toronto.
Iler Campbell LLP is a law firm serving co-ops, not-for-profits, charities, and socially-minded small business and individuals in Ontario.
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