Many Canadians are generous in their gifts to charity, and in return, they may receive tax benefits. In recent months, there’s been some loosening of the restrictions placed on charities, which may be of interest to contributors.
While Ottawa was in the hands of the Conservative Party led by Stephen Harper, the government put strict restrictions the political activities of charities in 2012.
Five years later, Canada Revenue Agency (CRA), under the current Trudeau-led Liberal Party government, said it is suspending audits of political activity by charities. The move comes after recommendations by a panel the CRA commissioned to study the issue. The panel’s 2017 report urges the government to “broaden the ability of registered charities to engage in political activities,” while at the same time maintain “an absolute prohibition on partisan political activities.”
The five-member panel said that one particularly strong message emerging from the feedback it received during consultations was that a lack of clarity meant that some charities view political activities as too risky and engage in self-censorship. Without knowing the exact parameters within which they can operate, and given that the penalty for even an accidental breach of the rules may be deregistration, many charities make a rational choice to avoid or limit the risk.
Furthering a Group’s Charitable Purpose
The panel recommended that a charity’s political activities, whether pressing for a change in government policy or buttonholing a politician, be judged on whether they further the group’s charitable purpose. The panel proposes eliminating current rules that restrict a charity’s political activities to 10% of its resources.
One of the panel’s key recommendations was that the CRA revise its policy guidance to explicitly allow charities to:
1. Provide information to others related to their charitable objects (including the conduct of public awareness campaigns) for the purpose of informing and swaying public opinion. Such information must be truthful, accurate and not misleading.
2. Conduct research, distribute it to others and discuss the research and its findings with the media and others as they see fit.
3. Express opinions on matters relating to their charitable objectives, as long as they draw on research and evidence and don’t impinge on hate laws or other legitimate restrictions on freedom of speech.
4. Encourage keeping or changing law or policy, either in Canada (on any level of government) or outside of Canada.
5. Call on supporters or the general public to contact politicians of all parties to express their support for, or opposition to, a particular law or policy.
6. Make written or verbal statements to elected officials, parties and candidates, and release such materials publically. The adoption of a charity’s policy by a political party doesn’t in itself constitute partisan political activity.
7. Invite competing candidates and political representatives to speak at the same event, or request written submissions for publication, provided that candidates and parties are given an equal opportunity to speak or have their views published.
8. Express their views and offer others opportunities to express their views, on social media or elsewhere provided such platforms are monitored and partisan political messages are removed.
The panel also encouraged the CRA to:
- Remove the requirement that a charity’s materials must reflect all sides of the argument, and add that they must be fact-based, and
- Amend CRA Form T3010, Registered Charity Information Return (annual report) to remove the requirement to quantify resources used for political activities, and replace it with one to describe, in narrative form, the nature of the public policy dialogue and development work undertaken.
Expansive View of Charitable Activity
The panel went on to say that, in its view, the CRA could find support for a broader view of what constitutes charitable activity in case law.
For example, the 1999 Supreme Court ruling in Vancouver Society of Immigrant and Visible Minority Women v. Minister of National Revenue supports looking at the activity in the context of a charitable purpose. If a charity calls for a change in the law in furtherance of its charitable purpose — and such activity is subordinate and non-partisan, the panel said it believes the policy could accept it as charitable.
The panel noted that it believed such an expanded view would go a long way in providing clarity to the charitable sector and would enable it to more meaningfully contribute to public policy reform. Moreover, the panel said, it would remove the current disadvantage faced by the charitable sector in relation to for-profit companies, which can advocate in the public policy arena without restriction.
The panel also urged the CRA to list examples of what will be considered partisan political activities to replace the prohibition on both “direct and indirect” partisan political activities, which the panel suggested is highly subjective (particularly “indirect”), and has been the subject of much confusion.
Need for Legal Changes
Feedback on another issue was clear: fundamental legislative change is needed, and new policy or other administrative measures won’t be sufficient. Suggestions from the panel included:
- Adopt an inclusive list of acceptable charitable purposes in the Income Tax Act that reflects contemporary society, its issues and expectations.
- Consider the approach of other jurisdictions, some of which have softened restrictions on political purposes.
- Clarify that public policy activities (for example, research, dialogue, advocacy, and calls to action) are charitable, provided they’re non-partisan and subordinate to a charitable purpose. In other words, accept the Supreme Court of Canada decision from the Vancouver Immigrant Society case and incorporate it in future legislation (that an activity is considered in the context of the charitable purpose).
- Create a permanent mechanism for consultation with the charitable sector to ensure an ongoing process for developing policy guidance.
- Enable charities to benefit from social enterprise and social finance models.
The CRA said the suspension of charity audits will be in effect until the government officially responds to the panel’s report.