Over the years there have been periodic calls for the modernization of Canadian laws regarding the involvement of charities in public debate and public policy development, activities labeled by the Canada Revenue Agency as “political activities.” While legally charities in Canada must devote all of their resources to “charitable activities carried on by the organization itself,” since 1986 section 149.1(6.2) of the Income Tax Act has clarified that a small amount of political activity will be deemed to be charitable (10% of total resources according to current CRA policy), provided that those political activities are “ancillary and incidental to its charitable activities” and do not involve “direct or indirect support of, or opposition to, any political party or candidate for public office”).
However, as one Canadian charities lawyer has put it:
In an Act full of mathematical formulae for the determination of tax liabilities in all sorts of different circumstances, this section is remarkably devoid of precision. It is vague and subjective, and does little to help charitable organizations and their accountants categorize and quantify their activities and expenditures as charitable or not.
The full depth of the problems with the vague and subjective nature of current law and policy became more apparent in 2012, however, when the federal government increased the budget of the CRA for the explicit purpose of undertaking political activities audits of charities, and gave the CRA the power to impose new penalties on those who might be found out of compliance. Environmental charities were hard hit, as were international development, anti-poverty and human rights charities that had “been burrs under the government’s saddle” although the Revenue Minister at the time rejected “any claim that the government is using the tax agency as a weapon against its opponents.”
Despite a commitment of today’s federal government to end the “political harassment” of charities many charities that were caught in the political activities ‘sweep’ of the former administration remain in limbo, still under audit years later. The Minister of National Revenue has now launched a consultation process and will be receiving submissions until November 25th with the aim of better understanding the problems with the status quo and accepting recommendations for modernizing the rules governing the charitable sector. This column summarizes the submissions of West Coast Environmental Law to the panel appointed by the minister. The full submissions are available at www.wcel.org.
Problems with the status quo
Canadians have long moved beyond the narrow, moralistic view of charity that characterized the Victorian period. Unfortunately, our laws have not. Based on our current law, soup kitchens might be considered charitable, but the CRA does not consider advocacy to defend the rights of the poor or prevent poverty to be charitable in the legal sense. Similarly, cleaning up pollution may be charitable, but advocating for stronger laws to keep our air and water clean may not be.
Simply put, our laws are out of touch with contemporary Canadian views of charity. In recent polling about how acceptable various advocacy activities by charities were, over 80 percent of Canadians across the country felt that it was acceptable or very acceptable for charities to: engage in letter writing campaigns (83%), place advertisements in the media (87%), meet with government ministers or senior public servants (91%), use research results to support a message (92%) and speak out on issues like the environment, poverty and health care (94%). Close to 2/3rds were also fine with charities holding legal street protests or demonstrations. While some of the above noted activities are considered charitable by CRA policy, others are not, with little logical rationale for the distinctions made. In particular, the ability of charities to involve citizens in law reform activities is severely circumscribed.
In our experience, donors today want to support charities that advance lasting, systemic solutions and not simply band aid fixes. In many cases this will require legislative or policy change, and public debate about the best way to do so. The superior courts in some common law jurisdictions, notably Australia and New Zealand, have rendered judgments that have modernized the understanding of charity in important ways in those jurisdictions, but the Canadian courts have expressly declined to do so.
Why we all lose out when charities are silenced
Supporting the work of a charity is a critical way for individuals to combine our efforts to address challenges facing our society or environment in a way we could not do alone. From laws preventing drunk driving, to addressing acid rain, to ending apartheid, charities have a demonstrated track record of achieving changes of societal benefit. Limiting charities’ involvement in public debate and public policy development silences the voices of the millions of Canadians who rely on the charities they support to advance solutions they could not achieve alone. Furthermore, it exacerbates an already very uneven playing field between the individuals and the charities they support on one hand and powerful economic interests on the other.
The commonly advanced rationale for limiting charities involvement in so-called “political activities” harkens back to tax policy. Because of the tax advantages charities receive, we are told, it is acceptable, and even desirable to limit charities involvement in public debate and public policy development on matters on which there is no societal consensus and thus uncertain societal benefit. This rationale cannot be sustained, however, when one considers the tax advantages afforded to some of the most powerful economic actors in our society to advance their views on the same subjects. From a tax perspective, corporations may deduct unlimited amounts of lobbying and advocacy expenses to advance their private interests, as well as most advertising expenses in Canadian newspapers, television and radio stations. By way of contrast, charities working for the public benefit are limited to using at most 10 percent of their already more limited resources for “political purposes”.
Perspectives on reform
The current Canadian approach to charities’ involvement in public debate and public policy development is antiquated, subjective, arbitrary and confusing –denying Canadians the right to have their voices heard through the charities they support. Legislative reform is essential to ensure Canadians have the right to be heard on public policy issues through the charities they support.
In our submission, a new law should:
- Define “charity” based on the societal goals an organization seeks to achieve (its charitable purposes), consistent with modern realities and our constitutional democracy.
- Ensure charities are free to choose the most effective approaches to achieve their purposes unless an activity is expressly prohibited by statute.
- End restrictions on charities’ participation in public debate and public policy development.
- Explicitly protect the free speech of charities, by clarifying that charities can be constituted and operated to:
a. raise awareness of, or advocate for, a particular perspective or approach to achieving charitable purposes;
b. advocate for a change in a government decision, policy or law related to achieving charitable purposes;
c. take a position on an issue or policy related to their charitable purposes, regardless of whether a political party or candidate for public office has also done so, and,
d. report or comment on a policy or position, or proposed policy or position, of any level of government related to charitable purposes, regardless of whether such policy or position is in writing or expressed by a named elected official or candidate for public office.
- If a new law restricts charities’ participation in the electoral process, any prohibition should be limited to direct participation by a charity in an electoral campaign on behalf of (or in opposition to) any political party or candidate for public office, and not be used to limit the free speech of charities as set out above.
In particular, we recommend that the Income Tax Act be amended to add the following new provisions:
Free Speech of Charities
The Minister may not deny registration, impose penalties or revoke the registration of a charitable organization on the basis that the charitable organization:
(a) advocates for a particular perspective or approach to achieving its charitable purposes; or,
(b) undertakes research, analysis, education, awareness-raising or advocacy on issues of public debate related to its charitable purposes, regardless of whether the position taken by the charitable organization requires a change in a government decision, policy or law.
Second, we would replace the prohibition in s. 149.1(6.2) on “direct or indirect support of, or opposition to, any political party or candidate for public office” and with a narrower restriction on “electioneering” defined as follows:
“Electioneering” means participation in a political campaign on behalf of (or in opposition to) any political party or candidate for public office, but does not include:
(a) taking a position on an issue or policy related to a charity’s purposes, regardless of whether a political party or candidate for public office has also done so, or,
(b) reporting or commenting on a policy or position, or proposed policy or position, of any level of government related to charitable purposes, regardless of whether such policy or position is in writing or expressed by a named elected official or candidate for public office.
Statutory Definition of Charity and Charitable Purposes
Finally, we recommend that amending the Income Tax Act to include statutory definitions of “charity” that focuses on charitable purposes (rather than the activities of charities), leaving charities free to determine the best approaches to meet these purposes. This should be complemented by a modern definition of “charitable purposes”. The definition of charitable purposes should include purposes not only recognized to date by the Canadian courts and regulators (e.g., protection and preservation of the environment), but also those recognized in other common law jurisdictions, while leaving the courts free to evolve the common law by recognizing future purposes analogous to those set out in statute and beneficial to the community. We note that catalyzing informed public debate on matters of societal importance and advocacy for changes to the law have been accepted as potential charitable purposes in Australia and New Zealand respectively. Modernization and expansion of some purposes will also be required, for example to reflect Charter protections as they are now understood in Canada.
Australia in particular has undertaken legislative reform of this nature, and section 12 of the 2013 Australian Charities Act, as well as case law in that jurisdiction could provide a helpful starting point for Canadian legislators. In particular, the Australian legislation explicitly includes law reform advocacy in its definition of charitable purposes.
Charities provide a key avenue for Canadians to engage in important debates about social justice, liberty, poverty and the environment and to magnify our voices to achieve solutions. Individuals and organizations have until November 25th to make a submission. Further resources and analysis on this issue may be found at protectcanadiansfreespeech.ca.