The release of a University of Victoria study calling for updates to Canadian charitable law created quite a stir last week.

The study, prepared for DeSmog Canada, was covered by the Toronto Star, Vancouver Sun, Victoria Times Colonist, Canadian Press, Macleans, The Tyee, Yahoo! News and CFAX.

The report called for the Canada Revenue Agency (CRA) to clarify rules around “political activities” — defined as any activity that seeks to change, oppose or retain laws or policies — and to provide a more generous limit on allowable policy advocacy in line with other common law jurisdictions such as Australia and New Zealand. It also called for the creation of a politically independent charities commission to remove the potential for political interference in audits.

The findings were raised in the House of Commons by Victoria NDP MP Murray Rankin, who stated the report “analyzes the alarming lack of clarity in the rules governing political activities for charities.”

Tim Gray, executive director of Environmental Defence, said the recommendations put “what’s going on in Canada in the context of what’s going on in other common law and western countries … It gives a sense of how far Canada is behind on these things.”

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Environmental Defence was one of 18 Canadian charities that called on the country’s politicians to enhance the ability for charities to engage in public policy debates earlier this month.

“The lack of a level playing field between business and citizens around public policy is particularly evident in the debate around climate and tar sands,” Gray told DeSmog Canada. “There’s massive spending going on by the oil sector to influence public policy and every dollar they spend on lobbyists in Ottawa or on television ads, they deduct from their gross income and therefore reduce the income tax that they pay to build roads and run hospitals.”[view:in_this_series=block_1]

Citizens who donate money to a charity only receive a 17 per cent tax benefit and charities are limited to spending 10 per cent of their resources on policy advocacy work, described as “political activity” by the CRA.

Fifity-two charities have been audited for their “political activities” under a $13.4 million audit program launched by the federal government in the 2012 budget.

“It’s already unfair and the rhetoric that’s out there right now is to say that that level of unfairness should be enhanced,” Gray said. “It would be a huge move to favouring involvement by corporations in public policy at the expense of citizens.”

Gray also said citizens are confused by the current talk around “political activities,” which many assume to mean “partisan activities,” which charities are banned from taking part in.

Bill Schaper, director of public policy and community engagement for Imagine Canada — which advocates for the charitable sector — said his group has been hearing more and more about re-thinking how we define charity over the last couple of years.

“It’s something that’s been percolating,” Schaper told DeSmog Canada.

But he also noted that there are risks associated with opening up charitable law for major changes. National Post columnist Andrew Coyne, for instance, has argued that we should get rid of charitable status altogether.

“As much as the grey zones are causing issues right now, sometimes grey zones are better than too much clarity because you might not like the clarity you get,” Schaper said.  

He noted that the charitable sector can do a better job of educating itself in terms of what constitutes “political activity” and said there would need to be much more discussion before Imagine Canada would push for specific changes to the law.

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A report released today by the University of Victoria’s Environmental Law Centre calls for sweeping reform of Canadian charitable law in line with other jurisdictions such as the U.S., Australia, New Zealand and England.

Current rules around “political activity” — defined by the Canada Revenue Agency (CRA) as any activity that seeks to change, oppose or retain laws or policies — are confusing and create an “intolerable state of uncertainty,” the report says.

“This has created a confused and anxious charitable sector and detracts from them carrying out their important work,” Calvin Sandborn, legal director of the Environmental Law Centre, said.

The report — prepared for DeSmog Canada — comes as 52 charities are being targeted in a $13.4 million audit program launched by the federal government in 2012 to determine whether any are violating a rule that limits spending on political activities to 10 per cent of resources. Those charities include Environmental Defence, the David Suzuki Foundation, Canada Without Poverty, Ecology Action Centre and Equiterre.

Australia and New Zealand, also common law jurisdictions, have modernized their laws in recent years to allow charities to conduct more policy advocacy in carrying out their missions.

The report, Tax Audits of Environmental Groups: The Pressing Need for Law Reform, calls for Canada to establish clearer rules about what constitutes “political activity” and provide a more generous limit on allowable “political activity.”

Canada’s Charities Law Urgently Needs Update: New @ELC_UVic report http://t.co/EUj828Va94 #UpdateCharitiesLaw #cdnpoli

— DeSmog Canada (@DeSmogCanada) March 25, 2015

“U.S. charity regulation is superior to current Canadian law because it is less vague and more respectful of the value that charities bring to public policy debates,” the report states.

Many European countries place no limit at all on a charity’s political activities.

Earlier this month, 18 Canadian charities called on the country’s politicians to enhance the ability for charities to engage in public policy debates.

“Our society has evolved and our legislation hasn’t,” said Eric Hebert Daly, executive director of the Canadian Parks and Wilderness Society, a group that signed on to the letter.

The new University of Victoria report calls on Canada to modernize the definition of what qualifies as charitable to rectify instances such as the CRA’s ruling that Oxfam can not have a charitable goal of “prevention of poverty.”

“In modern society the law should recognize that a poverty-relief organization can often relieve poverty more effectively by lobbying for affordable housing laws than by operating a soup kitchen,” the report says.

In October 2014, the Broadbent Institute released a report, which raised questions about whether the recent audits have been targeted at charities critical of the Harper government. The report said several right-leaning charities are reporting zero “political” activity while engaging in work that appears to meet the CRA’s definition.

There is a direct structural chain of command from the Minister of National Revenue to the charities directorate (which audits charities), the University of Victoria report notes before calling for the removal of any potential for political interference by establishing a politically independent Charities Commission like the one in England and Wales.

“Regardless of whether the audits are targeted or not, an obvious way to address this issue would be to reform the law to eliminate the potential for political control over CRA audits,” the report reads.  “This has been done in other jurisdictions.”

“The perception that audits may be targeted at charities critical of government policies creates a chilling effect,” the report says — adding that with such vague rules, charities can end up spending an “inordinate amount of energy and resources protecting themselves from an audit.”

The report also notes the contrasting treatment of business and charities under the Income Tax Act:

Since businesses can deduct advertising expenses from their income, they can lobby the public through advertising without any imposed statutory restrictions. A recent example has been the omnipresence of the multimillion-dollar [Enbridge] Northern Gateway radio, television, internet and newspaper ad campaign favouring the project. All of these advertisements would presumably be tax deductible and therefore subsidized by general taxpayers.

In contrast to companies’ tax-deductible political advertising campaigns, charities must carefully ensure that all activities of a political nature are kept within the 10 per cent limit. This contrasting treatment of business and charities under the Income Tax Act has the effect of encouraging businesses to take political action in support of commercial and private interests — while hindering the counterbalancing efforts of charities working to protect public interests.

The report provides the example of cigarette companies fighting smoking laws to defend profits while cancer societies advocated smoking laws for the public good (to prevent cancer). The “political activities” of the cigarette companies would have been tax deductible, whereas the charities advocating tougher smoking laws would have had to follow the ten per cent rule.

“This impairment of charities’ pursuit of the public interest has been magnified by the recent spate of audits and their repercussions on the charitable sector,” the report says.

Policy advocacy by Canadian charities has resulted in measures addressing acid rain, regulations on smoking, laws against drunk driving and regulations on toxic chemicals.

Canadian charities and non-profit organizations account for more than eight per cent of Canada’s GDP. As of the end of 2013, there were more than 86,000 registered charities in Canada.

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Pen Canada, a Canadian charity that fights for freedom of expression and represents more than 1,000 writers and supports is the latest group identified for a political-activities audit by the Canada Revenue Agency (CRA).

The group has been a vocal opponent of some of the Harper government’s recent policies, including the muzzling of federal scientists and the alleged surveillance of Canadian citizens as revealed through the Edward Snowden leaks.

Follow revelations of mass state surveillance, Pen Canada advocated for an adoption of “International Principles on the Application of Human Rights to Communications Surveillance.”

The organization also spoke out against restrictive communications protocols, implemented by the Harper government, that prevent federal scientists from speaking with the media about their research. “The federal government’s restriction on media access to publicly funded scientists have become a serious infringement on the right to freedom of expression in Canada,” the group wrote on its website.

Federal auditors appeared at Pen Canada’s offices yesterday, asking to review internal documents, the Globe and Mail reports.

Philip Slayton, the group’s president, said they are fully cooperating with the audit, of which they were notified two or three months ago.

The audit places Pen Canada among the ranks of several other charities currently under audit. The list includes prominent charities such as the David Suzuki Foundation, the Canadian Centre for Policy Alternatives, Canada Without Poverty, Environmental Defence, ForestEthics, Tides Canada and Amnesty International Canada.

So far Physicians for Global Survival, a group advocating against nuclear weapons, is the only Canadian charity to have its charitable status revoked for being deemed too political.

As DeSmog Canada recently reported, new research done by Gareth Kirkby, a former journalist and graduate student at Royal Roads University, suggests Canada’s charitable sector has come under threat from federal policies that hinder the ability of advocacy groups to carry out their mandate.

Kirkby’s research, which included the anonymous participation of 16 charities currently under audit, confirmed charities are self-censoring due to the threat of audits, which place a strain on the groups’ resources.

Even groups not currently under audit have augmented their messaging, Kirkby found, in anticipation or fear of a potential audit.

The result is a ‘chill effect,’ Kirkby stated.

Environmental charities advocating on issues related to the oil and gas industry, Kirkby discovered, “seem to be the most heavily targeted.”

In 2012, before the federal government announced $8 million dollars would be devoted to the investigation and audit of Canadian charities (DeSmog Canada subsequently discovered through Access to Information legislation the figure is actually well above $13 million), Prime Minister Stephen Harper was asked about environmental charities critical of government policy receiving federal funding.

He said, “If it’s the case that we’re spending on organizations that are doing things contrary to government policy, I think that is an inappropriate use of taxpayer’s money and we’ll look to eliminate it.”

The CRA maintains the audits are not politically motivated, despite ongoing criticism from many groups and individuals.

The Globe and Mail reports Pen Canada has held only one or two full-time positions in recent years and, according to its latest tax records, reported just $237,000 in expenses for the 2011-2012 fiscal year.

The group reported no political activities, although charities are allowed to spend 10 per cent of their resources on political activities under CRA rules. Partisan activities are off limits.

Slayton said Pen Canada has played by the rules although the CRA rules regarding political activities are unclear.

“They (the rules) are vaguely formulated,” he told the Globe and Mail. “There’s a lot of room for interpretation. We’ll see what the CRA thinks.”

He added the audit is a drain on the group’s resources. “This is taking up a lot of time,” he said, in reference to the preparatory work they had to do before the auditors arrived. The process is expected to take months and possibly over one year.

“I refuse to let it have a chilling effect on us,” Slayton said. “We are not going to have some kind of fear – about having our charitable status questioned by authorities – stop us speaking out on issues.”

“If it means you have to live in fear of the revenue authorities, and if it means that there are things you want to say, you feel you should say, but you feel you cannot say because of the rules, well then, what price [is] charitable registration?”

Image Credit: Margaret Atwood by Thompson Rivers University via Flickr.

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