The federal government has decided to appeal a landmark decision by the Ontario Superior Court, which found that restrictions on the activities of charities represented an unjustified infringement of freedom of expression.

“The Government of Canada has identified significant errors of law and has served notice that it will be appealing the decision to address the uncertainty created by it,” the government said in a statement.

However, in the same breath, the government said it would present legislation this fall to amend the Income Tax Act to “allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy.”

Restrictions on the activities of charities became a lightning rod during the Harper government years, when $13.4 million was spent to audit the advocacy work of charities. Many believed the audits were targeted at groups the Harper government disagreed with — such as the David Suzuki Foundation, Environmental Defence Canada, Equiterre, Ecology Action Centre and Tides Canada.

The Trudeau government campaigned in 2015 on a promise to end the “political harassment” of charities by “clarifying the rules governing ‘political activity.’ ”

While the new legislation will decrease restrictions on the activities of charities, Leilani Farha, the executive director of Canada Without Poverty — the organization that took the charter challenge to court — said she’s “deeply disappointed” with the government’s decision to appeal the ruling.

“The government has … wrested away from us charter protection,” Farha told The Narwhal. “And what their appeal says is that they do not believe that this is a charter issue of free expression and they do not believe charities should have the charter right to free expression.”

Leilani Farha is the executive director of Canada Without Poverty, which took a charter challenge of restrictions on charitable activities to court — and won. But now the federal government is appealing the ruling.

The July ruling by Justice Edward Morgan of the Ontario Superior Court of Justice found the restrictions on “political activities” an arbitrary and unjustified infringement of freedom of expression as guaranteed in Section 2 of the Charter of Rights and Freedoms.

The Canada Revenue Agency (CRA) defines political activity as any activity that seeks to change, oppose or retain laws or policies.

Farha said she questions how much consideration government officials and even other charities in the sector have given to the implications of the appeal for people living in poverty.

“The decision affirmed that poverty will not be relieved in this country if people living in poverty do not have free expression and can not contribute to public policy debate,” Farha said.

“For me it was not just a bad day for democracy; for me, it was offensive what happened yesterday.”

Farha said Canada Without Poverty will fight the case in the court of appeal and to the Supreme Court if it has to.

“This is a huge issue for the country. We’re certainly not going to lie down on this one at this point,” she said.

Andrew Gage, a staff lawyer with West Coast Environmental Law, welcomed the government’s commitment to confirm the right of charities to fully participate in public discourse, but said the government’s appeal of the charter decision “is a step in the wrong direction.”

“Under Canada’s tax laws, charities are very constrained in their public activities, while other organizations that receive more generous tax benefits — such as corporations — remain unrestricted,” Gage said.

“Strong laws against smoking in public spaces, drunk driving and pollution were all proposed by charities, and Canada is strongest when many voices are heard.”

Sidney Ribaux, co-founder and executive director of Equiterre said while his organization refused to be cowed by an audit of its activities, improved legislation is important for the sector.

“Our stand was: we’d rather lose our charitable status than lose our freedom of speech,” Ribaux said.

Regardless, Equiterre pressured the federal government for years to remove the restrictions.

“If environmental groups in the country feel that they can’t say everything they need to say to protect the environment then ultimately we’re not going to achieve our objective,” he said.

“We’d rather lose our charitable status than lose our freedom of speech.” — Sidney Ribaux, Equiterre

The government’s hand was ultimately forced by the court ruling, Ribaux said.

“What they said publicly last night, we’ve been pushing them to say that since they were elected almost three years ago and there’s been huge resistance. The group that brought the ball across the final goal line is Canada Without Poverty with this court case.”

For their part, Canada Without Poverty vows not to let the charter challenge die.

“The government is trying to make this about policy. This is not about policy,” Farha said. “This is about a charter right to free expression. And Prime Minister Trudeau and the PMO can not suddenly decide because they want to that this is not a charter issue.”

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2012 was a dark year for Canadian environmental charities.

Just nine days into the new year, Joe Oliver, then minister of natural resources, released an open letter saying environmental groups had a “radical ideological agenda” and were set on stopping “any major project no matter what the cost.”

Then came the federal budget, in which the Stephen Harper government announced $8 million for political-activity audits of charities.

The Canada Revenue Agency (CRA) defines political activity as any activity that seeks to change, oppose or retain laws or policies. If you want to encourage Canadians to get in touch with their elected officials about issues they care about, that’s “political activity.”

To stay in line with the law, charities could not allow those types of advocacy activities to account for more than 10 per cent of their work.

It wasn’t long before charities like the David Suzuki Foundation, Environmental Defence Canada, Equiterre, Ecology Action Centre and Tides Canada found themselves facing multi-year audits, which could involve things like requests for all correspondence between staff, board members and volunteers.

The audits had an immediate chilling effect on the advocacy work of many charities and were also costly for all involved. The federal government set aside $13.4 million in total to carry out the audit program. On the other side, charities were tasked with the enormous burden of complying with the audit process. Environmental Defence, for example, ended up spending $200,000 on legal fees to navigate the audit process.

The blowback against the audits was so intense that the federal Liberal government campaigned in 2015 on a promise to end the “political harassment” of charities by “clarifying the rules governing ‘political activity,’ ” but three years and one expert panel report later, not much had changed — until now.

A ruling by an Ontario judge this week on a charter challenge brought by Canada Without Poverty stands to create a “new world” for charities and has left many in the charitable sector surprised and elated.

The ruling by Justice Edward Morgan of the Ontario Superior Court of Justice found the 10 per cent rule on political activities an arbitrary and unjustified infringement of freedom of expression as guaranteed in Section 2 of the Charter of Rights and Freedoms.

“Simply put, there is no way to pursue the Applicant’s charitable purpose — using methodology that is recognized by Parliament itself — while restricting its politically expressive activity to 10 per cent of its resources,” the judge wrote.

The ruling immediately quashes the 10 per cent rule, although the federal government can appeal.

David and Goliath: how a tiny charity changed the game

Canada Without Poverty, the charity that took the Income Tax Act Charter challenge to court, has three full-time staff and an annual budget of about $300,000 a year.

Executive director Leilani Farha, a human rights lawyer, said that when the organization was being audited, “the breadth of the audit struck me right away as problematic.”

After talking to some key advisors, the organization decided to target the root problem and approached law firm McCarthy Tetrault for pro bono representation.

“Anyone with a legal background could see there was a free expression issue,” Farha said. “We were being muzzled. We were being told we couldn’t express ourselves as an organization in the way that we wanted to.”

Leilani Farha, executive director of Canada Without Poverty, is a human rights lawyer. She said that when the organization was being audited, “the breadth of the audit struck me right away as problematic.”

A particular set of circumstances made Canada Without Poverty the right group to take the challenge.

“Relief of poverty is the oldest charitable head, period,” Farha said.

Additionally, the organization’s board of directors is made up of people living in poverty.

“They feel very strongly that in order to relieve poverty in Canada we need changes to laws, policies and programs and we need broad outreach to do that,” Farha said. “Their own poverty is related to the fact that they haven’t been able to engage in public discourse.”

The legislation was preventing the organization from actually pursuing and fulfilling its charitable purpose in Farha’s eyes.

The judge ultimately agreed. “The decision was decisive,” Farha said.

“We were being muzzled. We were being told we couldn’t express ourselves as an organization in the way that we wanted to.” — Leila Farha, Canada Without Poverty

Canada Without Poverty had asked for what’s called a “suspended declaration,” which would have had the judge telling the government to re-draft legislation. Instead, the judge immediately quashed the section of the Income Tax Act that he found infringed on the Charter of Rights and Freedoms.

If ruling stands, it’s a ‘new world’

Susan Manwaring, a lawyer who specializes in advising charities and non-profits, told The Narwhal the ruling is “very exciting for charities.”

Manwaring was a member of the expert panel set up by the Trudeau government to advise it on how to handle the political activities of charities, which recommended doing away with the restrictions, so long as a restriction on partisan politics remained.

“From that perspective, the decision is consistent with what the panel recommended,” Manwaring said.

She described Justice Morgan’s decision as “credible and strong,” but cautions the Crown can appeal until August 15 and until then she’s advising clients to hold off on changing practices around advocacy.

“If the Crown doesn’t appeal, then it stands, then there’s a new world,” she said.

“If the Crown doesn’t appeal, then it stands, then there’s a new world.” — Susan Manwaring, lawyer

Bruce MacDonald, president and CEO of Imagine Canada, which works to strengthen Canada’s charitable sector, said in a statement the ruling demonstrates the need for Canada to modernize charity law.

“We’re operating under a hodge-podge of rules dating back to Queen Elizabeth I,” MacDonald said.

“The Income Tax Act provisions in question, and the way in which they have been administered by the CRA, have been very unclear and have created great uncertainty for charities.”

The problem with how Canada regulates charities

Canada’s regulation of charities has long created headaches for charities, but 2012 marked the beginning of a multi-year migraine as 60 groups were targeted with audits of policy advocacy work that would be allowed in many other Western countries.

“I would say that the section of the Income Tax Act that deals with charities is very outdated, it’s very cumbersome, it doesn’t work well, its language is confusing,” Manwaring said. “I think those factors contributed to the [judge’s] decision.”

Tim Gray’s entire tenure as executive director of Environmental Defence Canada has been coloured by an ongoing audit by the CRA. It was targeted after a formal complaint was filed against them by EthicalOil.org, founded by Ezra Levant and Conservative political aide Alykhan Velshi.

Tim Gray, executive director of Environmental Defence, has been dealing with a CRA audit during his entire tenure at the organization.

Although the audits that were part of the Conservative audit program were suspended by the Liberal government, until this week it was “quite possible that the audit was going to start up again,” Gray said.

He described this week’s ruling as “a pretty amazing decision.”

Gray said Environmental Defence’s advocacy activities are “fundamentally necessary to protect the environment, which is our charitable purpose.”

“If you don’t work on public policy and you’re an environmental organization, you’re basically stuck with cleaning up other people’s messes,” Gray said.

“To what benefit would it be to the Canadians who are donating to charities if charities are completely silenced from commenting on policies and laws that would actually protect the environment? It makes no sense.”

A 2015 University of Victoria report on the audits of political activities found Canada’s law created an “intolerable state of uncertainty” for charities and was more restrictive than laws in other jurisdictions.

“If you don’t work on public policy and you’re an environmental organization, you’re basically stuck with cleaning up other people’s messes.” — Tim Gray, Environmental Defence

“Other Western countries have made significant changes to their charitable laws over the past number of years. The United Kingdom, New Zealand, Australia, the European Union have all removed restrictions on public policy work by charities — and the sky has not fallen,” Gray said.

Will this open the floodgates for charitable status?

One of the concerns about modernizing Canada’s charitable law has been that it could open the floodgates to more groups becoming charities.

But experts say that concern is misplaced.

“The definition of what constitutes a charity has not changed, but the ruling recognizes that charities should be free to engage in whatever activities their volunteer-led boards deem most effective in order to achieve their charitable purpose as accepted and enforced by the CRA,” said MacDonald

“The definition of what constitutes a charity has not changed.” — Bruce MacDonald, Imagine Canada

Manwaring agrees: “It doesn’t change the requirements for registered status that require the charity to have a charitable mission and not to have a political purpose.”

Canada’s charitable purposes include relief of poverty, advancement of education, advancement of religion or “certain other purposes beneficial to the community in a way the law regards as charitable.”

It’s worth noting that the work of public service news outlets, such as The Narwhal, has thus far not been recognized as charitable and this ruling doesn’t change that. However, the federal government did promise in February to explore ways for news organizations to accept charitable money.

Will the federal government appeal?

Manwaring said it’s “not unlikely” that the federal government will appeal the decision.

“Very often charter cases go to the Supreme Court and very often governments will try to defend the rule of law that they have established,” she said.

“The Department of Justice and the Department of Finance may be concerned that this is a precedent, not really because of what it says for charities but because of what it says about the Income Tax Act as a whole.”

Gray hopes the federal government sees this ruling as an opportunity to keep its election promise.

“Why the federal government would challenge or appeal a federal court ruling which in legal terms is essentially doing what they promised themselves to do both in the election and then in the letters to their ministers would be very puzzling,” he said.

Farha of Canada Without Poverty said it’ll be tough for the federal government to get around the freedom of expression argument.

“I think that’d be the wrong decision for the country, for democracy, for anti-poverty groups, for the charitable sector,” she said.

“We will go to the Supreme Court if we have to.”

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Environmental and left-leaning charities can breath a sigh of relief now that Prime Minister Justin Trudeau has instructed Minister of National Revenue Diane Lebouthillier to modernize Canada’s archaic charity law and clarify rules around allowable “political activity.”

The ministry should “allow charities to do their work on behalf of Canadians free from political harassment,” Trudeau wrote in a ministerial mandate letter Friday, “with an understanding that charities make an important contribution to public debate and public policy.”

The new mandate signals a remarkable change in tone from the at times aggressive stance of the former government.

In 2012 the Harper government allocated $13.4 million to the Canada Revenue Agency for the audit of charities to determine if groups were in violation of rules that limit their spending on “political activity” to 10 per cent of resources. The program also instituted new reporting for charities receiving foreign funding.

The audit program was launched in the wake of former Natural Resource Minister Joe Oliver’s infamous open-letter in which he accused environmental organizations participating in the Northern Gateway pipeline hearings of being foreign-funded “radical groups” intent on “hijacking our regulatory system.”

Many environmental charities felt they were targeted by the investigation and said the sometimes multiple successive audits left them strapped for resources, intimidated and unable to carry out their mandates.

Environmental charities under audit included Equiterre, the David Suzuki Foundation, ForestEthics, Tides Canada, West Coast Environmental Law, the Pembina Foundation, the Sierra Club, the Ecology Action Centre and Environmental Defence.

Critics also pointed out that right-leaning charities that clearly engaged in political activity, such as the Fraser Institute and the C.D. Howe Institute, were spared from the audits even though their activity appeared to violate CRA rules.

A report prepared for DeSmog Canada and released by the University of Victoria Environmental Law Centre in March 2015 found Canada’s charitable laws lack clarity and create an “intolerable state of uncertainty” for active charities. The report called for sweeping reform of Canada’s charitable law to clarify what constitutes “political activity” and to allow for more generous limits on allowable “political activity.”

Calvin Sandborn, director of the law centre, said he is “thrilled by this reversal of policy.”

“Whether or not government was directing audits against charities, a dangerous chill had fallen on environmental charities. People were afraid to speak out, and that was bad for Canada,” Sandborn said. “Charities need to be free to speak out for law reform related to their charitable mission. Charitable advocacy helps society recognize and actually respond to the problems that charities address.”

He added the political activities of the Canadian Cancer Society resulted in tougher smoking laws for public places and the political work of Mothers Against Drunk Driving has saved lives by fighting for tougher drunk driving laws.

“If charities had continued to shy away from any political activity at all, public debate about how to solve society’s problems would have been seriously impoverished — as those with some of the best expertise on such problems would have remained silent,” Sandborn said.

"I think many people in the charitable sector will see this as a welcome development that the new government is keen to both take a little bit of the spotlight off charities and take a closer look at the regulatory environment for charities and not-for-profits,” Kathryn Chan, assistant professor of law and charitable law expert at the University of Victoria, told DeSmog Canada.

Chan added there is some lack of certainty as to whether the audits were politically motivated or not, but said in some ways it didn’t make a difference.

“There was certainly a perception of harassment and sometimes that can do damage on its own whether or not it’s true,” Chan said. “I think there’s need to address that no matter what the exact factual situation was.”

Image: Revenue Minister Diane Lebouthillier via Flickr

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A new report from the Broadbent Institute is raising questions once again about the political activity audits conducted by the Canada Revenue Agency (CRA) and whether or not the agency has unfairly focused on charities with missions that don’t align with the interests of the federal government.

The report finds nine out of 10 prominent right-wing charities claimed zero per cent of their budgets were used for political activity in the most recent fiscal year. The final filing for the tenth organization has yet to be submitted or made public by the CRA.

The report is an update of a similar October 2014 investigation, which discovered all 10 charitable organizations reported zero political activities between 2011 and 2013. That investigation led the Broadbent Institute to call for an independent inquiry into the CRA’s audits to ensure charities under investigation aren’t the target of political attack.

The new report, which reviews the 2014 filings of the 10 organizations in light of their public activities, renews calls for an independent inquiry “to ensure transparency and fairness in the CRA’s decision-making.”

Under CRA rules, charities are allowed to spend up to 10 per cent of the organization’s time and money on "political activities," which the CRA defines as any activity that seeks to change, oppose or retain laws or policies.

According to the Broadbent Institute, many of the public activities undertaken by the organizations in question, which include the Fraser Institute and Focus on the Family, appear to meet the definition of political activity.

For example, in September 2014, Marco Navarro-Genie, president of the Atlantic Institute for Market Studies published an opinion piece in the Chronicle Herald that discouraged governments from banning fracking, saying the move “closes opportunities for greater innovation…and the development of more employment.”

“Prohibition is the wrong impulse,” he wrote.

The report also cites the example of Macdonald-Laurier Institute managing director Brian Lee Crowley, who in July 2014 argued the federal government should “assert its power to sweep away barriers to trade created by the provinces” in the Globe and Mail.

Other groups investigated in the Broadbent report are: C.D.Howe Institute, the Montreal Economic Institute, Canadian Constitution Foundation, Energy Probe Research Foundation, and Frontier Centre for Public Policy.

“The examples cited are only some of the many possible examples of political activity in which these groups engaged,” Jonathan Sas, Broadbent Institute director of research and author of the report, writes. “The juxtaposition calls into question how these charities interpret the restrictions on engaging in 'political activity' and why, if these groups are engaging in political activity, as defined by the CRA, the agency continues to allow them to report zero per cent.”

So far, at least 52 charities have been the target of the CRA’s $13.4 million audit program, which began in 2012.

Environmental Defence, the David Suzuki Foundation, Equiterre, Pen Canada, Canada Without Poverty, Canadian Centre for Policy Alternatives and the Ecology Action Centre have all been subjected to investigation and audit since the program began.

In March 2015, the University of Victoria Environmental Law Centre released a report, prepared for DeSmog Canada, that called for significant reform to Canada’s charitable tax law.

The report found current rules around the issue of political activity are confusing and create an “intolerable state of uncertainty.”

The report called on the federal government to clarify rules about what constitutes political activity and to loosen the 10 per cent rule on allowable limits.

The Broadbent Institute report confirms the broad discrepancies in how charities view reporting requirements around political activities.

“This report makes clear that the CRA rules around political activity are interpreted, to put it charitably, quite differently by many right-leaning charities,” Sas concluded in the report.

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Canada Without Poverty, an Ottawa-based charity, is arguing the sweeping audits of charities by the Canada Revenue Agency (CRA) are a violation of human rights before the UN Human Rights Committee in Geneva this week.

Harriett McLachlan, president of Canada Without Poverty, told the CBC she will argue the contentious audits violate Canada’s international commitments.

The Canada Revenue Agency has targeted 60 Canadian charities in a $13.4 million audit program to determine if the groups are violating rules that limit their spending on political activities to 10 per cent of resources.

McLachlan told the CBC the political activity rules silence groups like Canada Without Poverty that advocate for increased government accountability. Charities in Canada are prevented from engaging in any partisan activity.

"If we want to write a petition, or be part of some kind of gathering, a protest, there's a fear there that we are stepping over the bounds," she told the CBC.

"There's a potential of a gag being put over my mouth."

In March the University of Victoria Environmental Law Centre released a report that called for broad reforms to Canada’s charitable law.

Rules around political activity, considered by the CRA to be any activity that seeks to change, opposed or retain laws or policies, have created an “intolerable state of uncertainty” for charities, the report states.

“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 recommends Canada modernize laws to both establish clearer political activity rules and to allow for more advocacy work for groups working to protect the public interest. Many European countries place no restrictions on the political activities of charities.

In early March, 18 prominent Canadian charities including Oxfam Canada, the Canadian Parks and Wilderness Society, the David Suzuki Foundation and Equiterre, wrote a letter to Canada’s political parties asking them for platforms committed to enhancing freedom for charities wishing to engage in public policy matters.

The groups argued in their letter that “without years of organizing effort by Canadian charities, Canada would not have dealt with issues such as addressing acid rain, promoting safe driving, reducing smoking and banning toxic chemicals.”

Recently federal Liberal leader Justin Trudeau announced his party platform will include new rules to protect charities from political intimidation.

The UN Human Rights Committee selects a number of countries for review each year and this is the first time the Harper government will face the panel of independent experts.

Kairos and Amnesty International Canada will join Canada Without Poverty, raising concerns around Canada’s troubling failure to address the crisis of missing and murdered indigenous women as well as the country’s legacy of child abuse in indigenous residential schools.

"There should be space for people to hold the government accountable on these issues, human-rights issues," McLacnlan told the CBC. "Poverty should not exist in a wealthy country like Canada."

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You may be surprised to hear this, but the history of charitable case law in Canada involves a little-known story about war, political deception and a group of ‘United Brethren’ known as the Moravians. Really.

It should read like a Dan Brown novel.

Unfortunately, it’s not nearly that scintillating. Mostly, I’m sure, because the history of charitable law has been written by…well…lawyers.

But there is an interesting story of the protracted history of charitable law in our country and it reaches way back to Shakespearian times. That history continues to have a profound effect on the contemporary Canadian political landscape.

To make that loooooong story short, what you need to know is this: Canadian charity law is old and full of holes.

The Current State of Affairs For Canada’s Charities

Charities in Canada are strictly prevented from engaging in partisan activities (such as endorsing a political party), but they are allowed to participate in political activity (defined by the Canadian Revenue Agency as any activity that seeks to change, oppose or retain laws or policies) so long as that activity doesn’t take up more than 10 per cent of their resources. Such policy advocacy by Canada’s charities has resulted in laws against drunk driving, the regulation of smoking and the measures that eliminated acid rain.

The rest of a charity’s work must be technically charitable, and yet what, exactly, constitutes charity is a question for the ages.

And that’s a question that, at least in Canada, has never been sufficiently answered.

As a result, charities are left operating in this legal grey zone with no precise knowledge of how their activities will be seen in the eyes of the law or even how that law might be applied, and what the consequences of that law might be.

This uncertainty — on its own — would be enough to provoke a case of charity paralysis for most organizations.

But when coupled with a recent $13.4 million federal audit program of charities’ “political activities,” this legal uncertainty is enough to cripple some of Canada’s most respected charities, preventing them from carrying out their most basic mandate.

In March, a report on charitable law by the University of Victoria’s Environmental Law Centre stated Canada’s current rules around “political activity” are so confusing they create “an intolerable state of uncertainty.” The report — prepared for DeSmog Canada — called for sweeping reform of Canadian charitable law in line with other jurisdictions such as the U.S., Australia, New Zealand and England.

Charities: Mind the Gap

The law that governs charities — the Income Tax Act — “doesn’t define the term ‘charitable,’ ” Kathryn Chan, assistant professor of law and charitable law expert at the University of Victoria, told DeSmog Canada.

“The body of law upon which the courts and the Canada Revenue Agency have always relied on for determining who is charitable and who is not in this country is a body of case law that has a very long lineage and goes back at least to 17th century England,” she said.

Chan added that even with that history behind us there is sparse case law in Canada related specifically to charities “and so there are gaps.”

That means “the parameters around the kinds of things our charitable laws are based on are laws that were set in 17th and 18th century England and this arguably isn’t a very accurate reflection of our contemporary society.”

Modern-day concerns such as drunk driving, second-hand smoke or climate change just weren’t around hundreds of years ago when the first definition of ‘charity’ emerged in a British courtroom.

This leads to a situation in Canada where charities are forced to rely on the “discretion of the Canada Revenue Agency.”

But the agency “has very loose parameters within which to make decisions as to the charitable status or not of organizations,” Chan added.

“The less clear the law is, and the less clear the legislation is, the greater discretion you’re vesting in the administrative agency.”

“It gives rise to a lot of uncertainty for sure.“

Compounding the difficulty this uncertainty creates for organizations is the fact that charities aren’t often in a position to challenge the Canada Revenue Agency’s legal interpretation.

So, Chan said, “if we’re going to move things forward in the courts you need some champions.”

And that’s where the Pemsel Case Foundation comes in.

A Case to Be Made for Charities

The Pemsel Case Foundation — named after a pivotal 1891 judgment in England that made charities exempt from income tax (that’s where the Moravians come in) — has a mandate to clarify the law when it comes to Canadian charities, both inside and outside the courtroom, says executive director Peter Broder.

“There are actually a relatively small number of cases that are litigated in Canada and because of that, the opportunity to develop a robust intellectual analysis of what qualifies as charitable and what doesn’t is limited in comparison to other jurisdictions,” Broder said.

He added his foundation  — founded in 2010 — doesn’t argue whether a particular organization should be granted charitable status or not. Instead it is trying to develop a ‘charity test’ for the courts that can help determine when and where charitable status makes sense.

“The important thing — for the purposes of developing the structure of law in Canada — is that we use the right test and that the right considerations go into that test,” he said. “We are looking for an outcome that is rigorously argued as opposed to an outcome that is arbitrary.”

For example, Broder offered up the question of whether one amateur youth soccer organization might qualify for charitable status. He said the Crown expressed concern that introducing one group of this kind would result in all 21,000 other amateur soccer associations in Canada wanting charitable status.

But the cost or inconvenience of that consequence shouldn’t play a role in the decision for one soccer association, Broder said.   

Legally it should come down to whether another analogous group had previously been deemed charitable.

“We would argue that it’s not about the costs,” Broder said.

“Outside Canada, the fiscal consequences of a decision are not generally a significant consideration in determining the meaning of charity.”

“What we’re trying to do is to make sure that they use the appropriate test and apply it in the appropriate way.”

But, he adds, “We’re not the white knight.”

No Evidence Audits Are Politically Motivated: Broder

Broder characterizes the work of the Pemsel Case Foundation as “scholarly.” He said the goal of the organization isn’t to be oppositional, but to clarify the law.

With respect to critics who claim some of CRA’s recent political activities audits are‘politically motivated, Broder says he’s “agnostic.”

But he does say there is significant room for improvement within the law.

“If the law is clear and there is more certainty to the law — it is easier for the administrator and it is easier for the person who is trying to abide by the law,” he said. “If the law is loose and vague then the opportunity for it to be abused at an administrator’s discretion is greater, but just because it’s loose and vague does not mean there is administrative abuse.”

Canada Needs Fulsome Public Debate On Charities

Perhaps the most notable thing about Canada when it comes to charitable law, Chan said, is our lack of public debate.

“Where Canada is kind of unique is in the almost negligible amount of political debate — actual debate within the legislature or within the public — about what kinds of things should be charitable and what should not,” Chan said.

Ask an average person on the street about Canada’s charities, she said, and they won’t know a thing about them. For instance, they are unlikely to know that many of our universities and hospitals operate under the charity umbrella.

There are conversations to be had about the charitable sector in Canada and what service that sector should perform, Chan said. And for that, Canadians need more than the strategic litigation undertaken by the likes of the Pemsel Case Foundation.

“Canadians might want to have a say in determining what our charitable sector looks like: who’s in and who’s out and how it should be administered,” she said. “Ultimately I think that we need a broader political conversation about the way forward.”

Image Credit: David Garrick Between Tragedy and Comedy, BBC

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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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Eighteen Canadian charities have written a letter to the country’s political parties asking them for platform commitments to enhance the ability for charities to engage in public policy debates.

The charities argue in their letter that “without years of organizing effort by Canadian charities, Canada would not have dealt with issues such as addressing acid rain, promoting safe driving, reducing smoking and banning toxic chemicals.”

The chief concern lies around the current regulation of so-called “political activities” — defined by the Canada Revenue Agency as any activity that seeks to change, oppose or retain laws or policies. Charities are currently limited to spending ten per cent of their resources on these “political activities.”

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Groups that signed onto the letter include Oxfam Canada, the Canadian Parks and Wilderness Society, Amnesty International Canada, David Suzuki Foundation and Equiterre.

“Our society has evolved and our legislation hasn’t,” Eric Hebert Daly, executive director of the Canadian Parks and Wilderness Society, told DeSmog Canada.

Charities have changed from being primarily service providers — doing things like running soup kitchens and helping the disabled — to contributing direct knowledge of social issues to public policy debates, Hebert Daly argued.

“It seems ridiculous to not let the experts be the ones to speak out on issues that they’re experts in,” he said. “If you’re a corporation, you can write off 100 per cent of your spending on political activity and have no restrictions whatsoever, but if you’re a charity you can only write off 10 per cent. There’s a real discrepancy there that doesn’t seem to make sense.”

Right now, the letter the charities sent to federal politicians would qualify as “political activity” and would need to be accounted for under the ten per cent rule.

“When they hear political activity, most people think ‘supporting a political party’ but there’s a huge gap between creating public policy and supporting a political party,” Hebert Daly said.

Charities are banned from taking part in “partisan activity” (supporting or opposing a candidate or political party).

Several of the charities that signed onto the letter have been audited since 2012, when the federal government dedicated $13.4 million to the Canada Revenue Agency to audit the political activities of charities.

The groups argue in their letter that the current regulations are confusing:

“A confusing regulatory environment leaves many would-be advocates unclear how proactively charities can advocate for policy change. The existing interpretation of the Income Tax Act appears to be open to widely divergent interpretations of what constitutes charitable activity … The result is a chill where charities feel that their efforts are being discouraged, subjected to rhetorical attacks or harsh or arbitrary review.”

Hebert Daly says all political parties should be interested in reforming the law so there is no question about arbitrary application of the rules or silencing of dissent.

“The fact that the interpretation itself can change at any moment is part of the problem,” he said. “It would simply take a bureaucrat three seconds to change their mind at CRA and we’d be way above the 10 per cent.”

The groups are asking for an open consultation process involving a broad range of charities and the public to help develop new regulations for the sector.

“The debate on this has really just started,” Hebert Daly said. “I think you need to have an open and honest conversation in the public view about what makes sense in terms of modernizing the Income Tax Act.”

Photo: Dave King via Flickr

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This article is re-published with permission from mikedesouza.com

As some of you may know, I’ll be starting a new role in January 2015 as an investigative resources correspondent for Reuters.

Getting access to records about government decisions and policies has long played a key role in the work of many journalists around the world. It will also be a key element for me in the weeks, months and years to come.

So to end off 2014, here are a few examples of some of my recent experiences with government efforts to either release or hide information.

Canada’s information watchdog has noted that the Supreme Court of Canada recognizes access to information as a quasi-constitutional right of all Canadians.

Obtaining access to information is an extension of freedom of expression since it allows the population to be informed and speak about government policies and decisions on how these governments spend public money.

Deleted records at the Canada Revenue Agency

The Canada Revenue Agency took more than a day to answer some basic questions about its decision to delete some instant messaging records of its employees.

You can find my report on this case over here in the Toronto Star.

The CRA declined to answer some of my questions directly, including whether it had verified whether any of the information deleted was of “business value.” By law, all Canadian government organizations are required to preserve records of “business value.”

When I asked some simple follow up questions – including whether any of its senior officials or media officers ever communicate with the minister or with Conservative political staffers in her office using text messages – the CRA called to complain that it wasn’t reasonable for me to ask these questions and expect them to respond within a couple of hours.

The Canada Revenue Agency instructs bureaucrats to delete logs and disable future logging of instant messages of its employees.

More than a week after I first asked questions and requested an interview with its commissioner, the CRA confirmed it was logging Internet activity of its employees – including on their mobile devices – in case it needed this information to review potential cases of misconduct, but that it wasn’t logging their text messages. Why does it keep one set of logs and not the other?

The CRA declined to answer this question.

You can find some of the emails detailing the CRA instructions to delete records of instant messages over here.

Foreign Affairs: This reporter’s question is “undeserving of a response”

Last summer, Canada’s Department of Foreign Affairs, Trade and Development wasn’t providing a lot of information about its relationship with the American Legislative Exchange Council. The council, also known as ALEC, is a secretive organization. It benefits from charitable status based on its mandate to “educate” U.S. state legislators by connecting them with corporations to draft model pieces of legislation.

A series of high-tech firms including Google left ALEC in recent months because it continued to host discussions of people without scientific credentials that cast doubt about peer-reviewed research showing the link between human activity and climate change.

“I will suggest we decline the two requested interviews.” – John Babcock, spokesman for Canadian Department of Foreign Affairs, Trade and Development.

Canadian diplomats have had some exchanges with members of ALEC as part of the federal government’s efforts to promote the oilsands and TransCanada’s Keystone XL pipeline. But senior diplomats declined to grant interviews, which led me to write a series of detailed questions to the department in writing.

The department sent me some general and vague statements about who Canadian diplomats were meeting and what they were discussing.

In response to questions asking for details about diplomatic discussions with lobbyists on energy issues, a Canadian government spokesman recommended evasive answers before getting feedback from diplomats about whether they had the answers. This spokesman told his colleagues in internal e-mails that he believed I was “attempting to make specious connections.” He also said one of my questions was “undeserving of a response.”

He also suggested declining the interview requests, without even knowing the answers to the questions raised.

One Canadian diplomat also sent an e-mail to other officials in the department asking them to tell the journalist that she was “not available” for an interview.

You can find these internal e-mails here.

Transport Canada’s vacant rail safety positions

Over a span of several weeks, Transport Canada declined to answer a series of basic questions about critical positions that are vacant in its rail safety and dangerous goods divisions – vacancies that appear to date back to at least 2009.

It confirmed it had vacant oversight and inspector positions within its dangerous goods and rail safety divisions but it declined to identify them or even confirm whether it knew exactly how many of these positions were vacant.

After Reuters reported on internal records detailing these vacancies, the federal New Democrats attempted to raise the issue in Parliament.

In response to questions from NDP deputy leader Megan Leslie in the House of Commons, the parliamentary secretary to the transport minister, Jeff Watson, said that Prime Minister Stephen Harper’s government wouldn’t apologize for cutting “waste.”

“We make no apologies for reducing back office expenses while putting the resources where they belong on front-line safety,” Watson said.

The government declined to share details of what it had cut until it was forced to answer these questions through Canada’s Access to Information Act, which requires it to release public records upon request within 30 days to any Canadian who pays the $5 fee.

The records, received about 40 days after the request, confirm what Reuters had reported about vacant engineering and oversight positions. It also revealed these surprising details:

– All six senior positions in the Transportation of Dangerous Goods secretariat, including the manager, are vacant

– Five out of seven positions for scientists who review emergency response plans of companies transporting dangerous cargo are vacant at Transport Canada’s headquarters.

– Five out of seven positions at the headquarters are vacant for dangerous goods inspectors under chief enforcement

– Five out of 15 positions responsible for risk evaluation are vacant, including the chief of risk evaluation, and two accident analysts.

Liberal transportation critic David McGuinty said in an interview that the department appeared to be hiding information.

“Instead of coming clean and saying, we have a capacity problem right now, they won't do it,” said McGuinty in an interview. “They’ve got some explaining to do.”

You can find these records and the information that Transport Canada previously declined to release over here.

Or scroll down below to see the e-mail records from both Foreign Affairs; the charts of vacant and filled Transport Canada positions; and the e-mails from the CRA sending instructions from the office of the agency’s commissioner and chief executive officer for the deletion of internal records.

In terms of transparency, a public servant — who tipped me off about one of these stories — told me that all ministers in the Canadian government are transparent … because you can look right through them and see the prime minister’s office in the background.

Photo: Light Brigading via Flickr

CRA Delete Request by mikedesouza

DFATD underserving by mikedesouza

Dangerous Goods Chart Transport Canada by mikedesouza

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Good public policy improves the lives of Canadians, and contributions from civil society groups can significantly improve the public policy that governments make. Despite the benefits of working well together — to both sides, and to Canadians overall — relationships between the sector and governments are not without challenges.

Note: the term "civil society groups" includes both nonprofits, which have no limits on their political activities, and charities, which have well-defined limits on their “political activities,” as described below.

In the last three years, many within the charitable sector have become concerned about Canada Revenue Agency audits focused on political activities, but few realize that controversy over the regulation of charities dates back decades in our country.

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The current controversy revolves around 52 charites being audited in a $13.4 million 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. Some of those charities, including Environmental Defence, the David Suzuki Foundation, Canada Without Poverty, Ecology Action Centre and Equiterre, have gone public with the fact they are undergoing audits.

On February 6, 2014, CBC reporter Evan Solomon published a story and aired a segment on the television program Power and Politics about these audits. The news story raised the question of whether environmental charities critical of the government are being unfairly targeted for their “political activities” as defined by Canada Revenue Agency.

In October 2014, the Broadbent Institute further interrogated that question by releasing a report called Stephen Harper’s CRA: Selective audits, “political” activity, and right-leaning charities.

The Broadbent report examined publicly available CRA tax filings of 10 “right-wing” charities and cross-referenced these with their publicly available work. In each case, the charities had reported they had conducted no political activity between 2011 and 2013.

The Broadbent Institute’s report, which includes the Fraser Institute, the Atlantic Institute for Market Studies and Focus on the Family, provides examples of activity for each of the charities that the report’s authors argue meet the CRA’s definition of “political activity.” It’s unknown whether any of these charities are currently under audit.

Flashback to 1978: Trudeau Government Accused of “Muzzling Charities”

Controversy around charities undertaking “political activities” is anything but new. Thirty-six years ago, in February of 1978, the Trudeau government issued Information Circular 78-3. It warned charities that any political objects or activities would be understood as contravening the Income Tax Act, and could result in the revocation of an organization’s charitable status. The document took a broad view on what constituted political activities, and clarified that none of a charity’s resources could be devoted to them.

Charities, the federal opposition parties and the press reacted strongly to Information Circular 78-3, arguing it contravened the right of free speech, unduly constrained charities in their pursuit of improving society and ran against the democratic values of Canadians. 

An editorial in the Toronto Star from April 18, 1978, captures the tone of the response, calling it “outrageous” for the Trudeau government to “muzzle charities” with guidelines that “take the narrow view that while charities can directly aid the needy, for example, they can’t advocate changes in public policy that might benefit the needy [because] this is considered political activity.”

The Trudeau government defended its actions by claiming the information circular wasn’t a shift in policy, but rather only a reflection of the imperfect case law according to which purposes and activities of charities must be interpreted. Under ongoing pressure, the Trudeau government eventually suspended the circular. 

In 1987, the Mulroney government released Information Circular 87-1, which advanced the now familiar approach of allowing charities to undertake ancillary and incidental political activities that are not partisan and limited to expenditures of 10 per cent of a charity’s resources. The 1987 policy statement also required that charities report on both exempt and political activities in their annual information returns.

The mid-1990s to early 2000s saw an unprecedented amount of activity oriented to improving the relationship between the federal government and the charitable sector. It culminated in June of 2000, when the Chrétien government announced the Voluntary Sector Initiative, a five-year joint initiative between the sector and the government set up to improve their working relationship. Among the many outcomes of the initiative was a Code of Good Practice on Policy Dialogue (2002), which makes explicit why and how the federal government and the sector should work together on public policy.

In 2003, based in large measure on the work described above, and after open consultation with the sector, the Charities Directorate of Canada Revenue Agency updated its guidance on political activities with the release of CPS-022, which is still in effect today. It is substantially the same as Information Circular 87-1, but is more explicit and makes greater use of examples than previous guidance.

A close reading of the guidance reveals that Canada Revenue Agency permits more latitude in terms of political activities than many in the sector appear to believe (see: 10 Ways Charities Have Improved Canadians' Daily Lives). It would seem that at least some of the purported “advocacy chill” often cited in the sector flows from charities themselves not fully understanding the range of activities permitted by the regulator.

While some of the “chill” may be caused by charities’ own lack of understanding of the law, there’s no doubt part of it can also be attributed to the perception of a crackdown on the environmental sector.

While a robust regulator that conducts regular audits is an essential element of a well-functioning charitable sector, being audited is a stressful, time-consuming exercise that distracts from a charity fulfilling its mission. And when you have a government that has openly accused Canadian environmental groups of  “money laundering,” it’s little wonder environmental charities are feeling a little on edge at the moment. Only time will tell how the current audits will go down in the history books.

Obviously, the challenges presented by imperfect case law and an arcane regulatory regime around charities persist today. The Charities Directorate has recently launched a series of tools to help charities understand the rules. And the Pemsel Case Foundation was recently founded with a mission to foster better knowledge and understanding of charity law and regulation by the Canadian public and voluntary sector organizations.

A number of funders, including Max Bell Foundation, have taken an active interest in supporting charities who do public policy advocacy. I would hope these initiatives and others like them will help warm Canadian charities to the idea of doing public policy advocacy — because the potential rewards for all of us are enormous.

This article originally appeared in The Philanthropist.

Photo: Obert Madondo via Flickr

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