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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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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