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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The federal government has allocated more than $13 million for the Canada Revenue Agency’s (CRA) investigation of charitable organizations, which is planned to extend beyond 2017, according to documents obtained by DeSmog Canada through Access to Information legislation (PDF attached below).

Previous figures announced in the 2012 Bill C-38 Omnibus budget amounted to $8 million for the monitoring and investigation of Canada’s charitable organizations over two years.

According to the internal documents, the Minister of Finance approved $13.4 million in funding to institute new reporting requirements for charities engaged in political activities or receiving funding from foreign sources. The funds will also be used to ensure charitable organizations are “operating in compliance” with new rules. The document notes these new reporting and compliance initiatives will continue through the year 2016-17 and remain “ongoing.”

Screen shot of the Canada Revenue Agency document.

Screen shot of Budget 2012 plans as outlined on the Government of Canada’s budget website.

As the CBC recently reported, the CRA is auditing seven of Canada’s most prominent environmental charities, including the David Suzuki Foundation, Tides Canada, West Coast Environmental Law, the Pembina Foundation, Environmental Defence, Equiterre and the Ecology Action Centre.

Marcel Lauzière, president of Imagine Canada, told the CBC, “We’re concerned about what appears to be an increase in audits around political activity and in particular around environmental organizations.”

He added, “There’s a big chill out there with what charities can and cannot do.”

John Bennett of the Sierra Club said the rules the CRA is looking to enforce are unclear. “We don’t know what rules we’re playing by. The problem with this is that they gave the power to CRA to walk in and shut you down. And then if you want to complain, you can go to court afterwards.”

At least one environmental group, Environmental Defence, is currently appealing an audit report submitted by the CRA concerning the activities of the organization.

Ministerial correspondence documents, also released to DeSmog Canada, show the CRA and the Prime Minister’s Office received a significant amount of complaints regarding the investigation of charities, with letters likening the initiative to a “witch hunt,” “a wild goose chase,” a “crackdown…limiting free speech,” and an effort in “silencing those who can’t speak for themselves, and polariz[ing] the potential for public debate.”

Others claimed the monitoring of environmental charities would “negatively [affect] the dialogue required to determine the viability of resource development against environmental concerns,” and “was implemented to specifically target environmental groups opposed to the Gateway Pipeline development.”

To each complaint, the ministerial correspondence coordinator notes: “There is no expectation of reply from Minister Shea.”

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