The Canada Revenue Agency, charities, and political activities

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Earlier this month, the Ontario Superior Court passed a ground-breaking ruling that struck down restrictions related to charities and political activities. Prior to this ruling, organizations that publicly criticized or recommended changes to laws and policies risked losing their charitable status.

The court’s ruling has lifted the chilling threat that has been hanging over the work of social and environmental organizations since the CRA’s Political Activities Audit Program ramped up the restrictions in 2012. For those of us who believe in civic engagement, public education, and addressing the root causes of social, economic, environmental and cultural dilemmas, reading the decision of Justice E.M. Morgan is like a breath of fresh air.

Background

In 2016, Canada Without Poverty (a national anti-poverty and human rights organization) challenged the Canada Revenue Agency ’s restriction on “political activity” as well as the distinction between “charitable” and “political” activities.

At the time, they were one of many organizations audited by the CRA—under the former federal government—and their charitable status was at risk of revocation. The offending activities included: convening public policy discussions, providing public education, as well as conducting and supporting research.

The Ruling

The Ontario court ruled that the application of Section 149.1(6.2) of the Income Tax Act (1985) infringes on the constitutional right to free expression under Section 2 of the Charter of Rights and Freedoms and that the 10% rule (the extent to which a charity can focus on political or policy-related advocacy) is unconstitutional.

The court also stated that a further order would follow allowing “charitable activities” to “[…] be read to include political activities” in the carrying out of charitable purposes. (Partisan political actions remain excluded from the acceptable activities, a point not contested in this claim.)

In addition to the ruling itself, the reasoning behind the judgement will also resonate with those committed to social change. Justice E. M. Morgan’s reasons acknowledged the complexity of modern life, discussed what “is” or “isn’t” political (citing, among other things, feminist philosophy), and reflected on the growing recognition of the important role charities play when it comes to informing policy and engaging with the public.

What this all means

The implications for the social care sector are monumental. This ruling, its reasons, and their scope all combine to make explicit the value of charitable organizations and the necessity of their proactive programming, community engagement, and policy development when it comes to addressing systemic social issues.

We don’t yet know exactly how this will change the advocacy practices charities can undertake, but—regardless of the details—this is very much a step in the right direction. The court’s recommendations included the following.

  1. Revise the Canada Revenue Agency’s administrative position and policy (including its policy guidance, CPS-022 Political Activities) to enable charities to fully engage in public policy dialogue and development.
  2. Implement changes to the CRA’s administration of the Income Tax Act in the following areas: compliance and appeals, audits, and communication and collaboration to enhance clarity and consistency.
  3. Amend the Income Tax Act by deleting any reference to non-partisan “political activities” to explicitly allow charities to fully engage, without limitation, in non-partisan public policy dialogue and development, provided that it is subordinate to and furthers their charitable purposes.
  4. Modernize the legislative framework governing the charitable sector to ensure a focus on charitable purposes rather than activities, and adopt an inclusive list of acceptable charitable purposes to reflect current social and environmental issues and approaches.

The federal government has yet to announce if it will appeal the decision and had not commented as of this week. The Federation will continue to watch this issue as it unfolds and will inform our members of the various implications. Until then, you can read some other analysis of the decision from Imagine Canada and the Ontario Nonprofit Network.

Rick FitzZaland
Federation Executive Director