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Observing the impossible law

the-lawIt is a commonly understood principle of law that for a law to be fair it must be possible for those regulated to obey. For example, nobody would think a law against speeding just if the speed limit changes arbitrarily. In charity law this situation is not only possible but it exists in certain high–profile circumstances.

There are two examples in the context of the political activities rules. First, from a statutory perspective political activity is not a defined term and it is, by definition, ambiguous. The case law does not do much to clarify the difficulty as the common law explanation of political activities includes “…activities designed essentially to sway public opinion on a controversial social issue.”[1] As an example of the opacity we face, in the Action by Christians case, the Federal Court of Appeal case found anti–torture activities to be controversial! If torture is controversial in Canada then one has to wonder what would not be so classified.

Another difficult part of the political activities test is the statutory stipulation that the charity is limited to using 10 percent of its resources in their pursuit. “Resources” is a broad and nebulous term which includes not only financial and capital resources, but volunteer resources as well. It is clearly impossible to calculate 10 percent of volunteer resources and so charities can be forgiven for not knowing how to obey this law. For both of these reasons, the political activities tests are arguably contrary to principles of natural justice which demand that laws must be capable of obedience.

Another similar (and interesting) situation exists when a charity is in the process of winding up its operations. In these circumstances a charity can satisfy the revocation tax by transferring its assets to eligible donees (as opposed to qualified donees). One of the qualifications of an eligible donee is that it is up to date on its T3010 filings. But given that the CRA does not notify the public immediately if a charity is derelict in its duties, it is impossible for the transferor charity to know if the recipient is indeed in compliance with the filing of its T3010. Arguably, the charity cannot even rely on the declaration indicating that the recipient meets the requirements because the obligation to transfer to an eligible donee is on the transferor and not on the recipient. In the result the transferor may, in good faith, make a transfer to an ineligible donee and not satisfy the requirements of the revocation tax.

That charities are subject to laws that cannot be obeyed is symptomatic of several problems. In part this can be traced back to the federal government’s lack of constitutional jurisdiction in legislating in this area (a topic we have written about many times). But the role of the courts in ensuring that laws meet the principles of natural justice has become muddied with the long record of losses by charities at the Federal Court of Appeal. However, the solution to this particular problem—including some of the more problematic parts of the political activities tests may be simpler than redrafting the constitutional division of powers. At the very least, Parliament should draft laws that allow a charity to be able to know the laws they may be breaking. Such changes would be relatively minor and perhaps in the nature of a band-aid solution but at least this may alleviate some of these anxiety on the part of those of us tasked with making sure charities comply with the law.

[1] Action by Christians for the Abolition of Torture v. Canada 2002 FCA 499 at para. 38 citing Human Life International in Canada v. MNR [1998] 3 FC 202 (C.A).

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Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLP is one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more here
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