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Political activities law: Charity brings new Charter challenge

political activitiesWhen the Liberals came into power last year, the new Minister of National Revenue announced that she was putting a halt to the “political activities” audit of charities that the previous administration had been conducting for the past few years. In practice, this meant that the charities in line to be audited under the program were given a reprieve, but those that were already in the course of being audited were not. One of the latter charities, Canada Without Poverty (CWP), is now bringing a constitutional challenge against the political activities law.

As our readers surely know, there has been quite a bit of tension the past several years between the Canada Revenue Agency (CRA) and the charities it administers regarding the definition of political activity and the acceptable limits within which charities may engage in it. Canadian law and policy on the subject is quite a bit stricter than in other Commonwealth and developed countries.

The Income Tax Act (ITA) allows for political activities only so far as they do not include direct or indirect support or opposition to any political party or candidate, and even then the activity must be “ancillary and incidental” to charitable activities and not prevent the charity from devoting “substantially all” of its resources to charitable activities. The CRA in turn has interpreted “substantially all” to mean 90 percent, leaving a max of 10 percent of resources allowed to be spent on non-partisan political activity. The CRA has been very broad in its interpretation of what counts as a prohibited ‘partisan’ activity. For example, it censured CWP in part for activities such as publishing links on their website to newspaper articles recommending changes to government policies, and holding a dinner where impoverished people could rub shoulders with policy–makers.

Add to this the fact that “resources” doesn’t just mean money—it includes things like volunteer hours dedicated to a task—and can imagine just how quickly the work of tracking, reporting, and defending the use of resources on such a broad range of activities becomes a huge challenge, especially for large organizations.

In late August, CWP filed a constitutional court challenge against the political activity provisions in the ITA for violating two of the rights in the Canadian Charter of Rights and Freedoms (Charter): the s. 2(a) right to freedom of expression, and the s. 2(d) right to freedom of association (think back to the dinner the CRA didn’t like them hosting). This will also require CWP to convince the court that these rights are limited in a way that is unreasonable, since the Canadian constitution explicitly allows the government to put reasonable limits on Charter rights.

The CWP is ultimately not arguing against the CRA’s audit findings, but rather the legitimacy of the underlying law that the CRA is tasked with enforcing. They are taking the position that tax breaks for charities are currently contingent on limits to freedom of expression, and that in their case in particular the restrictions outright prevent them from effectively pursuing their charitable goal of relieving poverty.

This court challenge is arguably the inevitable outcome of increasing crackdowns in Canada, especially compared to the increasing freedoms elsewhere in the world over the same time period. Indeed, looking back across CWP’s history, it is obvious that the CRA’s policies have restricted over time. A CRA document from 2009 related to their charitable registration mentions only a caution about political activity, even though CWP has been generally carrying out the same sorts of activities for years. The Liberal government took a first conciliatory step by cancelling the political activities audit, and we understand they are discussing a new legislative framework for administering the political activities of charities, but CWP’s challenge could potentially force a change at a deeper level that would bring Canada more into line with the developed world’s 21st century values.

By: Alexandra Tzannidakis

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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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