The issue of charities engaging in political activities has been a hot item since 2012. In that year the Harper Government gave $8 million to the CRA Charities Directorate to begin what has been termed the “political activity audits”. Budget 2012 also tightened up the political activity rules which were already in place.
It is important to remember that this discussion begins with the Scarborough Legal Services case in 1985 which held that activities intended to influence public policy did not qualify as charitable. Shortly after that case the Federal Government passed a relieving provision intended to ameliorate the Scarborough decision by allowing charities to use up to 10% of their resources to engage in political activities. The thinking was that charities are often on the front lines engaged in service delivery- such as a food bank or women’s shelter- and therefore, these organizations had valuable contributions to make to the public policy debate.
The Government of the day, and indeed any government since, could have completely overturned the Scarborough Legal Services decision rather than simply limit it. It would seem that it was felt that charities should not be able to use their right to issue tax receipted donations to engage, in an unlimited way, in the political debate. And that it would be improper for a charity’s attentions to focus on seductive politics rather than the hard work of engaging in actual charitable work.
Skip forward to a few weeks ago, when the decision of Justice Ed Morgan of the Ontario Superior Court in Canada Without Poverty was released. In that decision (which we wrote about here) Justice Morgan found that the political activity limitation of 10% was an unfair restriction on a charity’s freedom of expression. He, therefore, ruled that these restrictions were unconstitutional and the law was effectively eliminated from the Income Tax Act immediately. (Importantly though, Justice Morgan agreed with the restriction of charities engaged in partisan political activities as being completely forbidden).
While the Federal Government appealed the decision, they nevertheless came out with proposed changes to the rules late Friday September 14, 2018, shortly before Parliament resumed sitting on Monday. Those draft rules are available on the finance website here. On the face of it the Government changes are seemingly minor but their effect is to completely overturn the Scarborough Legal Services decision and to implement Justice Morgan’s more recent ruling.
The new rules allow charities to engage in ‘political activities’ as that has been defined by the common law, and will (presumably) continue to be defined by the Courts moving forward. Effectively, this will allow charities to engage in policy influencing activity both domestically and abroad without limitation. Moreover, the ruling is retroactive to 2008 which should benefit most of the charities which had previously been caught in the political activity audits. (Those audits and objections had been suspended at whatever stage they were at, and we expect most will now be abandoned).
While these suggestions are not only a part of the series of recommendations made by the panel and they certainly remove some of the technical difficulties and the ambiguity of the rules that existed previously, they are a cause for some concern. The new rules which are supported both by would effectively allow charities to engage in limitless campaigning with charitable dollars. This was a position governments have refuse to endorse for over thirty years. And it effectively legislates public interest campaigning subject only to the relevant political finance legislation. One can easily imagine the abortion debate reigniting because the two sides are both capable of marshalling huge resources to engage in this fight.
The decision has significant power to impact our social fabric and peace in this country. There is yet a consultation period and remains to be seen if this issue is addressed in a meaningful way, but as it stands the changes would be welcomed with relief by those charities that have been dealing with significant ambiguity in the law since 1985.
The proposals have yet to have their first reading in Parliament and, assuming they pass third reading, must be passed through the Senate. It will be remembered that the Senate has become a difficult place for the Liberals to pass legislation over the past few years. Moreover, the Senate Special Committee on the Charitable Sector will be looking at political activity later this term and may well come to its own conclusion on the issue thus delaying the passage of these proposals into law. Keeping in mind that an election is set for October 2019, if the bill does not receive Royal Assent by the time Parliament rises before the summer these proposals will die and, depending on the election, may not be reintroduced.
The consultation period closes October 13, 2018. Drache Aptowitzer lawyers would be pleased to consult with any organization who was under audit as a result of the previous rules or is considering in engaging political activities as a result of the new ones.