The freedom of expression of Canada’s 80,000-plus charities is being unfairly restricted. According to the Income Tax Act (ITA) and a Canada Revenue Agency (CRA) policy, if a charity spends more than 10 per cent of its funds, personnel time and other assets on “political activity,” its charitable status can be revoked. This restriction means charities are unable to do what they do best — work for the public interest.
When charities explicitly encourage the public to urge politicians or civil servants to “retain, oppose or change the law, policy or decision of any level of government in Canada or a foreign country,” they are considered by the CRA, with reference to the ITA, to be engaging in “political” rather than “charitable” activity. Charities that exceed this 10 per cent limit risk revocation of charitable status and, subsequently, the loss of much or possibly all of their assets, and organizations attempting to acquire charitable status must demonstrate that they will operate within this limit.
Why are Canadian charities so limited in the exercise of their civil society voice? Canada’s charity law is linked to the Elizabethan England Statute of Uses of 1601, in which purposes considered charitable in nature are listed, including relief for the elderly, sick and impoverished. Referencing this statute, the 1891 Pemsel and the 1917 Bowman v. Secular Society decisions of the House of Lords, and the 1981 McGovern v. Attorney General decision of an English court have rooted in the common law concepts of charitable and political purposes that today anchor Canada’s treatment of “political activities” by Canadian charities.
A 2006 Library of Parliament backgrounder noted: “Although the common law does not allow charities to engage in any political activities, the Income Tax Act has modified the common law to permit registered charities to engage in some degree of political discourse.” This degree is generally interpreted by CRA as meaning the 10 per cent limit. Canada’s charity law has been repeatedly charged as inefficient, imprecise, subjective, unfair and a muzzle on freedom of expression. Inefficiency arises from civil servants attempting to monitor the political activities of thousands of charities, from the courts monitoring controversial CRA decisions regarding charitable registration or deregistration, and from charities themselves that, being fearful of government reprisal, may hack at the branches of a problem instead of tackling the political root.
For example, food banks ladling cans of soup are considered by the CRA to be engaging in charity. But if those same food banks rise up to vigorously and persistently challenge the structural reasons – the policy and law-centred reasons – why hunger exists at all, the CRA could consider them to be engaging in “political activity.” And yet both activities are about the relief of poverty: one about the consequential end of the poverty cycle, manifest in hunger and the backstopping reaction of food aid, the other about the systemic end, such as
inequitable income distribution that furthers poverty.
Imprecision and subjectivity arise when the CRA, for example, attempts to judge when a charity has crossed the line from informing the public about an issue to attempting to advocate a particular point of view. Unfairness arises because charities, through the 10 per cent rule, are considerably limited in participating in the democratic process, whereas corporations are permitted to write off 100 per cent of their lobbying expenses and political parties – the most political of all organizations – are permitted to issue tax receipts for donations, at a value (75 per cent of the gift) far higher than the value of receipts issued by charities.
But the most serious charge, expressed by the now-defunct Institute for Media, Policy and Civil Society (IMPACS), which attempted to pry space for the expressive voice of Canadian charities, concerns the extent to which the charity law is “a serious impediment to modern Canadian democracy...[limiting] the voices of charities and the people they serve, very often the most vulnerable members of society.” Indeed, administrators are often on edge that their charity could be subject to a CRA audit and possible revocation of charitable status – for many charities akin to a death sentence.
Ninety-one per cent of respondents to a 2002 IMPACS survey of charitable organizations believed “that the status quo is not acceptable, and that the law of advocacy by charities must change.” The majority of charities consulted preferred that the Income Tax Act be amended to clearly identify what charities can and cannot do regarding advocacy. This has not yet been done, but changes in 2003 to the CRA’s administrative policy provide a measure of clarity, although imprecision and subjectivity remains.
Charities have also signalled support for either eliminating all restrictions on advocacy – as charities in France enjoy – or allowing charities to expend up to 49 per cent of their resources on advocacy, thus to remain in compliance with the Act that charities spend “substantially all” of their resources on charitable purposes. These findings are backed by a 2000 survey, by the Canadian Centre for Philanthropy (now Imagine Canada) and the Muttart Foundation, that found that 88 per cent of Canadians agreed somewhat or strongly with the statement, “charities should speak out on issues like the environment, poverty and health care.”
Most charities consulted by IMPACS in 2002 agreed with a 1999 Supreme Court of Canada determination that the best way to change Canada’s charity law is through legislative reform rather than through court challenges of CRA decisions that prevented non-profit organizations from obtaining charitable status, or that stripped existing charities of their status.
And so it is (way past) time for Parliament’s leadership on this file. There can be no rational justification for limiting the advocacy voice of charities in Canada. To continue to do so through Canada’s charity law is an affront to democracy.
This article was originally published in The Lawyers Weekly (November 16, 2007). Rob Rainer is Executive Director of Canada Without Poverty. Founded in 1971 as the National Anti-Poverty Organization, Canada Without Poverty is a national charity with a mission to eradicate poverty in Canada, for the benefit of all.