On July 17th, Justice E.M. Morgan of the Ontario Superior Court of Justice issued a decision that will change the future for many charities in Canada.
The story starts in 2012, with the decision of Stephen Harper’s Conservative government to introduce the $8 million Political Activities Audit Program. Harper wanted to shut down opposition to his government, of which there was plenty, by investigating and limiting the political activities being carried out by charities. First under the magnifying glass were environmental organizations, but also targeted were charities working on issues related to human rights, poverty and other important issues.
What the law says
Section 149.1 (6.2) of the Income Tax Act defines the extent to which a registered charity may devote its resources to “political activities,” but does so in somewhat general terms. Since 2012, the Canada Revenue Agency (CRA) had been interpreting the Act to mean that charities could devote no more than 10% of their resources and activities to such activities and has enforced the Act on that basis.
Between 2012 and the election of the Liberal government in 2015, the CRA conducted complete or partial audits into the activities of 60 charities across the country.
To say this “audit program” created an advocacy chill across the country would be an understatement. After all, law and government policy reform are a cornerstone of many charities.
How, for example, could a violence against women organization do its job if it were not advocating for law reform and much-needed changes to government social policy? And yet, this activity is exactly what Harper’s Conservative government wanted to limit.
Dying without dignity
In 2015, Dying with Dignity, a small but mighty charity that advocates for quality in dying as well as the protection of end of life rights, became the first charity to lose its charitable status. This meant the organization could no longer provide charitable tax receipts to donors.
I am a big supporter of Dying with Dignity and, no doubt like many others, unhappily had to limit my financial contributions to the organization because of the loss of this tax receipt.
Other organizations scrutinized their activities in an attempt to ensure their political activities did not exceed the magic (and arbitrary) 10%. Not an easy task:
“Spending can be tracked, but it’s hard to calculate what 10% of all resources amounts to in terms of time and action. How much does writing one op-ed count? Giving a quote in an interview? How can that percentage be documented and supported when the CRA comes around for an audit? And how much time is lost trying to figure all that out?”
Taking the government to court
Canada Without Poverty, a charitable organization working to end poverty in this country, decided to take the federal government to court over this practice, and it is this case that ended so well in July.
In his decision, Justice Morgan found that the 10% limitation on political activities imposed by the CRA in its interpretation and enforcement of the Income Tax Act was a violation of the freedom of speech provisions (section 2(b)) of the Charter of Rights and Freedoms.
His decision stated that the phrase “charitable activities” as set out in s. 149.1(6.2) of the Act is to be read to include political activities that may further the organization’s charitable purposes. Still prohibited are partisan political activities. In other words, a charity cannot engage in activities that promote or attack a particular political party but can otherwise use whatever percentage of its resources it deems appropriate on all other political activities.
The decision came into effect immediately upon the reasons for judgment being issued, an unexpected bonus for all concerned.
Leilani Farha, executive director of Canada Without Poverty, had this to say about the decision:
“It’s a great judgment for democracy in Canada and for poor people across Canada. It’s great for the charitable sector, who can in an unencumbered way pursue their charitable purposes in any which way they deem appropriate.”
The current federal government campaigned on a promise to end Harper’s inquisition into the political activities of charities. It has not followed through on that promise in the enthusiastic way many of us had hoped it might. Now, it has the opportunity to do so, supported by Justice Morgan’s decision.
In 2016, the Minister of National Revenue established a Consultation Panel to make recommendations about the issue of political activity and registered charities. In its report, the Panel recommended that the Income Tax Act be amended “to explicitly allow charities to fully engage, without limitation, in non-partisan public policy dialogue and development that is related to and furthers the charity’s purposes.”
Let us hope that this recommendation from the government’s own panel, coupled with Justice Morgan’s decision in the Canada Without Poverty case, will mean the government does not appeal the decision and moves swiftly to implement the recommended change to the Act as well as to end all audits currently underway.
In Ontario, where many of us are waiting with bated breath to learn whether or not there will be cuts to our provincial government funding, this decision could not have come at a better time.