Charity Chill and the Urgent Need to Reform Canada’s Charitable Laws

March 25, 2015

Victoria, BC – Canada’s laws for charities are in need of urgent reform.  A new ELC report released today calls for sweeping modernization of Canadian charitable law in line with other jurisdictions such as the U.S., Australia, New Zealand and England.

Prepared for DeSmog Canada, the report finds current rules in Canada around “political activity” — defined by Canada Revenue Agency as any activity that seeks to change, oppose or retain laws or policies — are ambiguous and confusing and the penalties for breaking the rules are too harsh.

“It’s difficult for any charity to be certain it’s carrying out its activities within the rules,” said Calvin Sandborn, legal director of the Environmental Law Centre at the University of Victoria. “This has created a confused and anxious charitable sector and detracts from them carrying out their important work.”

Australia and New Zealand, also common law jurisdictions, have modernized their laws in recent years to allow charities to conduct more policy advocacy in carrying out their missions.

The report finds there is currently potential for political interference with the tax auditing of charities and calls for the creation of an independent Canadian Charities Commission.

In 2012, the federal government set aside $13.4 million to audit “political activities” of Canada’s charities. Since then, the Canada Revenue Agency (CRA) has undertaken audits of more than 52 charities, including seven of Canada’s most prominent environmental charities.

The report makes five key recommendations to modernize Canada’s charitable law.

1) Remove any potential for political interference by establishing a politically independent Charities Commission like the one in England and Wales. Currently, there is a direct structural chain of command from the Minister of National Revenue to the charities directorate, which audits charities.

2) Establish clearer rules about what constitutes “political activity” and provide a more generous limit on allowable “political activity.” U.S. rules are often more generous; Australia and New Zealand are now allowing more political activity; and many European countries place no limit at all on a charity’s political activities.

3) Modernize the definition of what qualifies as charitable — to rectify things like the CRA’s anachronistic ruling that Oxfam could not have a charitable goal of “prevention of poverty.”

4) Get rid of the “death penalty” for minor violations of the 10 per cent cap on political activities. The emphasis should be to achieve compliance — not to destroy the charitable organization.

5) Law and policy should be amended to encourage the intervention of Provincial Attorneys General in appeals involving charities and federal tax ministers of the Crown. This would help ensure that someone advocates the general public interest in questions regarding the meaning of “charity” and other charitable principles and laws.

It’s important to note that while Canadian charities are currently prohibited from undertaking more than 10 per cent “political activities” as defined by the CRA, political advertising campaigns by companies are tax-deductible.

“This contrasting treatment of business and charities under the Income Tax Act has the effect of encouraging businesses to take political action in support of commercial and private interests — while hindering the counterbalancing efforts of charities working to protect public interests,” Sandborn said.

Canadian charities and non-profit organizations account for more than eight per cent of Canada’s GDP. As of the end of 2013, there were more than 86,000 registered charities in Canada.

The report was prepared for DeSmog Canada, a non-profit public interest news outlet.

Click here to read the report.