Charities face heightened restrictions on political engagement

publication date: Aug 8, 2012
author/source: Adam Parachin
Charities face a strange contradiction surrounding the role they are permitted to play in the law and policy making processes of government. Charities are in many senses uniquely suited for active, constructive participation in the process of law and policy reform. A combination of field experience, specialized knowledge and closeness to the community gives them the capacity to comment meaningfully on the effectiveness of existing and/or the need for new government programming.  Adam Parachin photo

Nevertheless, the doctrine of political purposes severely restricts the ability of charities to function as agents of reform. Charities are permitted to expend only a restricted amount of their resources on political activities. The permitted amount ranges from 10% to 20%, depending upon the charity's annual income (the lower the annual income, the higher the permissible percentage). Partisan participation in election campaigns is, however, absolutely prohibited. Further, no institution can qualify for charitable status (or continue to so qualify) if it has (or adopts) a political purpose, as distinct from a political activity.

Recent developments

Critics of the doctrine of political purposes welcomed the 2010 decision of the Australian High Court in Aid/Watch Inc. v. Commissioner of Taxation. Bucking the trend of the Canadian and English precedents, a majority of the High Court concluded that agitating for legal or policy reform is an acceptable way for a charity to achieve its charitable mission. In other words, swaying public opinion on law and government policy is not automatically a political activity permitted on an exceptional basis but can instead qualify as the charitable mission of an organization.

The Aid/Watch decision sparked hope that Canadian courts might follow suit and liberalize the rules restricting political advocacy by charities. However, such hope was quickly squelched by the 2011 decision of the Federal Court of Appeal in News to You Canada v. Minister of National Revenue. In this decision the Federal Court of Appeal expressly concluded that Aid/Watch should not be followed by Canadian courts. 

More recently, the federal government signalled its policy preference for strengthened rather than relaxed rules regulating the political activities of charities. In addition to introducing new tax penalties for charities carrying on excessive political activities, the 2012 Budget introduced new rules designed to frustrate the use of inter-charity grants to fund the political activities of charities. Under the new rules, a charity funding political activities carried on by another charity will itself be considered to be engaging in political activities to the extent of the funding provided. Further, Canadian charities receiving funding from foreign sources to carry on political activities must now for the first time disclose the receipt of such funding to the Canada Revenue Agency.

How are charitable and political purposes distinguished?

With the renewed emphasis on regulating political advocacy by charities it is important to revisit both how and why the law distinguishes between charity and politics. 

Courts have categorized as political the promotion of a political party or candidate for public office. Since electioneering is perhaps the quintessential political act, this is neither surprising nor controversial. Indeed, anecdotal accounts suggest that there is absent any widespread pent-up desire on the part of Canadian charities to become actively and directly engaged in electoral politics.

What is less satisfactory is that courts have also characterized as political any purpose that entails seeking a change of any sort - even unquestionably altruistic changes - to the law or policy of a domestic or foreign government, promoting a point of view or attitude of mind, advocating in favour of one side of a controversial social issue and creating a climate of opinion. It is here where the doctrine of political purposes has arguably been unduly broad in its categorization of political purposes. 

A few examples readily illustrate the controversy.  In McGovern v. Attorney General, the House of Lords concluded that the Amnesty International Trust, a Nobel Peace Prize winner, was not charitable because one of its purposes was to seek the abolition of human torture. The Court reasoned that abolishing human torture could only be accomplished by seeking a change to the law (how else could torture be truly "abolished"?). But since seeking a change to the law is political, seeking the abolition of torture must by necessary implication also be political, or so the Court reasoned.

In another widely criticized decision - Re Strakosch - it was held that a trust established for the purpose of appeasing racial tension was political rather than charitable. One of the concerns raised by the Court was that appeasing racial tension could very well extend to seeking law reform and more generally promoting an attitude of mind through support of, say, a particular newspaper or political party. Re Strakosch is admittedly no longer administratively enforced by the Charities Directorate of the Canada Revenue Agency but it reveals the unexpected breadth of the doctrine of political purposes.

Contradictions abound

Through the doctrine of political purposes, courts have managed to sustain seemingly contradictory positions surrounding the legal meaning of charity. So although it is political to seek the abolition of human torture, courts have nevertheless established that it is charitable to prevent cruelty to animals. It is charitable to educate the public towards the view that peace is preferable to war, but political to help two societies find peaceful ways to live together. It is charitable to educate from a particular point of view, but political to promote the same point of view. It is political to pursue law reform of any sort, but organizations pursuing law reform through constitutional human rights litigation have nevertheless been registered as charities. Appealing to emotions is political, but purposes inciting strong emotions can qualify as charitable.

The list of apparent contradictions supported by the doctrine of political purposes could continue. Nonetheless, the federal government endorsed the doctrine in the 2012 Budget and by extension the somewhat strange implications it bodes for the legal meaning of charity. For better or for worse the doctrine will remain good law in this jurisdiction for the foreseeable future. 

With the Federal government's crackdown on political advocacy by charities comes a renewed need to understand the policy basis for the doctrine of political purposes.  These rationales will be explored in a follow-up article.  We shall see that the rationales in support of the doctrine are as unusual as the doctrine itself.

Adam Parachin is associate professor at the Faculty of Law at the University of Western Ontario. He teaches, researches and writes in the areas of trusts, estates and charities law. His work in the area of charities law has recently been recognized through the Douglas J. Sherbaniuk Distinguished Writing Award from the Canadian Tax Foundation and a substantial research grant from the Social Sciences and Humanities Research Council to study donation incentives.

Contact him at 519-661-2111, ext 81445 or by email.

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