It has been over three years since the Honourable Joe Oliver, then Minister of Natural Resources, fired the proverbial shot across the bow in the political activities debate by releasing his unprecedented “open letter” on January 9, 2012. The letter did not explicitly target registered charities, but rather “environmental and other radical groups” threatening “to hijack” the regulatory system “to achieve their radical ideological agenda” and delay government supported projects “to undermine Canada’s national economic interest.”[1] However, given the timing of his comments, the House of Commons Standing Committee on Finance’s (“Standing Committee”) December 15, 2011 announcement of its study on charitable giving, as well as other public statements by the federal government, many in the sector and media speculated that the federal government was utilizing Canada Revenue Agency (“CRA”) to take aim at environmental charities under the guise of reviewing the political activities rules that apply to all registered charities. This speculation was fuelled in great part by the passing of Bill C-38, An Act to Implement Certain Provisions of the Budget Tabled in Parliament on March 29, 2012 and Other Measures (“Budget 2012”).[2]

One adverse consequence of these statements and the resulting speculation is the difficulty in separating fact from fiction in accurately assessing how the federal government’s increased focus on registered charities’ political activities is really impacting the sector. Allegations of political interference and administrative unfairness are a serious business that should not be blindingly accepted or easily ignored. However, the intersection of registered charities and political activities is not a new phenomenon and a clearer understanding of the legislative framework and regulatory history is important to appreciate the current issues. Accordingly, this Charity Law Bulletin (“Bulletin”) refers to a number of secondary and primary sources in order to add some needed background and context to the current debate and clarify the publicly documented facts so far. In particular, the Bulletin reviews the pre-Budget 2012 political activities climate, key Budget 2012 provisions, CRA’s implementation of Budget 2012, and recent statements from CRA and the Minister of National Revenue (“Minister”) to help readers differentiate between the federal government’s political agenda and the public response of the federal regulator.

Background

After publication of the above referenced comments by the Minister of Natural Resources on January 9, 2012, the launch of an inquiry into the foreign funding of charities by the Honorable Senator Nicole Eaton,[3] and the release of the federal government’s Building Resilience Against Terrorism: Canada’s Counter-terrorism Strategy (“Counter-terrorism Strategy”)[4] in February of 2012, offered little to ease sector concerns. In addition to identifying specific registered charities and their funders, Senator Eaton made the following comments regarding the rationale behind the inquiry:

There is political manipulation. There is influence peddling. There are millions of dollars crossing borders masquerading as charitable foundations into bank accounts of sometimes phantom charities that do nothing more than act as a fiscal clearing house. They dole out money to other charities without disclosing what the money is for. This inquiry is about how billionaire foreign foundations have quietly moved into Canada and, under the guise of charitable deeds, are trying to define our domestic policies.[5]

Senator Eaton’s comments, coupled with the federal government’s Counter-terrorism Strategy, which cited the threat of domestic issue-based extremism as including “the promotion of various causes such as animal rights, white supremacy, environmentalism and anti-capitalism,”[6] added to the sector’s perception of federal government bias.[7]

The subsequent implementation of Budget 2012, to amend the Income Tax Act’s (“ITA”) provisions related to registered charities’ political activities and introduce requirements for registered charities to disclose foreign funding, added more fuel to the fire.[8] In fact, Budget 2012 made specific reference to recent concerns being “raised that some charities may not be respecting the rules regarding political activities” and “calls for greater public transparency related to the political activities of charities, including the extent to which they may be funded by foreign sources.”[9] Since then proponents on all sides of the debate, i.e. politicians, academics, members of the sector, the legal community, and the media, have taken up arms — lobbing accusations and formulating various theories of how the political activities of registered charities have come to be a focus of CRA’s charitable compliance activities, creating an unfortunate chill across the sector.[10]

Pre-budget 2012 climate

In sorting through fact from fiction, it is important to point out the role of different parts of the federal bureaucracy. The Department of Finance Canada (“Finance”) is responsible for preparing the budget and developing tax policy and legislation in accordance with the federal government of the day’s agenda.[11] CRA is tasked with “supporting the administration and enforcement of the program legislation,” including the ITA provisions related to registered charities.[12] The federal government for its part, i.e., the elected politicians forming the government, has chosen to regulate the political activities of registered charities under the ITA for three decades. Registered charities have had legislative authority to carry out limited political activities beginning with the 1985 tax year and the introduction of subsections 149.1(6.1) and (6.2) of the ITA. These original amendments to the ITA were described by the federal government at the time of their introduction as “a relieving measure” and served to “clarify that registered charities are allowed to engage in non-partisan political activities that are ancillary and incidental to their charitable purposes.”[13] 

Since 1987, CRA and its predecessors have issued numerous publications, policies, and guidance, which set out its interpretation of the ITA’s political activities provisions and reflect what Canadian courts have said about registered charities’ political activities.[14] These policies have not always been well received. For example, one commentator in 2002 described the then current law and administrative policies as frustrating and confusing, with the latter causing “an element of fear” amongst charities “because the stakes are very high,” i.e. the potential for revocation of registered charity status.[15] However, in 2003, CRA released its still current Policy Statement CPS-022, Political Activities (“CPS-022”) after extensive consultations with the sector.[16] Although a thorough review of CPS-022 and the circumstances leading up to these sector consultations is beyond the scope of this Bulletin, the consensus at the time was that the policy was generally well received.[17] In fact, there appears to have been only one case on political activities in the courts since CPS-022 was released.[18] The absence of cases has previously been cited to suggest CPS-022 “has achieved a balanced approach in addressing ... [the political activities] debate in Canada.”[19] Perhaps even more telling, is that CPS-022 has not been substantially changed in response to the Budget 2012 amendments.

Terrance S. Carter, B.A., LL.B, TEP, Trade-mark Agent – Managing Partner of Carters, Mr. Carter practices in the area of charity and not-for-profit law, is counsel to Fasken Martineau on charitable matters.  Mr. Carter is a co-author of Corporate and Practice Manual for Charitable and Not-for-Profit Corporations (Carswell), a co-editor of Charities Legislation and Commentary (LexisNexis Butterworths, 2015), and co-author of Branding and Copyright for Charities and Non-Profit Organizations (2014 LexisNexis Butterworths).  He is recognized as a leading expert by Lexpert and The Best Lawyers in Canada, and is Past Chair of the CBA National and OBA Charities and Not-for-Profit Law Sections. He is editor of www.charitylaw.ca, www.churchlaw.ca and www.antiterrorismlaw.ca.

Linsey E.C. Rains, B.A., J.D. - Called to the Ontario Bar in 2013, Ms. Rains joined Carters Ottawa office to practice charity and not-for-profit law with a focus on federal tax issues after more than a decade of employment with the Canada Revenue Agency (CRA). Having acquired considerable charity law experience as a Charities Officer, Senior Program Analyst, Technical Policy Advisor, and Policy Analyst with the CRA’s Charities Directorate, Ms. Rains completed her articles with the Department of Justice’s Tax Litigation Section and CRA Legal Services.