Introduction
There has been a great deal of activity over the past few years over the role of charities in public policy debates and a number of significant developments recently that have changed the landscape for charities in this area.
Background
The precursor to the recent developments starts with the CRA audit programme of reviewing the political activities of charities which commenced in 2012. The first wave of audits targeted environmental charities but later expanded to include poverty, human rights and international-development charities. The government later clarified that while about 30 charities were audited with respect to political activities, only 5 resulted in determinations to revoke registration, all of which were primarily based on facts that were beyond their involvement in political activities.
In January 2016 the government announced a suspension of the audits and commenced a public consultation on the rules regarding the involvement of charities in political activities.
On May 4, 2017 the CRA published the Report of the Consultation Panel on the Political Activities of Charities (the “Consultation Report”).
Recommendation No. 3 of the Consultation Report recommended that “the Act should be amended by deleting any reference to non-partisan political activities to explicitly allow charities to fully engage, without limitation, in non-partisan public policy dialogue and development, provided that it is subordinate to, and furthers, their charitable purposes”.
On July 16, 2018 the Ontario Superior Court of Justice struck down those provisions of the Income Tax Act (the “Act”) that restricted the amount of non-partisan political activities that a registered charity could undertake. The Canada Without Poverty v. AG Canada (“CWP”) case[1] provided that these provisions infringe on the charity’s right of freedom of expression under ss. 2(b) of the Canadian Charter of Rights and Freedoms. The court also found that there was “no justification of ss. 149.1(6.2) that draws a distinction between charitable activities and non-partisan ‘political activities’ in the nature of public policy advocacy”.
On August 15, 2018, the Minister of National Revenue announced its intention to appeal this decision but that in the meantime the appeal of the CWP decision would not change the direction of the government to take steps to remove the quantitative limits on political activities and to implement Recommendation no. 3 of the Report of the Consultation Panel on the Political Activities of Charities (the “Report”) (See Fasken Bulletin on “Political Activities of Charities: A New World” dated August 21, 2018). To this end, the Act was revised to effectively remove the distinction between ‘non-partisan political activities’ and ‘charitable activities’ by confirming that ‘public policy dialogue and development’ would be included in the definition of ‘charitable activities’.
Evolution of the New Legislation
On September 14, 2018, the Department of Finance unveiled draft legislative proposals regarding political activities of charities (the “Proposals”). These Proposals would remove the reference to the “substantially all” test relating to the ability of charities to engage in political activities. The explanatory notes that accompanied this draft legislation clarified that the CRA would make the determination of permitted political activities by reference to the common law (of which there was little).
A draft guidance, Charities and public policy advocacy was released on October 2, 2018 (“Draft Guidance”), which was intended to replace the current CRA guidance, CPS-022, Political Activities. However, this was later withdrawn.
On October 25, 2018, the Department of Finance tabled a Notice of Ways and Means Motion to implement the changes noted above. The changes went beyond what was in the Proposals by providing that charitable activities include, without limitation, public policy dialogue and development activities carried on in furtherance of a charitable purpose.
On December 13, 2018, Bill C-86, Budget Implementation Act, 2018, No. 2 received Royal Assent. A number of the amendments are retroactive to prior years such as 2008 and 2012 and thus impact suspended audits.
Bill C-86 amends the Income Tax Act in the following ways:
- it removes the “substantially all” test in ss 149.1(6.1)(6.2) and (6.201);
- it retains the prohibition on charities from devoting their resources to the direct or indirect support of or opposition to any political party or candidate for public office”;
- it removes the suspension for non-compliance with the “substantially all” test but permitted suspension for devotion of resources to partisan activities;
- it adds new definition of charitable activities to include public policy dialogue and development activities carried on in furtherance of a charitable purpose (the explanatory notes clarify that there are no limitations on this activity); and
- it adds a new ss. 149.1(10.1) which provides that “Subject to subsections (6.1) and (6.2) public policy dialogue and development activities carried on by an organization, corporation or trust in support of its stated purposes shall be considered to be carried on in furtherance of those purposes and not for any other purpose”[4] (the explanatory notes clarify that these activities will not be considered to reflect a separate political purpose).
It should be noted that the legislation does not contain a definition of public policy dialogue and development activities but the explanatory notes indicate that these activities “generally involve seeking to influence the laws, policies or decisions of a government whether in Canada or a foreign country” by “providing information, research, opinions, advocacy, mobilizing others, representation, providing forums and convening discussions”.
Draft Guidance
On January 21, 2019, the CRA released a draft guidance, CG-027, Public policy dialogues and development activities (the “Draft Guidance”). The Draft Guidance was open to comments until April 23, 2019.
The following are highlights of the Draft Guidance:
The Draft Guidance confirms that public policy dialogue and development activities (referred to as PPDDAs) include “seeking to influence the laws, policies, or decisions of a government, whether in Canada or a foreign country”.
PPDDAs can be described as activities a charity carries on to participate in the public policy development process, or facilitate the public’s participation in that process. A charity can also transfer resources to another qualified donee to support the recipient’s PPDDAs. As long as a charity’s PPDDAs further its stated charitable purpose, the Act places no limit on the amount of PPDDAS a charity can engage in and expenditures toward PPDDAs will be included in determining whether a registered charity has met its disbursement quota.
The Draft Guidance includes the following list of PPDDAs from the Consultation Report:
Providing information – charities may provide information to their supporters or the general public related to their charitable purposes (including the conduct of public awareness campaigns) in order to inform or persuade the public in regards to public policy. Such information must be truthful, accurate, and not misleading.
Research – charities may conduct research into public policy, distribute the research, and discuss the research and findings with the media and with others as they see fit. Note that to advance education as a charitable purpose, a charity’s research must meet the criteria in Policy statement CPS-029, Research as a charitable activity.
Disseminating opinions – charities may express opinions on matters related to their charitable purposes to participate in developing public policy, as long as they draw on research and evidence and are not contrary to hate speech laws or other legitimate restrictions on freedom of expression.
Advocacy – charities may advocate to keep or change a law, policy, or decision, of any level of government in Canada, or a foreign country.
Mobilizing others – charities may call on supporters or the general public to contact politicians of all parties to express their support for, or opposition to, a particular law, policy, or decision of any level of government in Canada or a foreign country.
Representations – charities may make representations in writing or verbally to elected officials, public officials, political parties, and candidates, and appear at parliamentary committees, to bring their views to the public policy development process, and may release such materials publicly. Note that a charity engaging in this type of activity may be required to register as a lobbyist organization.
Providing forums and convening discussions – charities may invite competing candidates and political representatives to speak at the same event, or may request written submissions for publication, to discuss public policy issues that relate to the charity’s purposes.
Communicating on social media – charities may express their views, and offer an opportunity for others to express their views, in regards to public policy, on social media or elsewhere.
It is important to note that there are requirements that charities need to satisfy before they may engage in PPDDAs, namely that:
- the PPDDAs must relate to the charity’s stated charitable purpose; and
- the PPDDAs, when considered together with the charity’s stated charitable purpose, would meet the public benefit test of the CRA.
In other words, charities may not be established for the sole purpose of engaging in PPDDAs.
No Partisan Political Activity
The Draft Guidance continues to confirm that charities are prohibited from partisan political activity. They cannot “directly or indirectly support or oppose a political party or candidate for public office”.
Examples of direct support include the following:
- endorsing a candidate over social media;
- telling people on a charity’s website not to vote for a political party; and
- making a donation to a political party or a candidate’s election campaign.
Examples of indirect support or opposition include the following;
- internal planning documents of a charity explicitly confirm it will oppose a political party that takes a different view on certain policy issues; and
- internal minutes of a directors meeting record decision to oppose a candidate in a provincial election.
The Draft Guidance gives examples of allowed activities as follows:
- communicating about policy issues either in or outside of an election period, provided they do not identify a political party or candidate; and
- informing the public about policy positions of political parties and candidates so long as it does so in a neutral fashion, hold all candidates debates, or provide the voting record for all MPs or other levels of government on an issue.
Blogs/Websites
In addition the Draft Guidance clarifies that if a charity has a blog or website it is required to monitor these platforms and remove messages that support or oppose a political party or candidate for public office or post a notice that messages that support or oppose a political party or candidate will be removed.
Representatives of a Charity
The Draft Guidance also provides guidelines on how representatives of charities may personally engage in partisan political activities.
For instance, the Draft Guidance provides that while representatives of a charity, such as directors, are permitted to engage in political processes in their personal, private capacity, they:
- must not use the charity’s resources (i.e., office space, supplies, equipment, publications, or human resources) to support their personal political involvement;
- must not use events or functions organized by the charity as a platform to voice their own political views; and
- are encouraged to indicate that their comments are personal rather than the view of the charity.
Finally, the Draft Guidance notes that while the Act permits PPDDAs without restriction there are other legal requirements that a charity must be aware of such as federal and provincial lobbying and election legislation and the common law in different provinces.
Effect of the Proposed Changes
The new legislation and the Draft Guidance are a welcome development and will give charities greater opportunities to fulfil their charitable purposes and advocate for the charitable causes they promote.
Charities should revisit their policies on political advocacy as they may be too restrictive given the new rules.
The Draft Guidance makes it clear that the government will rely on records to satisfy itself that charities are complying with the new law and charities must keep in mind that the onus is on them to ensure that the PPDDAs are done in compliance with the Act.
Records of minutes relating to political activities should demonstrate that the primary consideration in carrying on PPDDAs is to further the stated purposes of the charity and provide a public benefit.
Absence of records make it difficult to support an argument that the charity is in compliance should an issue arise.
Expenditures on PPDDAs should be properly characterized as they now qualify as charitable activities.
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[1] 2018 ONSC 4147.
[2] The appeal of the CWP decision was later abandoned.
[3] Report of the Consultation Panel on the Political Activities of Charities (31 March 2017).
[4] ss. 149.1(10.1) of the Income Tax Act.
https://www.fasken.com/en/knowledgehub/2019/04/political-activities-of-charities
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