Government appeal: Federal government plans to appeal recent ruling on political advocacy for charities

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Sometimes you win some and sometimes...maybe you didn’t win? Not quite the way the adage goes, granted, but that’s how many charitable organizations in Ontario – and across the country – may feel after a statement by the federal government confirming that it will be challenging a recent ruling by the Ontario Superior Court that had determined that limiting charities to just 10 percent political activities was unconstitutional.

As reported here in an Aug. 8, 2018 story titled A judgement for the ages? Ontario court decision opens up possibilities for political advocacy by charities, a July 16, 2018 ruling by Superior Court Justice Ed Morgan in the case of Canada Without Poverty vs. Attorney General of Canada found in favour of Canada Without Poverty, deciding that a longstanding rule in the Income Tax Act that restricts charities to a maximum of 10% of spending/resources towards non-partisan, political activities contravenes Charter rights – specifically freedom of expression.

The decision was hailed by many in the sector as a win for freedom of activity and speech for those organizations whose causes rely on political advocacy. But it may all come to naught.

Making a statement

For almost a month after the ruling, there was no word from government about what its plans were regarding the situation. Then, on August 15, a joint statement by the Ministries of National Revenue and Finance was issued, which contained the following paragraph:

“With regard to the decision in Canada Without Poverty v the Attorney General of Canada...the Government of Canada has identified significant errors of law and has served notice that it will be appealing the decision to address the uncertainty created by it, and to seek clarification on important issues of constitutional and charity law. The resolution of these legal issues, while necessary, will not change the policy direction the Government intends to take with respect to the removal of quantitative limits on political activities.”

So an appeal is in motion. But the end result, regardless of whether the appeal is successful, could still be the same for sector organizations that are hoping for a loosening of restrictions on spending towards political advocacy. This possibility is not lost on those who hailed Justice Morgan’s decision.

In a statement, Bruce MacDonald, president and CEO of Imagine Canada - one of the first organizations to praise the court decision – said his organization considered the ministries’ statement as a signal of “real progress” for the sector.

"The announcement of the government’s willingness to broaden the environment in which charities can engage in the public policy process was a significant component of the recommendations of the Consultation Panel on the Political Activities of Charities. We look forward to a more substantial response related to the government’s commitment to modernize the legislative framework for charities and nonprofits, as contained in their mandate letters, and to the other items contained in the panel’s report."

A less-than-appealing appeal

While organizations like Imagine Canada are putting a positive spin on Ottawa’s appeal move, others are still not at all pleased that the government is showing an intent to allow expanded political advocacy for nonprofits.

In an August 22 post to her site Your Working Girl, Gail Picco, a charity strategist, fundraiser and principal with The Osborne Group in Toronto, blasts the government for indicating it will allow more spending on political activity, despite its appeal. She writes:

“This is not a win for the revolution. The other side can spend money too. And the other side has a damn sight more of it. One result of Canada Without Poverty is that the Federal Treasury and thus Canadian taxpayers will now pay for every half-baked, alt-right, corporate-focused piece of political activity that can take place in the name — and under the guise — of charity. There are many opinions out there on how to cure social problems from boot camps to abstinence.”

Picco uses some examples of what she says could happen with the new law for charitable spending on political advocacy. They include scenarios wherein groups with social agendas – and deep pockets - could set up charities to argue against “universal heath care”, or for “ harsher treatment of criminals.” The oil and pharmaceutical industries are also name-checked in Picco’s worries about how powerhouse, for-profit industries could hijack the charitable sector.

“That is precisely why a spending limit exists,” she notes of the 10% ceiling. “It levels the playing field. So the people with the most money don’t drive the legislation of a country (any more than they already do). Canada Without Poverty amounts to opening the door so you can be rolled over by a bulldozer.”

For his part, charity law expert Mark Blumberg, who wrote a critical piece about the Superior Court ruling on his Globalphilanthropy.ca blog, also believes that Ottawa should reconsider any move to allow further room for charities to fundraise for political advocacy causes.

After the government’s statement on its move to appeal, Blumberg posted some facts about political activities by the Canadian charitable sector, which included the following item:

“Of the approximately 86,000 registered charities in Canada, about 500 report carrying out political activities on their annual information return to the CRA.”

Blumberg is long on record as saying that for the amount of charities who would – or could – actually make use of increased spending limits on political activity, this whole exercise seems pointless.

As he wrote in a July 30 report for Blumbergs:

1. “There are almost 200,000 nonprofits in Canada. It is easy to set up a nonprofit in Canada. We have about 80,000 to 100,000 that are not registered charities. They are and have always been free to be involved in as much partisan and non-partisan activities as they want. They have and always have had “freedom of speech.

2. “[Canada has] a type of nonprofit that has special requirements and rules, and receives special privileges over and above other non-profit organizations...we call it a 'registered charity'...they are regulated under the Income Tax Act of Canada.”

In 2016, in response to Canada Without Poverty’s application for a court hearing on its case, Blumberg wrote that the rules on political activity in the Income Tax Act already provided Canadian charities “with huge opportunities to be involved in political activities.” He acknowledged that while it is important to have the charitable sector at the political table to affect change, with only 500 or so registered Canadian charities (less than 1%) annually claiming that they conduct political activities, there is “a small number of ‘charities’...causing a lot of stress and distraction for the rest of the charitable sector” with this issue.

However, the government may already have other plans for ensuring that Canadian registered charities don’t abuse any newfound political activity abilities.

An end-around in the making?

An August 18 story on Huffpost.ca, quotes anonymous government sources saying that along with its appeal of the Ontario Superior Court decision, the government is also looking at ways it can mitigate Canadian charities from becoming too much like “U.S.-style super-PACs.”

The article states:

“The federal government may strip the status of some registered charities while it lifts all limits on the amount of non-partisan political activity institutions can engage in. [T]he Liberal government may, for example, repeal Canada Without Poverty's status as it develops a new test to ensure that registered charities don't engage solely in political activism.”

That manoeuvre could have a chilling effect on the sector, as organizations will again have to rethink how they conduct political activities and what new limits might be in effect that could impact their charitable status.

It remains to be seen how the government’s appeal will play out and how it will look at specific charities – such as Canada Without Poverty – in its construction of any test to revoke registrations or limit political activities through any legal test.

What is certain is that this case is far from over and the ripple effect will continue.

Andy Levy-Ajzenkopf is a professional writer living in Toronto. He can be reached at aajzenkopf@yahoo.com.

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