On December 13, 2018, the Canadian government passed new legislation for the Income Tax Act that would allow charities to conduct unlimited political activities, provided those activities remained non-partisan and in service to the charity's mission.
This action came about three months after a landmark decision was made in an Ontario Superior court in the case of Canada Without Poverty v the Attorney General of Canada. The ruling gave charities the right to advocate beyond the old 10% limit that was previously the standard for political activities. The federal government made some initial noise about appealing the ruling. Then, it suddenly decided not to. CharityVillage covered that story in depth and you can read about it here.
Some experts and leaders in the sector were concerned that allowing what could amount to unfettered political advocacy by charities on government, could lead to a U.S.-style system wherein more established, deep-pocketed nonprofits could use their resources and connections to influence policy makers and tilt the charitable landscape in favour of larger, more organized entities.
The arguments for and against rage on, and the government is now taking all sides into consideration.
P-P-D-D-A-C, spells... confusion
On January 19, 2019, in order to move this file along and get to a resolution, the CRA issued Guidance Reference #CG-027. Though it sounds like the numerical designation of a droid class from the Star Wars fictional universe, in plain English, this is called the Public Policy Dialogue and Development Activities by Charities (PPDDAC) draft guidance document. It is, in all actuality, a pivotal file that is being analyzed by charities across the sector. The CRA has put it out there and solicited feedback from all interested parties, who have until April 23, 2019 to do so. Still, it is the current interpretation being used by the CRA in how charities can conduct their activities.
So how does it work?
According to the CRA draft guidance, a PPDDAC activity is described as "activities a charity carries on to participate in the public policy development process, or facilitate the public’s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 Income Tax Act places no limit on the amount of PPDDAs a charity can engage in." It’s unclear whether this could include or exclude certain political advocacy.
In a recently-released FAQ about the new changes, the CRA clarifies how, in their interpretation, this all pertains to charitable organizations activities going forward. The Agency states in its second bullet:
"The rules governing the political activities of charities have been amended to remove the quantitative limits on the resources a charitable organization or charitable foundation can devote to political activities that do not directly or indirectly support or oppose a political party or candidate for public office.* Similar amendments were made to the rules governing Canadian amateur athletic associations. The definition of 'charitable organization' in the Income Tax Act was also amended to clarify that, as is similarly required of a charitable foundation, a charitable organization must be constituted and operated exclusively for charitable purposes.
"Furthermore, the Income Tax Act was amended to specify that charitable activities include public policy dialogue and development activities that further a charitable purpose, and to ensure that public policy dialogue and development activities carried on by a charity in support of its stated charitable purposes are considered to be in furtherance of those purposes and not in furtherance of any other purposes.
"As a result of these changes, charities may now pursue their stated charitable purposes by carrying on unlimited public policy dialogue and development activities in furtherance of those purposes.”
[*Note that the rules prohibiting charitable organizations, charitable foundations and Canadian amateur athletic associations from devoting any part of their resources to the direct or indirect support of or opposition to a political party or candidate for public office remain in effect.]
It’s important to remember that this guidance isn’t law. However, it is guidance that is now usable for interpretation by courts. The fact that it was adopted as language at all by the CRA has irked some and pleased others.
On the "pleased" side...
In November 2018, Imagine Canada published a Q&A bulletin addressing concerns it was hearing from the public about the possibility that the CRA's new guidance would open the floodgates for the Canadian version of powerful lobby groups (or US-style so-called "super-PACS") that could unduly influence government and help elect politicians sympathetic to their causes.
Imagine's document assures readers that no such thing could occur.
"[T]here is no reason why a lobby group should obtain charitable status after these changes are made compared to before, if this group has political purposes, not charitable purposes," the organization writes. And with reference to "Super-PACS" it states:
"Super-PACs are organizations that have raised and spent billions of dollars in the US around elections to support or oppose political parties or candidates. They are not registered or organized as charities. The proposed [CRA] rules do not open the door to charities as Super-PACs in Canada because Canadian charities:
- are not allowed to engage in any partisan activities;
- face the same election spending limits as other organizations;
- must dedicate all their activities to advancing charitable not political purposes.
"Election spending limits are imposed by the Elections Act. This will not change," according to Imagine Canada.
But some aren't so sure.
On the "none-to-pleased" side...
Canadian charity lawyer Mark Blumberg has spent considerable time and effort since last year, critiquing the guidance and the notion that charities should be able to spend unlimited resources toward advocacy and influencing policy around the nonprofit sector.
On both his Globalphilanthropy.ca blog and at appearances giving testimony in the Standing Senate Committee on Finance's Review of Political Activities for Charities last year, Blumberg has been blunt about his views on this seeming loosening of restrictions on charities and political activities. In a recent interview with CharityVillage, he reaffirmed comments he made to the committee.
"For over 30 years, we had rules that allowed charities to spend up 10 percent of their resources on non-partisan political activities connected with their objects," Blumberg told the Senate Committee. "The debate about charities and political activities has consumed a lot of space since 2011. The Liberal government has put forward legislation on October 25, 2018 that I think is quite dangerous [by allowing] Canadian charities to conduct unlimited political activities as long as they are non-partisan and connected with the objects of the charity. Unlike donations to candidates, which are capped, there are no caps on amounts that can be donated to a registered charity.
He continued: "I am afraid that allowing charities to spend 100% of their resources on political activities is not going to empower average Canadian charities to be more involved in political activities because they had the opportunity to spend up to 10% of resources under the previous rules but 99% of them did not even spend 1%. My concern is that this change is going to help a few very wealthy individuals or large companies with some very peculiar views to essentially dominate the political discourse in our country as has happened in the US”
Up for interpretation
It’s anyone’s guess as to how this new guidance will impact the sector and its activities long term. Time will tell, but in the meantime, the arguments for and against its adoption continue.
Andy Levy-Ajzenkopf is a professional writer living in Toronto. He can be reached at email@example.com.
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