Many inside the Canadian charitable sector will recall that shortly after the 2015 Federal election victory by the then-new Liberal government, Prime Minister Justin Trudeau’s party promised a “significant overhaul” of the Canada Revenue Agency (CRA). More specifically, it pledged to institute a change of culture regarding how – and why - the Agency viewed and audited charities.
A January 27, 2016 CharityVillage article looked more in-depth at how sector leaders felt about the change in tone at the time. The mood was optimistic and hopeful.
In the year and a half since that story was first published, Minister of National Revenue Diane Lebouthillier struck an expert panel to consider ways in which the CRA might adapt to new realities in the sector and adopt new policy. After a year-long investigation, the panel submitted its report to government containing its list recommendations.
While many are hailing the report as a vindication for charitable organizations that came under the previous government’s onerous auditing program, others are wondering whether the recommendations – either in whole or in part – will ever be acted upon.
A quick side-note to the above: While the report was received by the government on or around March 31, 2017, Minister Lebouthillier’s office only put out an official, one-page press release “welcoming” the Panel’s document and thanking it for its efforts on May 4, 2017.
Panel, panel, on the wall...
The Report of the Consultation Panel on the Political Activities of Charities was released at the end of March 2017.
In its Executive Summary, the panel outlines its mission with the following paragraph:
“To enable and maximize the contributions of charities, we need a regulatory environment that respects and encourages their participation in public policy dialogue and development. This is not currently the case. The legislative framework for regulating charities in Canada is out-dated and overly restrictive.”
The reasons and details of how the panel believes Canada can best achieve this end are laid out through the report. But in short, the Report signals four broad changes to the CRA and the Income Tax Act (ITA) that it believes will help charities have more of a voice – along with a safer governmental environment to raise that voice without retribution. As such, the expert panel notes:
“In this Report, the Panel offers four recommendations, with the first two relating to interim administrative changes, and the second two focused on the longer-term legislative changes required:
- Revise the CRA’s administrative position and policy (including its policy guidance, CPS -022 Political Activities) to enable charities to fully engage in public policy dialogue and development.
- Implement changes to the CRA’s administration of the ITA in the following areas: compliance and appeals, audits, and communication and collaboration to enhance clarity and consistency.
- Amend the ITA 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.
- Modernize the legislative framework governing the charitable sector (ITA) to ensure a focus on charitable purposes rather than activities, and adopt an inclusive list of acceptable charitable purposes to reflect current social and environmental issues and approaches.”
Many sector leaders and backers view the recommendations as laudable goals. And with Minister Lebouthillier officially suspending audits of all the remaining charities under investigation as part of the Conservative government’s Political Activities Audit Program initiated in 2012, all would seem calmer now for the sector.
Only, this suspension is just that - a temporary freeze on those audits and existing auditing protocol by the CRA. In a May 4 press release, the CRA notes that this suspension is in effect only until the government “officially responds to the Panel’s report.” As of the writing of this article, it has not yet done so.
This wait on a response has some in the sector worried, though others seem unconcerned.
Susan Manwaring, a partner at Miller Thomson LLP in Toronto – and head of its Social Impact Group – is a member of the Panel. She believes the report was taken to heart by the ministry.
“When we presented the report to the Minister our impression was that it was well-received and viewed as helpful” she says. “It certainly represented what the Panel heard from the sector; and Ministry officials were present at the consultations, and received all the submissions so we don’t think the report was a surprise.”
Manwaring adds: “They have thanked us for the Report and confirmed it is being studied. They haven’t involved us in their discussions, which isn’t a surprise to me; but the Panel did indicate it would be willing to respond or assist if it would be helpful.”
Upon further reflection...
Charity law expert Mark Blumberg of Blumberg Segal LLP in Toronto, notes that the Ministry’s response lag to the Panel’s report could be cause for concern.
By way of background, Blumberg says that the Political Activities Audit Program begun in 2012 was an “overreaction” by then-Prime Minister Stephen Harper that was “foisted on the CRA” to conduct audits on 60 charities over the course of a few years.
“The CRA in fact started 52 audits over a three year period,” Blumberg writes on his Canadian Charity Law blog.
[Note: Blumberg authorized CharityVillage to use his blog as reference for his quotes for this article, as they directly pertain to the subject matter and reflect his already public opinion/comments accurately.]
“This is what is known as the Political Activities Audit Program. What is not discussed in the press release is that during the last four or so years, there have been approximately 3,200 other audits initiated by the CRA; but they are not under the Political Activities Audit Program,” Blumberg says. “They relate to all facets of compliance and non-compliance. If one were to guess that 2% of regular audits might have to deal with political activity type issues, then there would be 64 audits that include political activities from the last few years that are not part of the Political Activities Audit Program. The Ministers statement only relates to the Political Activities Audit Program and not the other CRA audits that deal with political activities.”
However, Blumberg refers to the whole topic of political activities for charities as “a giant smelly red herring wrapped around the charity sector” milked by consecutive governments and a small cadre of registered charities (he does not name which).
“It is a giant diversion from...many real issues within the charity sector...99% plus of charities can conduct far more political activities under the current rules than they do,” he writes. “About 50 to 100 charities are probably truly constrained by [current] rules… that accounts for about 1/10 of 1 per cent of charities.
“While I believe that many charities should be doing more political activities, I am not so naive as to think that the political activities of charities are going to be the main selling feature of the charity sector in the public's mind. It is the charitable activities of the charity sector that are really the source of the legitimacy and public trust in the sector. Focusing for six years - and it is not over - on the role of charities and political activities as a central feature of the discussion of charities will in the long [run] reduce public trust in the sector, and make fundraising harder.”
Still, others believe the focus on this issue has been well worth the effort.
Imagining a new political landscape
Bruce MacDonald, president and CEO of Imagine Canada, was also pleased by the Panel’s report. Imagine was one of 20,000 organizations and individuals who submitted information/opinion as part of the Panel’s extensive consultation process in formulating its report. However, Imagine did not seek a seat at the Panel table.
“We did not have a direct role in the panel's deliberations,” he says. “It wouldn't have been appropriate for us to interfere in or try to influence those deliberations. We made a submission as part of the consultative process, and I was invited to participate in one of the in-person consultative focus groups that were held across the country.”
Asked what his organization is hearing from its stakeholders regarding the Panel report and the minister’s release, MacDonald said: “In regards to the audit suspension specifically, our sense from the sector is that there is relief and optimism. For ourselves, we hadn't actually recommended an audit suspension or cancellation as, without access to any of the audit findings or, indeed, knowing with certainty the list of organizations being audited, we did not believe we had an evidence-based reason to do so. Our hope and expectation would be that the Minister has based her decision on evidence to which we do not have access, and that care has been taken to not establish a precedent of political guidance in the audit process.”
Imagine issued its own release welcoming the news of the Panel report, the full statement can be read here.
And now, a word from Government
Lise Newton, a spokesperson for the CRA, told CharityVillage that the agency was busy reviewing the Panel report.
“Charities play a key role in Canadian society and provide valuable services to Canadians. That is why the government is committed to ensuring that charities are able to contribute to public debate and the development of public policy,” Newton said in an email.
She notes that the CRA is now “carefully reviewing and assessing the recommendations” of the Panel.
“It is important to note that the rules related to political activities in the Income Tax Act remain in force and charities must continue to comply with all the legal requirements for registration, including these rules,” Newton adds.
Minister Lebouthillier has also shared the Panel report with the Minister of Finance, according to the CRA.
Asked when the sector and public might know more about the government’s position on the Panel’s report, Newton responded: “The government’s review and analysis of all the recommendations will continue. For this reason, it would be premature to comment on any potential policy or administrative changes at this time. Additional information will be made public as it becomes available.”
Andy Levy-Ajzenkopf is a professional writer living in Toronto. He can be reached at email@example.com.
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