It’s an accusation that’s been tossed around by politicians and organizations since the Conservative government announced last March it would set aside $8 million over two years to ensure charities follow the rules around political activities.
The David Suzuki Foundation was among the charities to come under fire, with Ethical Oil, an organization advocating for the Canadian bitumen industry, leading the attack.
“The David Suzuki Foundation is a highly political organization. With the mounting evidence of partisan and political activity, it is time for the Canada Revenue Agency (CRA) to investigate,” Ethical Oil spokesperson Jordan Graham said on the organization’s website.
A few weeks later, David Suzuki announced in an open letter on the foundation’s website that he had stepped down from the board.
“I want to speak freely without fear that my words will be deemed too political, and harm the organization of which I am so proud,” Suzuki wrote.
The response to the budget provision was mixed. Critics called on the government to stop “slandering charities” that are acting within the rules, while supporters of the move argued that taxpayer money should not be put toward political activities.
It is a debate with a long history.
A historical question
The definition of charitable purposes dates back more than four hundred years to what is commonly known as the Statute of Elizabeth in 1601. The document’s lengthy preamble laid out a list of purposes that could be considered charitable. Nearly 300 years later, the House of Lords grouped the purposes into four categories, in what is known as Pemsel’s case: relief of poverty, advancement of education, advancement of religion, and any other purpose for the public benefit.
Historically, charities were free to act politically, and they did. In a 2011 article published in The Charity Law & Practice Review, Australian charity law experts Kerry O’Halloran and Myles McGregor-Lowndes point to the Victorian-era charities that led the campaign to improve conditions for children working in factories or as chimney sweeps.
As common law developed, so did the definition of a charity. O’Halloran and McGregor-Lowndes write that it was a 1907 judgment that first used the term political in reference to charities. The court ruled that an organization with political purposes could not be a charity because “the law has no way of judging whether a proposed change in the law will or will not be for the public benefit.”
In Canada, specific regulations were laid out in the Income Tax Act of 1985. Canadian charities today can generally put 10% of their resources toward non-partisan political activities that further their charitable purposes. Smaller charities can use up to 20% of their resources for political activities. The percentage can be averaged over three years.
A problem of clarity
In May, Prime Minister Stephen Harper defended the increased scrutiny on charities’ political activities.
“What is incumbent upon all charities is that they respect the laws regarding political activities. Those laws are clear,” Harper said in the House of Commons.
The problem, however, is that for many charities the laws are not clear at all.
“In our view, the 10% rule is badly formulated, poorly understood and potentially highly arbitrary in its application by Revenue Canada,” states the authors of the Broadbent Report from 2009.
The 1999 Report of the Joint Tables found that the limit on political activity and the fear of losing charitable status creates an “advocacy chill.” Unclear about the line between sharing views and advocating a change of law, many charities avoid all political activities, even those that are allowed and would help their charitable cause.
According to the CRA, advocacy is not necessarily a political activity. Political activities refer to an explicit call to action.
Bob Wyatt, executive director of the Muttart Foundation, says most charities do not come close to meeting the cap on political activity.
“At both a staff level and a board level, the so-called advocacy chill is caused, in my view, in large part because people don’t understand what the rules are.”
Mark Blumberg, a Toronto-based charity lawyer, agrees. The biggest barrier to charities getting involved in political activities, he says, is not the rules – it’s not knowing the rules. Blumberg has calculated, based on charities’ reported political activities, that the charitable sector can spend 1,000 times more as a whole before it reaches the 10% limit.
Challenging the rationale
Canadian charities may have more flexibility than many believe, but some charity law experts say any constraints on political activity are a problem.
“I don’t see any justification for not allowing charities to pursue political purposes that benefit society,” says Alison Dunn, a professor at Newcastle Law School.
There are legal rationales for having some restrictions on charities’ political activities: courts cannot determine if a change in law would be in the public benefit and politically active charities might usurp the government. Dunn says these rationales don’t hold up.
Matthew Turnour, an Australian charity law expert, says countries that don’t use common law, such as European countries, tend to not have constraints on charities’ political activities.
Having fewer constraints, he says, benefits society. “It’s clearly to the benefit of our society for people to engage in public debate, whatever view they take. It doesn’t matter much, so long as they engage.”
O’Halloran and McGregor-Lowndes conclude in their 2011 article: “The political constraint rule...represents an archaic use of the law to suppress matters clearly in the public interest and has contributed considerably to a general muting of dissent in the nonprofit sector.”
Taking the question to the courts
Those strong words come from a jurisdiction that has seen change.
It began in 2006 when Aid/Watch, a registered charity and watchdog of the Australian government’s aid programs, lost its charitable status. The Australian Tax Office said political activities had become Aid/Watch’s main activities after the organization, among other things, delivered a 60th anniversary birthday cake to the World Bank. According to the Australian Tax Office, these activities were not charitable and did not further the organization’s charitable purposes.
The case made it to Australia’s High Court in late 2010. The court’s decision was significant; it ruled that Aid/Watch was acting politically, but that generating public debate was beneficial to the community.
The court’s decision ended “a four year gag on free speech for many NGOs,” Aid/Watch says on their website.
The ruling doesn’t signal changes to other common-law countries like Canada just yet.
Australia’s common law on the issue allowed for more flexibility, Dunn says. Australian courts had previously concluded that it would be difficult for courts to determine a public benefit of a change in law. In the United Kingdom and Canada, the courts have taken a much stronger stance – judges cannot determine whether the change in law a charity is advocating would be of public benefit.
Fear of foreign influence
In Canada, Conservatives have voiced another rationale behind the restrictions on charities’ political activities: the concern that foreign funding could lead to foreign influence.
During an inquiry into the foreign funding of Canadian charities, Conservative Senator Don Plett said "foreign entities should simply not be allowed to meddle in the Canadian regulatory process under the guise of charities."
Harper’s government isn’t the only one to voice this concern. There’s also Vladimir Putin’s in Russia.
In July the Russian president signed a law in July requiring all Russian non-governmental organizations that receive foreign funding and engage in political activity to register themselves as foreign agents. Failing to register could lead to fines or even prison time.
Organizations around the world have condemned the move.
The new regulations will “limit civil society’s ability to hold governments to account” and will “misrepresent what non-governmental organizations do,” Transparency International, an international organization that works on anti-corruption issues, said in a press release.
In Canada, the concerns over foreign funding are just talk.
“Charities have always had to report in detail from outside Canada. They will continue to do so,” Wyatt says.
No changes yet
Canada is not Russia. But it’s also not Australia.
“I don’t think in (jurisdictions other than Australia) that there is an appetite to change,” Dunn says. “It takes the political will to want to change.”
But the recent public attention to the rules regarding charities’ political activities could lead to “unintended consequences” as charities understand better what they are allowed to do, says Wyatt.
“I wouldn’t be surprised if in two or three or five years there’re actually more charities doing (political activities).”
David Suzuki’s open letter last April called for just that.
“I am keenly aware that some governments, industries and special interest groups are working hard to silence us. They use threats to the Foundation's charitable status in attempts to mute its powerful voice on issues that matter deeply to you and many other Canadians,” the letter said.
“This bullying demonstrates how important it is to speak out.”
Political activities as defined by the CRA:
1. Explicitly communicates a call to political action (i.e., encourages the public to contact an elected representative or public official and urges them to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country);
2. Explicitly communicates to the public that the law, policy, or decision of any level of government in Canada or a foreign country should be retained (if the retention of the law, policy or decision is being reconsidered by a government), opposed, or changed; or
3. Explicitly indicates in its materials (whether internal or external) that the intention of the activity is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country.
Source: CRA website.
Heather Yundt is a freelance radio and print journalist based in Ottawa. She can be reached at email@example.com or on Twitter @hyundt.
Photos (from top) via iStock.com. All photos used with permission.
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