In May 2017, the Minister of National Revenue publicly released the report of the Consultation Panel on the Political Activities of Charities.
The Panel made four recommendations:
- Amend Canada Revenue Agency policies and guidance to enable charities to fully engage in the public policy process.
- Reform CRA administrative, audit, and communications practices related to political activity to ensure consistency and clarity.
- Amend the Income Tax Act to remove the distinction between political activity and other public policy work done by charities.
- Work towards legal and regulatory modernization so that charities are held accountable for fulfilling their purposes, rather than the individual activities in which they engage.
These recommendations reflect input the Panel received from Imagine Canada and many other participants in the consultation process.
Implementing the Consultation Panel’s first three recommendations immediately would be a welcome down-payment towards the broader legal and regulatory reform the sector needs and that the federal government has promised.
Why are these recommendations are so important?
In recent years, some have called into question whether it’s legitimate for charities to engage the public in their policy and advocacy work. The CRA launched an audit program specifically aimed at charities’ political activity.
We firmly believe that public policy is better when charities are at the table. They bring ideas, perspectives, and experiences that need to be heard before decisions are made. If anything, the real problem is that not enough charities feel comfortable participating in the process.
Part of the reason that charities don’t participate is that many of the current rules are unclear.
Public policy engagement vs. Political activities
The CRA allows for charities to make contributions to public policy and engage in political activities.
Charities have a long tradition of working towards public policy reforms to benefit communities and individuals. Things that we now take for granted, like smoke-free workplaces, environmental protection regulations, drunk driving laws, or expanded human rights protections, were promoted by charities before they became mainstream thinking.
Much of the public policy work done by charities is deemed “charitable” by the CRA:
- Meeting with elected officials and public servants to discuss an issue;
- Making submissions and presentations to legislative bodies or public tribunals.
These, among other policy activities, are part of a charity’s every-day activities if they are directly related to the charity’s purposes.
What is a “political activity?”
Essentially, when the charity gets the public involved in an issue, it is considered a “political activity.” Some common examples include:
- Organizing a letter-writing campaign
- Circulating a petition
- Holding a rally.
These activities are completely legitimate for a charity to carry-out, but the CRA has established limits on the resources a charity can devote to these activities in a year. The general rule of thumb is ten percent of a charity’s resources – with annual spend used as a general proxy for “resources.” (Smaller charities are allowed to use a higher percentage of their resources.)
All of a charity’s public policy activities are governed by certain principles:
- policy positions and recommendations must be reasonable and grounded in research and fact;
- charities must, to the best of their knowledge, be truthful; and,
- charities may not act in a partisan manner, whether directly or indirectly.
So, what’s the problem?
- Few would argue with the notion that charities should be non-partisan. But CRA auditors themselves have inconsistent ideas on what constitutes “partisan” behaviour – especially when it comes to the vague concept of “indirectly” partisan. If charities are to follow the rules, we need clarity and consistency as to what those rules are.
- Charities’ positions have to be well thought-out and researched. But when it comes to measuring “political activity” resources, the CRA can’t give us a consistent answer as to how to account for research costs.
Removing the distinction between “political” activity and the other policy work that charities do would give more organizations the confidence to get involved in the public policy process. It would put charities on a more equal footing with other types of organization, which have no limits on their activities in support of their interests (and, interestingly, no obligation to be truthful).