Much has been written and said recently about the carrying on of political activities by charities, but what does it really mean for charities?

Many in the charitable sector were excited about the recent decision of the Ontario Superior Court of Justice in Canada Without Poverty v. AG Canada in which the Court decided that certain rules in the Income Tax Act (Canada) (ITA) relating to political activities and certain aspects of the Canada Revenue Agency’s (CRA) interpretation and enforcement of these rules infringed upon the right to free expression under the Canadian Charter of Rights and Freedoms. This decision (had it stood) would have allowed a charity to engage in an unrestricted amount of non-partisan political activities, provided that such activities fell within the overall charitable purposes of the charity. According to CRA policy, a non-partisan political activity is one that does not involve “direct or indirect support of, or opposition to, any political party or candidate for public office.”

The excitement about this recent court decision was tempered as the Minister of National Revenue and the Minister of Finance issued a joint statement (Joint Statement) announcing that the federal government will appeal the Canada Without Poverty decision on the basis that it contains “significant errors of law” that create uncertainty in charity and constitutional law.

The Joint Statement also brought some positive news to the charitable sector in that the federal government announced that proposed amendments to the ITA will be presented this Fall to clarify the rules on charities and political activities (Amendments) and that the CRA will develop supporting guidance on the Amendments in consultation with the charitable sector.

The Joint Statement indicated that the Amendments will be consistent with recommendation no. 3 contained in the Report of the Consultation Panel on the Political Activities of Charities issued March 31, 2017 (Report) which will “allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy.” The Joint Statement noted that charities will still be required to have purposes that are exclusively charitable, and that the ITA will continue to contain the restrictions against charities carrying on any partisan political activities.

Another welcome announcement in the Joint Statement was confirmation of the Canadian Government’s intention to remove the quantitative limits on political activities (that is, the CRA interpretation of the ITA that requires charities to devote no more than 10% of their resources towards political activities), a rule which is considered by many to be confusing and arbitrary. Currently, charities that exceed the 10% limit could face penalties and sanctions, including revocation of charitable registration.

Significantly for charities that have been subject to sanctions and/or penalties arising from CRA audits relating to political activities, the Joint Statement also clarified that the Amendments would apply retroactively, including to the CRA audits and objections that are currently suspended.

So what does this all mean for charities? It appears that Canada will be entering a new and exciting frontier for charities’ engagement in public policy debates. However, while charities may be inclined to ramp up their political activities, caution should be exercised until the specifics of the Amendments are announced (and proclaimed into law) and the outcome of the appeal of the Canada Without Poverty case is determined.