On July 1, 2014, Canada’s Anti-Spam Legislation (CASL) came into force. For many organizations in the charitable and not-for-profit sector (collectively, NFPs), the road to compliance was and continues to be a challenge. In particular, questions surrounding the scope and applicability of the registered charities exemption have resulted in confusion and uncertainty for many NFPs. Last Friday, the Canadian Radio-television and Telecommunications Commission (CRTC) issued some much anticipated guidance in the form of frequently asked questions (FAQs) on this issue.
Designed as one of the most stringent anti-spam regimes in the world, CASL is expected to significantly change the e-communication landscape for organizations operating in the Canadian marketplace. Despite submissions made by members of the NFP sector to the government about the significant burden that CASL would impose on the sector, CASL does not contain a blanket exemption for the sector as a whole.
However, CASL does contain an exemption for commercial electronic messages (CEMs) sent by or on behalf of a registered charity, as defined under the Income Tax Act, where the primary purpose of the CEM is to raise funds for the charity. However, the scope and applicability of this exemption remained unclear because there was no guidance with respect to what constitutes a “primary purpose” or when activity is considered to “raise funds” for the charity.
IMAGINE CANADA GUIDANCE
On June 4, 2014, Imagine Canada published an Issue Alert stating that it had obtained clarity on the registered charity exemption from Industry Canada, one of the regulators responsible for CASL. Imagine Canada’s Issue Alert indicated that Industry Canada had advised that it interprets the charitable fundraising exemption to mean:
- All activities that fall under the Canada Revenue Agency (CRA) definition of fundraising, and which registered charities use to calculate their fundraising ratio, are exempt from the regulations
- A number of other activities that lie beyond the CRA fundraising definition, and which charities do not have to report when calculating their fundraising ratio, will also be exempt
The Issue Alert also provided examples of activities that they deemed to be exempt under the fundraising provision, such as newsletters that promote upcoming fundraising events (even where mention is made of corporate sponsors), the promotion of charitable activities that may involve a cost-recovery element, and the promotion of events and the sale of tickets by performing arts or cultural institutions, where the proceeds flow directly to the charity.
While this guidance was a welcome development for many NFPs, it was unfortunately short lived. On June 24 (one week before CASL came into force), Imagine Canada issued an update to this Issue Alert. In this update, Imagine Canada stated that the CRTC had contacted it to indicate that there are inconsistencies between the CRTC’s interpretation of the registered charities exemption and the information posted on Imagine Canada’s website. This news was concerning for many registered charities that hoped to rely on Imagine Canada’s guidance, especially since the CRTC (rather than Industry Canada) is the organization in charge of enforcing section 6 of CASL (the anti-spam provision). At the time of the Issue Alert update, Imagine Canada indicated that official guidance from the CRTC on this issue would be forthcoming.
CRTC’S GUIDANCE ON THE REGISTERED CHARITIES EXEMPTION
Last Friday, the CRTC provided guidance on this issue in the form of FAQs on registered charities.
In reference to the registered charities exemption, the CRTC clarified that the “primary purpose” of a CEM means the main reason or main purpose of the CEM. There could be a secondary or additional purpose to the message, but the principal purpose of the CEM must be to raise funds for the charity. Examples of CEMs that have as their primary purpose the raising of funds for the registered charity include:
- A CEM that promotes an event and/or the sale of tickets for an event, where the proceeds from ticket sales flow to the registered charity (e.g., a dinner, golf tournament, theatrical production, concert or other fundraising event)
- An electronic newsletter that provides information about the charity’s activities or an upcoming campaign but which also contains a section that solicits donations and may also mention corporate sponsors that supported the charity (but does not encourage the recipient to participate in a commercial activity with that sponsor)
However, the CRTC cautioned that where a CEM also advertises the corporate sponsors of a charity’s event and encourages the recipient to participate in a commercial activity with that sponsor, the fundraising exemption would not apply. Given that legitimate messages sent by registered charities raising funds are exempt under CASL, the CRTC also emphasized that its focus will be on messages sent by those attempting to circumvent the rules under the guise of a registered charity. These comments are aligned with the CRTC’s new FAQs on its general enforcement approach.
GUIDANCE ON CRTC’S ENFORCEMENT APPROACH
The CRTC has also updated its FAQs with respect to its general enforcement approach. While this approach is not specific to the NFP sector, it will be helpful for the sector to understand how the CRTC plans to enforce CASL. These FAQs affirm the CRTC’s verbal comments on the topic, namely that its goals are to promote compliance, prevent recidivism and support deterrence. Since the CRTC’s response will be dictated by the specific facts and circumstances of each case, the consequence of non-compliance will depend on various factors, including the nature, seriousness and impact of the violation, the history of non-compliance and the measures taken to prevent the violation. The CRTC has also confirmed that it will focus its investigations on cases where there are a significant number of complaints or there appears to be a major transgression.