Federal government appeals decision striking down limits on charities’ political activities, promises new legislation in the fall
August 16, 2018
BY Kevin Zakreski
In a decision handed down last month, Canada Without Poverty v Canada (AG), 2018 ONSC 4147, the Ontario Superior Court of Justice struck provisions of the Income Tax Act which “define the extent to which a registered charity may devote its resources to ‘political activities.’ ”Specifically, the court held that limits on charities’ political activities were unenforceable, while those pertaining to partisan activity remained in force:
The interpretation and enforcement by CRA of the “substantially all” requirement in s. 149.1(6.2) of the ITA by limiting to 10% a charitable organization’s use of its resources for political activities, as set out in the CRA Policy Statement, violates s. 2(b) of the Charter and is not saved by s. 1. There shall be a Declaration to that effect and an Order that CRA cease interpreting and enforcing s. 149.1(6.2) in that way.
There shall be a further Order that the phrase “charitable activities” used in s. 149.1(6.2) be read to include political activities, without quantum limitation, in furtherance of the organization’s charitable purposes.
The Declaration and Orders described above render meaningless ss. 149.1(6.2)(a) and (b) of the ITA. As part of the protection of freedom of expression encompassed by the above Declaration and Orders, there shall therefore be a further Declaration that ss. 149.1(6.2)(a) and (b) are of no force and effect pursuant to s. 52(1) of the Constitution Act, 1982.
The exclusion from “charitable activities” of partisan political activities contained in subsection 149.1(6.2)(c) of the ITA remains in force.
The rationale for these orders was the impairment that these provisions placed on the Charter right to freedom of expression:
Simply put, there is no way to pursue the Applicant’s charitable purpose—using methodology that is recognized as necessary by Parliament itself—while restricting its politically expressive activity to 10% of its resources as required by CRA under s. 149.1(6.2). As counsel for the Applicant points out, the Applicant does not claim a right to engage in political objectives or purposes; rather, it seeks to pursue its existing charitable purpose through means which are self-evidently expressive and protected by s. 2(b) of the Charter. In effect, the language of s. 149.1(6.2), and CRA’s 10% rule in application of that statutory provision, makes the Applicant’s charitable purpose untenable.
Moreover, the evidence is that the Applicant cannot function—or will have difficulty in functioning—in the absence of registered charitable status. The Attorney General presents no evidence that counters the Applicant’s description of its needs. The charity registration platform created by the ITA exists to support charitable works, and enforcement of s. 149.1(6.2), in burdening free expression, seriously impairs those works.
The court also found that this infringement couldn’t be justified under section 1 of the Charter because it failed to advance a pressing and substantial objective:
Restricting free expression for its own sake, in the absence of any further goal or policy purpose, is difficult to characterize as a pressing and substantive objective for the purposes of the Oakes test. The point of this first stage of analysis is to identify a social, economic, or other policy objective that is important enough in comparison with the Charter right that it can potentially justify limiting that right. Government cannot justify limiting the right of free expression for charities for the very purpose of ensuring that charities use no more than 10% of their resources on the exercise of free expression.
The Attorney General has not established a pressing and substantial objective, and the government’s case has not passed the first hurdle of Oakes. Once the objective is determined to be unjustified, the means chosen to accomplish the objective are equally unjustifiable and the impairment cannot be minimal. As for whether the effects of the measure are proportional to the objective, the question makes no sense since the objective and its effect on the Applicant’s rights are identical.
Yesterday, the ministers of national revenue and finance announced that the federal government had appealed the Ontario court’s decision “to address the uncertainty created by it, and to seek clarification on important issues of constitutional and charity law.” But “[t]he resolution of these legal issues, while necessary, will not change the policy direction the Government intends to take with respect to the removal of quantitative limits on political activities.”
Going further, the ministers promised new legislation in the fall to address the concerns raised in this litigation and the Report of the Consultation Panel on the Political Activities of Charities:
As a matter of good public policy, and to move forward with this commitment, our Government intends to amend the Income Tax Act to implement changes consistent with recommendation no. 3 of the Report of the Consultation Panel on the Political Activities of Charities. The intended amendments will allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy. Charities will still be required to have exclusively charitable purposes, and restrictions against partisan political activities will remain.
Our Government intends to present legislation to this effect in the Fall. The Canada Revenue Agency will develop supporting guidance in collaboration with the charitable sector. The legislation will be drafted to apply retroactively, including to the audits and objections that are currently suspended. This suspension will be lifted when the legislation is passed by Parliament, when we intend to fully respond to the Report of the Consultation Panel on the Political Activities of Charities.