Liberals promise to repeal restriction on charities' political activity

The Liberal government is headed to court to defend a part of the Income Tax Act that limits the political activities of charities — even as it promises to repeal that very same section of the law as early as the fall.

That apparently paradoxical position was announced on Wednesday, the deadline for launching an appeal of a July 16 ruling by an Ontario court that said the controversial section violates the Charter of Rights guarantee of freedom of expression.

A tiny Ottawa charity brought the case before the Ontario Superior Court of Justice after a political activity audit by the Canada Revenue Agency (CRA) threatened the group's existence.

The CRA had filed notice in 2016 that Canada Without Poverty (CWP) would lose its charitable status because 98.5 per cent of its activities were deemed 'political' — far in excess of the 10 per cent limit set out in the Income Tax Act. Losing the ability to write tax receipts to donors would put the CWP in a financial bind.

With pro bono help from a big Toronto law firm, Canada Without Poverty argued that the section of the Income Tax Act is an unjustified infringement on the guarantee of freedom of expression in Section 2 of the Charter of Rights and Freedoms, and obstructs its ability to press for policy and legislative changes to fight poverty.

Justice Edward Morgan agreed; he declared that the law's 10 per cent limit would have "no force and effect" immediately, starting a 30-day appeal clock that ran out Wednesday.

All sides agree

Morgan's ruling preserved the legal prohibition on partisan activities by charities — endorsing particular political candidates and parties — which all sides agreed is an appropriate restriction.

In a media release issued today, the federal government said it is challenging the Ontario ruling because of "significant errors of law" touching on constitutional questions — but will nevertheless move to amend the Income Tax Act to remove the 10 per cent restriction.

The proposed amendments are expected to be included in the omnibus Budget Implementation Act in the fall session of Parliament.

Any future government would be free to re-introduce the same legislative provisions and the same thing could happen to the charitable sector all over again.- Leilani Farha, executive director of Canada Without Poverty

"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," says the joint statement by National Revenue Minister Diane Lebouthillier and Finance Minister Bill Morneau.

"Charities will still be required to have exclusively charitable purposes, and restrictions against political purposes and partisan political activities will remain."

Leilani Farha, executive director of Canada Without Poverty, said the government's vow to change the law is "nothing to celebrate."

"Ultimately, their position is that what happened to CWP under the previous government does not violate the charter," she said. "If they win on appeal, any future government would be free to re-introduce the same legislative provisions and the same thing could happen to the charitable sector all over again."

During the 2015 federal election campaign, the Trudeau Liberals promised to end the "political harassment" of charities by "clarifying the rules governing 'political activity' …"

That commitment was aimed squarely at the Conservative Party under Stephen Harper, which in 2012 launched a $13.4 million program to have the CRA conduct political audits of 60 charities.

The project initially targeted a group of environmental charities that had challenged the government's energy and pipeline policies, and later spread to human rights groups and others.

The new Liberal government was reluctant to wind down the project, instead appointing a blue-ribbon panel in 2016 to examine the issues.

The panel in March 2017 recommended the government remove any reference in the Income Tax Act to the political activities of charities, saying such groups should be allowed to engage in non-partisan public debate "without limitation."

No immediate action

Lebouthillier said at the time the government would review the panel's recommendations. She took no immediate action, apart from suspending – but not cancelling – the remaining 12 active audits in CRA's political-activity audit program.

Five of those audits had concluded with a notice to deregister the charities, including Canada Without Poverty and the Toronto-based Environmental Defence — which says it has incurred some $200,000 in legal fees to respond to the CRA audit.

The suspensions will remain in effect, even after Wednesday's announcements, but any amendments made to the Income Tax Act regarding political activities will be applied retroactively to the 12 organizations facing suspended audits, the statement from Lebouthillier and Morneau indicated.

Tim Gray, executive director of Environment Defence, applauded the government's commitment "to legally end the muzzling of charities."

"We do not support the decision to appeal the ruling but recognize that the federal government is making moves to address the issues raised in it," Gray said in a statement.

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