Standing Senate Committee on Finance and their review of Political Activities - November 28, 2018

November 29, 2018 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law, Political Activities and Canadian charities

On Wednesday November 28, 2018 I presented to the Senate Committee on Finance in Ottawa. My presentation dealt with Bill C-86, Budget Implementation Act, 2018, and specifically the proposed changes to the rules and regulations on political activities carried out by charities within the Bill. 

Here is the full Video Webcast and my testimony begins at around 20:03:45.

On October 25, 2018, Finance put forward legislation that Canadian charities can conduct unlimited political activities connect to their objects as long as these activities are non-partisan. You can read more about the recent changes in my article Finance Changes to Political Activities and Canadian Charities. If you are interested in the issue of Canadian charities and political activities you might find some of the resources in political activities directory to be helpful. 

Here is my recommendation to the Senate Committee:

Recommendation 1: That the public policy dialogue and development activities (PPADA) of registered charities that would allow unlimited non-partisan political activities connected to the purpose of the charity be removed from Bill C-86 ie (revert to the Department of Finance "Legislative Proposals Notice of Ways and Means Motions" on September 14, 2018 and the courts, especially the Supreme Court, can decide the rules and what ancillary and incidental means. 

I support the CRA’s efforts to appeal the CWP decision and let the parties take it all the way to the Supreme Court.  

An alternative recommendation is

Alternative Recommendation: That the public policy dialogue and development activities (PPADA) of registered charities that would allow unlimited non-partisan political activities connected to the purpose of the charity be made subordinate (less than 50%) to the charity’s other charitable activities that are not PPADA

Here are my full comments which I did not finish due to time limitations:

Verbal Testimony to Senate Committee on Finance by Mark Blumberg, Blumberg Segal LLP, November 28, 2018

Thank you for the invitation to speak today.  I have been asked to discuss Bill C-86, Budget Implementation Act, 2018, especially relating to non-partisan political activities of registered charities and the unlimited public policy dialogue and development activities (I will refer to as PPADA) which essentially allows unlimited non-partisan political activities by Canadian charities.

If you have been paying attention over the last 2 months to developments relating to charities and political you might have whiplash. 

For over 30 years we had rules that allowed charities to spend up 10% of their resources on non-partisan political activities connected with their objects.  On September 14, 2018, Finance announced a return to the common law, allowing charities to do ancillary and incidental political activities. This probably would have narrowed the scope of political activities from the previous 10% allowance.  On October 25, 2018 Finance brought in proposed legislation that would allow Canadian charities to conduct unlimited non-partisan political activities connected with their objects.    

So essentially the Finance Minister has gone from 10% to say 1% to 100% all in the space of 2 months.  These sorts of head spinning changes are disconcerting.

The debate about charities and political activities has consumed a lot of space since 2011.  The Liberal government has put forward legislation on October 25, 2018 that I think is quite dangerous to allow Canadian charities to conduct unlimited political activities as long as they are non-partisan and connected with the objects of the charity.   Unlike donations to candidates which are capped there are no caps on amounts that can be donated to a registered charity. 

I am sure that you all have been looking at the political situation in the US with some concern.  I am afraid that allowing charities to spend 100% of their resources on political activities is not going to empower average Canadian charities to be more involved in political activities because they had the opportunity to spend up to 10% of resources under the previous rules but 99% of them did not even spend 1%.   My concern is that this change is going to help a few very wealthy individuals or large companies with some very peculiar views to essentially dominate the political discourse in our country as has happened in the US.
 

We know that Canadian charities on the T3010 annual return claim to have spent approximately $25 million per year on political activities. Yet if Canadian charities have expenditures of over $250 billion a year in theory Canadian charities could in fact spend almost $25 billion on political activities. In other words, Canadian charities under the old rules could spend 1000 times more funds on political activities than that which they claim to spend.  That was very unlikely to happen but fundamentally the issue holding back 99% of charities is not the rules.

Some people talk in terms of freedom of expression for charities, but it is really about money more than freedom of speech. People who work or volunteer with charities are free to express their personal views on their own time and that can even include partisan activities.   However, some want more - the ability to be paid using a charity's resources, which are subsidized by taxpayers, to express their political views and to not have to do any charitable activities.  The 10% rule is not enough for them.  They want 100%.   There is a difference between “free speech” and heavily “subsidized speech”.  There is nothing “free” about this speech! The tax incentives are huge, and will disproportionately benefit a very very small number of people. As well, the cost in terms of public confidence in the sector will not be free. 

Finance in their fall update are estimating that the cost of this measure will be up to 90m in Federal taxes foregone per year by 2022, which means charities would be spending about say $300m more on political activities per year. These figures don’t include the hit to provincial governments. By my off the napkin calculation it appears that Finance is guessing that there will be about a 12-fold increase in the amount of spending by registered charities from the numbers declared at the moment which are about 25m per year. I am not sure how Finance is going to measure this as these public policy dialogue and development activities (PPADA) aka non-partisan political activities are now “charitable” and donations to charities therefore presumably are just regular donations to charities.

I think the Finance figures are conservative, and if we look at the US experience we are going to have single individuals that will receive more than 90m in Federal tax relief.  The issue is not just going to be foregone Federal tax and provincial tax but  ultimately the quality of the work coming from a small number of charities with barely hidden partisan agendas that can undermine public confidence in the sector. Unfortunately, we only need to look at the US at the moment to see the corrosive impact of lots of dark money and political contributions funneled through the non-profit sector and some propaganda being promoted by some 501c3 organizations.

This is going to be a big mess and a distraction for the sector but as with many messes it will take many years to see the reactions and counter reactions and the damage.   It also is not the end of the debate.  It took the Federal Liberals 3 years to add 55 words to the ITA and it could take another political party a few months to unwind them.   Just look at the new Ontario government and how quickly they are unwinding the predecessor Liberal government’s changes. This change is not settling the issue – only tossing a tear gas grenade into the charity sector.

I think it is important for Canadian charities to conduct some non-partisan political activities if you want charities to have a significant impact on complicated and systemic issues facing our society.  The previous rules had allowed charities to spend about 10% of their resources on non-partisan political activities and these were fine for almost all charities and probably created an issue for far less than 1% of charities. 

There are tens of thousands of registered charities working hard every day to conduct charitable activities they are doing important charitable work and have particular expertise, knowledge and experience BECAUSE of their charitable work, and therefore even though they are heavily subsidized by the tax system it is a good idea that they do participate in the non-partisan political activities and the 10% allowed them a lot of leeway.   I think the very subsidized charity sector should be able to do highly subsidized non-partisan political activities because they are doing all the other real charitable activities. 

This legislation opens a hole in the charity system in that it allows groups to call themselves registered charities as long as they have “purposes” which are charitable, even though they  do no charitable activities in reality – yes we are redefining “non-partisan political activities” as charitable activities – but it is a questionable definition that I don’t think the public and many supporters of charities is going to embrace. 

If we have a few hundred high-profile single agenda groups on topics such as abortion, immigration policy, abolishing the monarchy, lowering taxes, getting rid of the minimum wage, gun control vs. gun rights, Middle East conflict, ending socialized medicine etc. - it could turn Canadians off charity and make fundraising more difficult.  It entrenches the ‘golden rule’ ie. those who have the gold make the rules.    

My recommendation is:

Recommendation 1: That the public policy dialogue and development activities (PPADA) of registered charities that would allow unlimited non-partisan political activities connected to the purpose of the charity be removed from Bill C-86 ie (revert to the Department of Finance "Legislative Proposals Notice of Ways and Means Motions" on September 14, 2018 and the courts, especially the Supreme Court, can decide the rules and what ancillary and incidental means. 

I support the CRA’s efforts to appeal the CWP decision and let the parties take it all the way to the Supreme Court.  

An alternative recommendation is

Alternative Recommendation: That the public policy dialogue and development activities (PPADA) of registered charities that would allow unlimited non-partisan political activities connected to the purpose of the charity be made subordinate (less than 50%) to the charity’s other charitable activities that are not PPADA.

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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