Backgrounder: Draft Legislative Proposals Regarding Political Activities of Charities


In Canada, registered charities are required to operate exclusively for charitable purposes and to devote their resources exclusively to charitable activities.

In 1985, a Canadian court decision introduced considerable uncertainty as to whether charities could use their resources to engage in political activities. In response, the Government amended the Income Tax Act to provide that, as long as a charity devoted substantially all of its resources to charitable activities, it could devote a limited portion of its resources (generally, about 10 per cent) to non-partisan political activities that are ancillary and incidental to its charitable purposes. These amendments were intended to be permissive, allowing charities to devote some of their resources to non-partisan political activities.

Some charities have argued that the rules on political activities are confusing, overly restrictive and hard to apply in practice, while denying charities the ability to participate fully in public policy development. In light of this, in 2015, the Mandate Letter of the Minister of Finance directed him to "work with the Minister of National Revenue to allow charities to do their work on behalf of Canadians free from political harassment, and modernize the rules governing the charitable and non-for-profit sectors. This will include clarifying the rules governing 'political activity,' with an understanding that charities make an important contribution to public debate and public policy."

In March 2017, an expert panel (the Panel) appointed by the Minister of National Revenue provided a series of recommendations to the Government based on consultations held with charities. This report was released publicly in May 2017.

With regard to political activities, the principal recommendation of the Panel (in Recommendation no. 3) was that the Government "amend the [Income Tax Act] by deleting any reference to non-partisan 'political activities' to explicitly allow charities to fully engage, without limitation, in non-partisan public policy dialogue and development, provided that it is subordinate to and furthers their charitable purposes."

The Panel recommended that the Income Tax Act "retain the current legal requirement that charities must be constituted and operated exclusively for charitable purposes, and that political purposes are not charitable purposes". At the same time, the Panel recommended that the Government retain the prohibition on charities engaging in partisan political activities.

A number of commentators have argued that, since the introduction of the amendments outlined above, the common law has evolved (particularly as a result of the decision of the Supreme Court of Canada in Vancouver Society of Immigrant and Visible Minority Women v. M.N.R. in 1999) such that non-partisan political activities that are ancillary and incidental to a charitable purpose are now permitted. The Government's review has concluded that the provisions originally introduced in 1985 are, in large part, no longer required.

On August 15, 2018, the Minister of National Revenue and the Minister of Finance issued a joint statement indicating that the Government would bring forward Income Tax Act amendments to remove the quantitative limits on non-partisan political activities, consistent with the Panel's Recommendation no. 3.

The draft legislative proposals released for public comment today would address the panel's recommendations on political activities by:

  • Largely removing the Income Tax Act provisions relating to the political activities of charities, including the provision that effectively allowed charities to devote approximately 10 per cent of their resources to non-partisan political activities.
  • Maintaining the prohibition on charities providing direct or indirect support of, or opposition to, a political party or candidate for public office.
  • Clarifying that charitable organizations, like charitable foundations, must be constituted and operated for exclusively charitable purposes.

As a result of these changes, the issue of political activities would be largely governed by the common law – meaning that a charity's political activities would continue to be permitted if those activities are ancillary and incidental to the fulfillment of its charitable purposes. At the same time, these changes would leave untouched the common law requirement that a registered charity cannot be established or operated for a political purpose. This is consistent with Recommendation no. 3 of the Panel.

The draft legislative proposals would, if adopted by Parliament, apply retroactively to related audits and objections that are currently suspended.

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