Although welcome and overdue, the new federal tax legislation and guidance on policy advocacy by registered charities doesn’t mean that compliance worries faced by sector organizations in this area are a thing of the past. For those unfamiliar with the changes, more information on them can be found online. Essentially, these changes free up groups to do more non-partisan policy advocacy in furtherance of their charitable purposes.
What hasn’t changed are the obligations of organizations under other statutes. Charities should be aware of any regulatory requirements they face, whether under federal or provincial law, before embarking on their advocacy work.
This was highlighted last month when, as was widely reported in the mainstream media, Elections Canada warned charities that they remained subject to third party registration requirements under election legislation if they meet spending thresholds for “regulated activities”. Activities in this category include several types of conduct, but for charities the most important is “election advertising”.
Under charity tax rules, no coordination with a party or candidate is allowed.Election advertising is “transmission to the public by any means during the election period of an advertising message that promotes or opposes a registered party or candidate, including by taking a position on an issue with which the party or person is associated.” The last part of this definition means that charities can be required to register as third parties if they pay to promote a policy stance that happens to overlap with a position of a party or candidate. The $500 financial threshold is quite low, so easily triggered if any costs are incurred in the promotion.
The charity’s position overlapping with the party or candidate’s is enough to prompt the requirement. An organization having an existing stance on an issue, which is later taken up or opposed by a political actor, does not eliminate the need to register. Nor does the spending having been undertaken independently of the party or candidate relieve the charity of its registration obligation.
Provincial election legislation may take a similar approach.
Under charity tax rules, no coordination with a party or candidate is allowed. The Canada Revenue Agency (CRA) does, however, state in its guidance that autonomously promoting charity positions that at some point become part of a party or candidate’s platform do not indicate partisanship for its purposes. More broadly, based on the two regulators’ different areas of focus and definitions, registration with Elections Canada as a third party will not generally result in increased scrutiny from CRA.
That said, moves by a charity to sharply increase its advertising on a contentious issue or otherwise take a higher profile on a controversial position during an election campaign could spur CRA interest.
Election law is only one worry. In policy dealings with government, charities may also have registration and/or filing obligations under lobbying legislation. Some lobbying statutes, such as Alberta’s, recognize that charities’ policy interaction with government is different from that of individuals, corporations or others because charities are established and operated for the public benefit, rather than private interests. So, exemptions or less onerous requirements may apply to charities under some of this legislation.
Both federal and provincial lobbying statutes need to be reviewed to determine what obligations, if any, a charity faces. Charities, their staff or their representatives may be required to register or report activity in some circumstances. Again, this is not in-and-of-itself apt to trigger compliance concerns from CRA.
One recent case, however, has thrown a wrinkle into federal lobbying regulations as they apply to charities. As a general rule, members of the governing body of a charity cannot be remunerated for their work on the board. This is a big reason for charities avoiding filing requirements in many cases. That could change.
Charities should be aware of any regulatory requirements they face, whether under federal or provincial law, before embarking on their advocacy work.In the wake of a trip taken by Prime Minister Trudeau and his family to visit the Aga Khan over the 2017 New Year’s holiday, a complaint was filed with the federal Lobbying Commissioner. The response to that complaint lead to a judicial review. The case, called Democracy Watch v. Canada (Attorney General), included a challenge to the Commissioner’s initial finding that the Aga Khan, in his capacity as a board member of the Aga Khan Foundation – since it was unpaid – was not covered by the Lobbying Act or the Lobbyists’ Code of Conduct. The Federal Court held that the Commissioner’s decision was not reasonable, given this and other factors, and ordered reconsideration of the matter by her office.
In commenting on the issues, the Court found that even if a salary wasn’t paid to the Aga Khan this did not mean he wasn’t compensated in other ways for his foundation role. It ordered the Commissioner to take into account “a broad view of the circumstances” in its reconsideration. The government has since taken the matter to the Federal Court of Appeal, where at the time of writing it had not yet been heard.
If, when this matter is eventually resolved, charity board members are found to be potentially compensated in circumstances where they are not remunerated directly, this will have huge implications for them in reporting requirements under the federal lobbying legislation. It could also affect many non-profit organizations that do not pay their directors.
For charities, both because they are public benefit groups and because many of them face capacity issues or are difficult to reach with compliance information, increasing what is required of them under this legislation would be a bad idea. While it would increase transparency, doing so would be at the price of unnecessary red tape for groups that are operating for public benefit.
For the moment, registered charities can celebrate their increased scope for policy advocacy under Income Tax Act rules, but they need to be diligent and careful in meeting any obligations they have under other statutes as well.