regulation of advocacy in the voluntary sector, b harvie

Voluntary Sector Initiative Report

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Regulation of Advocacy in the Voluntary Sector: Current Challenges and Some Responses

© Betsy A. Harvie, 2002

Funded by the Government of Canada, through the VoluntarySector Initiative, this report is published by the Voluntary SectorSecretariat, which provides support for voluntary sectorparticipation in the VSI, and communicates with the sectorabout the Initiative.

It does not necessarily reflect the views of theGovernment of Canada or the voluntary sector.


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Current ChalleCurrent ChalleCurrent ChalleCurrent ChalleCurrent Challengngngngnges and Some Responseses and Some Responseses and Some Responseses and Some Responseses and Some Responsesby Betsy A. Harvie

January 2002


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Executive Summary

This paper will provide background andcontext on the issue of advocacy from theperspective of the voluntary sector and estab-lish a framework for further discussion. Sincethe Advocacy Working Group (AWG) seeks toengage and learn from the sector, charitableand non-profit leaders were interviewed abouttheir opinions and experiences. Their defini-tion of advocacy goes further than someaccepted definitions. Advocacy is understoodto enable those who need help to find theirown voice. It gives power to citizens. Theydraw no distinctions in practice betweenadvocacy for an individual and advocacy forsystemic change or to benefit a group.Advocacy brings to light widely held bias anddismantles perceptions. Charities engage inadvocacy because it is an effective, andsometimes the only, way to achieve theircharitable purposes

Surveys indicate that 88 to 93 percent ofCanadians strongly support charities engag-ing in advocacy and almost 80 percent believethat charities understand the needs of Canadi-ans better than government.1 Nonetheless,there is vir tually no systematically collectedinformation in Canada about the groups,charitable and non-charitable, which engagein advocacy. More research is needed on therange and kinds of advocacy that are currentlyfunded by government, however a number offederal departments appear to understand thebenefits to their decision-making processes ofsupporting sector-based public policy input.

As government has downsized, it hascome to rely increasingly on the voluntarysector for advice on the operational implica-tions of programs administered by the sector.It needs the sector’s expertise, unique accessinto the community, attentiveness to socialneed and ability to facilitate the voices ofCanadians in public policy formulation –particularly since its own policy capacity hasdiminished in recent years and the complexityof policy issues has increased. Nonetheless,government enthusiasm for increased sectorinvolvement in policy development seems

Acknowledgements

I would like to thank Laurie Rektor of theVoluntary Sector Initiative Secretariat for herinvaluable assistance. Her insights into thesubstantive issues and her skills as an editorare acknowledged with gratitude. The finalproduct is much improved because of herinvolvement. The Advocacy Working Group,particularly its Chair, Megan Williams, Na-tional Director, The Canadian Conference forthe Arts reviewed drafts and provided helpfulcomments. Their contacts through out thevoluntary sector facilitated my interviews andopened many doors. I must acknowledge toothe contribution of the many staff and lead-ers of voluntary groups with whom I spokeduring late 2001. I appreciate that theycleared their schedules to be interviewedand that they were so candid in sharing theirobservations and anecdotes.

B.H.

About the Author

Betsy A. Harvie is a lawyer and consult-ant to Canadian charities and voluntarygroups. She advises on charity law, organi-zational structure, board governance andpolicy issue management. She obtained herB.A. (Hon.) from the University of Alberta in1981 and her LL.B. from Osgoode Hall LawSchool, York University in 1986. Between1988 and 1996, she was an associate andthen partner with the Toronto law firmGenest Murray where she practiced publicregulatory law. Since 1997 the focus of herwork has been within the voluntary sector.She holds a Professional Master’s of PublicAdministration specializing in the ThirdSector from the School of Policy Studies,Queen’s University. She can be reached [email protected]


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ambivalent. In part this is due to the difficul-ties of accommodating the sector’s viewpointsinto internal government processes and ex-pectations. It may also relate to perceptionsabout the sector’s capacity for and concernsabout the sector’s own biases.

Charities may not be established forpolitical purposes. Under the common law andthe federal Income Tax Act they may partici-pate in non-partisan political activities thatfurther their legitimately charitable purposes.The caveat is that these political activitiesmust be incidental and ancillary to their chari-table purposes. The Canada Customs andRevenue Agency (CCRA) has developed arule that registered charities may not devotemore than 10 percent of their resources topolitical activities.

Registered charitable status can make amaterial difference to the fundraising capacityof organizations. The sector also seeks atangible acknowledgment from governmentthat it has a vital role to play in public policydevelopment. Extending the advantages ofregistered status to groups that do more thanincidental advocacy would accomplish this.

CCRA tries to draw a fine line betweenactivity that is intended to inform (which ischaritable) and that which is intended topersuade (which is political). According toCCRA, legitimate public education encouragesa full and reasoned consideration of an issue;it does not seek to influence public opinion.Public education campaigns are rarely consid-ered charitable however since they seek topersuade, do not present all sides of an issueand are not part of a structured educationalexperience. The onus on charities to presentall sides is greater the more controversial theissue.

The problem with these requirements isthat they require groups to distinguish be-tween ‘facts to inform’ and offering ‘opinion topersuade’ when that is not how most peopleperceive an issue or communicate it to others.The ‘intention to persuade’ will always bepresent, regardless of what it is called or howthe information is shared. Requiring groups topresent both sides of an issue is unrealistic as

is making them responsible for establishingthat an issue is not controversial when anyissue that makes the newspapers is apt toarouse opposition from someone. Moreover,many charities work with the mostmarginalized members of society and theissues with which they contend are necessar-ily difficult and contentious. The requirementthat charities wait until they are invited toparticipate in government-led processesplaces them in a subordinate position vis-à-visgovernment and one that is inconsistent withtheir role as an early warning system.

The case law on political activities isunclear and inconsistent. Compounding this isCCRA’s conservative legal interpretations andapplication of its own requirements that canbe subjective, impractical, overly broad andunclear. This leads to confusion amongstcharities about what exactly is permitted andwhat is restricted. The uncertainties of thelaw, compounded with regulator insistencethat all decisions be made on a confidentialcase by case basis hampers the sector’sability to obtain clear guidance on the limits ofpermissible political activity. The regulatoryclimate has produced an ‘advocacy chill’where groups are fearful of the consequencesof engaging in impermissible activities andfrequently do much less advocacy than theymight wish or should do to achieve theircharitable purposes. The secrecy and uncer-tainty of the regulatory regime prompts someto question its integrity and the impartiality ofCCRA in selecting certain groups for auditsand investigation. Charities express concernsabout fundamental fairness based on thelimitations put on advocacy on the one hand,and the deductibility of lobbying and advertis-ing expenses by business, on the other. Morecertainty and fewer restrictions exist in theregulation of political activities by charities inthe United States and England.

This paper also addresses argumentsagainst reform including the following. If thetax advantages of registered status are ex-tended to other groups, is government provid-ing an indirect subsidy to organizations thatoppose it? Concerns exist about government’s


ability to control groups with extreme views.Although government may be worried aboutthe potential loss of tax revenue if moregroups are granted registered status, there isno reliable evidence that this would occur.Canada can learn from practices in otherjurisdictions, in particular, England. There mayalso be opportunities to develop sector-wideguidelines on best practices and approachesto political activities that would establish newbenchmarks for responsible conduct by chari-ties in respect of advocacy initiatives andreassure government that the sector as awhole takes seriously its obligations.

The paper concludes by identifying sev-eral options for reform including those out-lined in the “Working Together” report by theRegulatory Table, a proposal by IMPACS, andthe so-called ‘Drache’ and ‘Webb’ proposals.Each option is briefly analyzed from theperspective of charities, the voluntary sector,government and society.

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Table of ContentsAcknowledgements ............................................................................................................ iiAbout the Author ................................................................................................................ iiExecutive Summary ........................................................................................................... ii

PART 1: INTRODUCTION ................................................................................................ 1

1.0 Background ............................................................................................................. 12.0 Methodology ........................................................................................................... 2

PART II –ADVOCACY IN THE VOLUNTARY SECTOR ................................................ 3

1.0 Voluntary Sector’s Definition of Advocacy ......................................................... 32.0 Diversity of Advocacy Work ................................................................................. 43.0 Why Charities Engage in Advocacy .................................................................... 44.0 Advocacy By Whom?............................................................................................. 55.0 Public Approval of Advocacy ............................................................................... 6

PART III – THE FEDERAL GOVERNMENT ENVIRONMENT ..................................... 7

1.0 Government Provides Direct Support for Advocacy ........................................ 72.0 When Good Relations with Government are Not Enough ............................... 73.0 Devolution of Service Delivery Heightens Need for Advice ........................... 84.0 New Demands for Policy Input ............................................................................ 8

Part IV – The Regulatory Framework For Registered Charities ......................... 10

1.0 Restrictions on Advocacy ................................................................................... 102.0 Why Charitable Status Matters .......................................................................... 103.0 Advocacy and the Regulation of Charities ...................................................... 11

3.1 Limited federal authority to regulate charities ........................................... 113.2 Charity interpreted narrowly under the law of trusts ................................ 113.3 Headings of charity ........................................................................................ 123.4 Prohibition on political purposes ................................................................. 123.5 The restriction on political activities ........................................................... 133.6 The limits of public education....................................................................... 14

Part V – Problems With The Rules ............................................................................. 15

1.0 Regulation is Unreasonable and Overly Broad .............................................. 15

1.1 The difference between facts and opinion ................................................. 151.2 Intention to persuade will always be present ............................................ 151.3 The rules mandate the subordination of charities to government .......... 151.4 The ban on influencing any person is overly broad .................................. 151.5 Requiring charities to present both sides is unreasonable ..................... 151.6 Tiptoeing around socially controversial issues ......................................... 16

2.0 Problems of Clarity: Where to Draw the Line? ................................................ 16

2.1 When do language and images become emotive? ................................... 162.2 Subjectivity and other difficulties in measuring intention ........................ 162.3 Insufficient clarity among the regulated about

what is being regulated .................................................................................. 172.4 Advocacy chill ................................................................................................. 172.5 Difficulties with the 10% rule ........................................................................ 17

3.0 The Rules Prevent Charities From Achieving Their Charitable Purpose .... 18

3.1 Necessary for achievement of charitable purposes ................................. 183.2 Advocacy empowers those denied social justice ...................................... 183.3 Controversy is part of helping people on the margins ............................. 18

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4.0 The Appearance of Discriminatory Application of the Rules ........................ 19

5.0 Group Interests Can Support the Broader Public Interest ............................ 19

6.0 Inconsistent Treatment of Advocacy by Charities and Other Efforts to Change Policy .................................................................................................. 20

6.1 Unclear why litigation is treated differently................................................ 206.2 Difference between advocacy in the charitable sector and

lobbying and advertising expenses in the private sector ......................... 206.3 Difference between advocacy expenditures and

donations to political parties ......................................................................... 20

PART VI – OTHER JURISDICTIONS ............................................................................ 21

1.0 The United States ................................................................................................ 21

2.0 England ................................................................................................................. 21

PART VII – RESPONSES TO ARGUMENTS AGAINST CHANG E ........................... 23

1.0 Advocacy is Not Included in the Traditional Justification for Subsidizing the Charitable Sector ........................................................................................... 23

2.0 Indirect Subsidy to Organizations Opposing Government ............................ 23

3.0 Government Loses Control Over Who to Exclude ........................................... 24

3.1 Government loses control over groups whose political viewsare considered extreme ................................................................................. 24

3.2 Government loses flexibility to make judgements most Canadianswould support .................................................................................................. 24

4.0 Not in the Best Long-term Interest of the Charitable Sector ........................ 25

5.0 Loss of Taxation Revenue .................................................................................. 25

6.0 Advocacy Groups and Charities Do Not Contribute Usefully to the Policy Debate ....................................................................................................... 25

7.0 Difficulty in Measuring the Impacts of Advocacy ........................................... 26

PART VIII – OPTIONS FOR CHANGE .......................................................................... 27

1.0 Our Purpose and a Caveat ................................................................................ 27

2.0 Working Together Proposal: Re-define Political Activities ........................... 28

3.0 Working Together Proposal: Replace the 10% Rule with the Requirement that Political Activities be Incidental and Ancillary ........................................ 29

4.0 IMPACS Proposal: List Prohibited Partisan Political Activities in the Income Tax Act .............................................................................................. 30

5.0 Press for More Guidance From Courts or Tribunal ........................................ 31

6.0 Drache Proposal: Create New Category of Public Benefit Organization .. 32

7.0 Webb Proposal: Create New Category of Registered Interest Organization ........................................................................................... 33

PART IX – CONCLUSION .............................................................................................. 34

ENDNOTES ....................................................................................................................... 35

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PART I - INTRODUCTION

1.0 Background

The purpose of this paper is to providebackground and context on the issue of advo-cacy from the perspective of the voluntary sectorand to establish the framework for further discus-sions. We seek to stimulate debate and renewedconsideration of the voluntary sector’s advocacyand related issues. We are keen that the dia-logue engages the voluntary sector directly sothat its voice and ideas are heard.

Advocacy is of great importance to the workof many sector organizations and is consistentlyidentified as one of the most vital contributionsthat they make both nationally and internation-ally. It is through advocacy that the sector identi-fies and promotes ideas and activities thatpolicy-makers and legislators subsequentlyincorporate into public policy. Throughout historyvoluntary sector organizations have made tre-mendous contributions through their advocacyincluding work to eliminate poverty, the develop-ment of Medicare, and the creation of childwelfare policies and programs. In 1978 Mrs.Dudley of the Migraine Foundation said to afederal commission on charities: “I’d be willing tomake a guess that 50 percent of the legislationpassed in this country has been at the urging ofsome group. If you ever just sat and waited forthe government to propose legislation, you know

what would happen.”2

The ability of voluntary sector groups toprovide a voice for citizens, both at the marginsand in the mainstream, has been championed foryears as critical to the quality of democratic

decision-making. The sector’s acknowledgedstrength lies in its diversity and autonomy, bothof which enable it to promote new ideas andperspectives that enhance public decision-making.

In recent years as governments and publicspending have shrunk, the voluntary sector iscalled on increasingly to serve as the socialsafety net and response center for complexsocial problems. This shift demands that thesector be more than just a stakeholder in theprocess of governance3; it requires it to be a fullpartner with government in a relationshipfounded on mutual respect and joint decision-making.4 Some commentators have suggestedthat the sector’s advocacy and capacity foroversight of government is its most valued role:“arguably the most important organizations inthe sector are those performing a representationfunction: providing information so that citizenscan participate effectively in the policy process;representing the public interest and minorityviewpoints; and overseeing, monitoring, andevaluating government and other powerfulinstitutions in society.”5

It is not surprising that the voluntary sectorchafes under regulatory restrictions limitingadvocacy. The current regulatory and fundingenvironments restrict advocacy while failing torecognize its importance in contributing to avigorous civil society. For example, the sectorobjects to rules that distinguish between advo-cacy activities that are invited by governmentand those which are not. Those that are invitedare considered to be of public benefit and theuninvited are viewed as unwelcome, provocativeand in need of being restricted or limited. Thisdistinction is inconsistent with the role that the

Regulation of Advocacy in the Voluntary Sector:Current Challenges and Some Responses

by Betsy A. HarvieJanuary 2002


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sector plays in Canadian society. The rules alsoreinforce a power dynamic that treats the charita-ble sector as subordinate and diminishes thelegitimacy of its independent views. Hence theregulatory environment reveals an ambivalence ingovernment’s stated interest in and need for anindependent and diverse voluntary sector with theexpertise, capacity and mandate to championcauses and make the voices of Canadians heardin discussions about public policy.

2.0 Methodology

Informal interviews were conducted withsenior managers, staff and board members ofregistered charities and public benefit groups, andwith charity lawyers. An effort was made tointerview individuals from all parts of the countryand from a range of sectors: health care, disabil-ity, environment, arts, recreational sport, socialwelfare, women, seniors, immigrant and ethno-cultural, Aboriginal, and employment and training.Interviewees came from non-profits, charitableorganizations and foundations and includedumbrella organizations and membership groups.

The Voluntary Sector Initiative (VSI) Secre-tariat and members of the Advocacy WorkingGroup (AWG) identified interviewees based onexpressions of interest in this project, or becausethey were employed by charities whose advocacyactivities have been the subject of regulatoryinterest, or because their group has been deniedregistered charitable status due to their advocacywork.

During telephone interviews, we asked open-ended questions about their experiences andinsights, their understanding of advocacy, and howthe rules might have affected them. Some indi-viduals did not want their views and experiencesdisclosed lest it prompt inquiries from the CanadaCustoms and Revenue Agency (CCRA), or under-mine ongoing discussions with CCRA officials overthe characterization of their advocacy work.Accordingly, we have not identified specific organi-zations or interviewees except where the com-ments are general in nature.


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1.0 Voluntary Sector’s Definition ofAdvocacy

Advocacy has been defined as “the act ofspeaking or of disseminating information in-tended to influence individual behavior or opin-ion, corporate conduct or public policy and law.”6

The individuals interviewed for this paper, virtu-ally all of whom described advocacy in terms ofits effects, hold a more nuanced view. A numberof interviewees observed that the goal of advo-cacy is to improve people’s lives. Beyond thatthey offered four different views of what advo-cacy accomplishes.

First, they defined advocacy as either:enabling those who need help to find their ownvoice; or speaking up for people who cannotspeak for themselves. Across a diverse range offields, interviewees indicated that advocacy isnecessary because the people on whose behalforganizations speak are disadvantaged andwithout representation. Without advocacy,government will not listen to or hear them. Oneexecutive director stated that organizations muststep in to give voice where government hasfailed in its twin obligations to serve the mostmarginalized and the least resourced and toenable them to represent themselves.

Second, interviewees explicitly identifiedadvocacy as a way of giving power through theopportunity it creates to rectify the absence ofpower experienced by many citizens in their ownrelationship with the state. Hence, its effect isboth democratizing and empowering.

Third, interviewees drew no distinctionbetween advocacy on behalf of an individual andadvocacy for systemic change or that benefits agroup in a way that benefits the public. Rather,they saw the difference as shades along aspectrum. However, they did distinguish be-tween advocacy that promotes only the interestsof a membership group or association andadvocacy that advances the interests of a grouprepresenting a broader public benefit.

A fourth view is that advocacy brings to lightwidely held bias, challenges assumptions, and

PART II –ADVOCACY IN THE VOLUNTARY SECTOR

dismantles conventional perceptions. The civilrights, feminist and environmental movements allillustrate how advocacy brought into the main-stream ideas that had previously existed at themargins. On this there was consensus thatadvocacy has benefited the wider public interest.

Almost none of the interviewees mentionedthe distinction drawn by government betweenactivities that are invited and welcomed by it andthose that are not. Because their view of advo-cacy is outcome, not process or legally oriented,interviewees indicated that their decision tolaunch an advocacy initiative depends onwhether they believe they will be listened to, notwhether policy-makers invited the submission.

It is interesting to note that sector groupsand government each appear to judge theappropriateness of an advocacy interventionfrom their own perspective – how it might suc-ceed (in the case of the charity), or how it mightbe controlled (in the case of government).

The starting assumption for those inter-viewed is that advocacy is a legitimate andlegitimizing activity. It was suggested that thestarting-point for many in government is verydifferent. Some policy-makers see advocacy bythe voluntary sector as one-sided and thus notgenuinely analytical.7 Submissions from thinktanks and academics are regarded more favour-ably not because their bias is necessarily lessvisible but because they use methods thatresemble government’s own approach to devel-oping policy. Because “advocacy” and “politicalactivities” may carry negative connotations forgovernment, some in the voluntary sector rec-ommend it instead be called “public policy input”on grounds that this is what the sector meanswhen it speaks of advocacy.


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2.0 Diversity of Advocacy Work

Advocacy plays a critical role in the dailywork of charities in ways large and small. Itincludes calling for more prenatal support, homecare for the elderly, educating the police on thedynamics of domestic violence, insisting thatforeign domestics be told about Canadian em-ployment laws, and supporting research for heartdisease.

It can start when a group sees that aninjured worker needs help obtaining governmentcompensation or that a refugee family is afraid toask their school board for remedial tutoring fortheir child. The origins of an advocacy campaignmay lie in individual charitable acts, repeatedover and over, until a systemic problem revealsitself and the resolve to fully address the issuegalvanizes charitable leaders into action. Alter-natively, the identification of a problem requiringnew public policies may arise in the course of asector group’s research, analysis and consulta-tions on the issue.

3.0 Why Charities Engage inAdvocacy

Charities engage in advocacy because itoffers an effective means to achieve some oftheir purposes. In many areas of charitableconcern (such as protection of wildernessareas, health research, poverty, mental healthtreatment, or domestic violence), the mostefficacious solutions lie in regulatory change.Sometimes, legislative and policy change maybe the only answer that will work, as in thecase of income support for persons with dis-abilities or food supplements for persons ininstitutions.

Charities fulfil their mandates in a variety ofways. These often include service provisionand advocacy activities within the same organi-zation. For example, a food bank’s purpose isto ensure that the most disadvantaged peoplereceive food. However, over time it may alsorecognize that unless the underlying causes ofhunger – usually deep poverty – are ad-dressed, hunger will never be eliminated.Many charities believe they have a moral andethical obligation to use all legal means toachieve their purposes, including public policyinput.

Where a profound need for charitableaction exists, but where only systemic changeis apt to produce lasting improvement, charitiesand public benefit organizations consideradvocacy a top priority. A representative ofone of Canada’s largest health charities indi-cated in her interview that her organizationforesees a coming public health catastropheand attendant strains on the public purse dueto the rising incidence of disability in our agingpopulation. Its board has determined that thesolutions – additional trained specialists,accelerated research, and accessible andaffordable medication – will be impossible toachieve without extraordinary governmentleadership and a supportive policy environ-ment. However, government’s attention isfocused on immediate problems in the healthcare sector; it appears unable to plan for acrisis that is not yet upon us. For this charity,


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whose mandate is to alleviate suffering anddisability caused by disease, there is no alterna-tive to advocacy: it cannot wait – and Canadianswould not wish it to wait – for an invitation tospeak up.

It is clear that in spite of the funding pres-sures they face (or perhaps because of them),charities are less willing than in the past to limittheir response to those activities traditionallyconsidered charitable. Indeed, throughout thecharitable and “public benefit” sector (see defini-tion in section 4.0 of this Part III), groups per-ceive community and individual need as socialjustice issues. By re-framing the problems assystemic, they have expanded the range ofoptions for addressing such problems to includeeconomic and social policy change.

4.0 Advocacy By Whom?

Surprisingly little empirical data are availableon how the voluntary sector participates in publicpolicy processes or how its advocacy activitiesvary according to core missions. If the informa-tion shared in the interviews is indicative oflarger trends, we know that advocacy is criticallyimportant to organizations that are registeredcharities as well as to those that do not holdcharitable status.

Registered charities for which advocacy isessential are found in all sub-sectors and includethose that focus on health, faith, social justice,international development, the arts, educationand training. Social service agencies andgroups that work with marginalized and disad-vantaged populations also invest in advocacy.

Organizations without charitable status fallinto two categories: those engaged in charitablework but denied registered charitable statusbecause of the extent of their advocacy; and amuch broader range of non-charitable groupsthat promote activities or provide servicesintended to improve the quality of life of thecommunity or of a group within the communitythat shares characteristics based on age, nation-ality, race, ethnicity, gender, sexual orientation,residence, disability or disadvantaged economicstatus.8 Both categories of groups are oftenreferred to as public benefit groups. Theseorganizations operate in the broader voluntarysector, are non-profit, and are altruistic in theiroutlook; as well, their mandate is to make ameasurable contribution to the public welfare.9

Public benefit groups include umbrellaorganizations whose primary purpose is tospeak on behalf of and serve their memberorganizations, rather than deliver servicesdirectly to the public. They include umbrellagroups in particular sub-sectors such as health,arts and culture, and family services as well asother sector-wide voluntary and volunteer or-ganizations. We do not consider non-profitssuch as professional associations to be publicbenefit groups.

According to recent research by the Cana-dian Centre for Philanthropy, organizations thatengage in advocacy but are frequently refused


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charitable status (whether because of theiradvocacy or because the balance of their work isnot considered charitable at law) include: groupsmandated to foster cultural pluralism, toleranceof diversity, economic and social participation bythe disadvantaged, internationalism, environ-mental protection, human rights and civil liber-ties, and unicultural and multicultural assistance;culturally focused community and resourcecentres; organizations promoting local or sus-tainable trade and international cooperation;groups devoted to refugee support; arts andrecreation organizations; and grassroots andumbrella environmental groups.10 Many of thesegroups (that engage in advocacy but are deniedcharitable status) would qualify as public benefitorganizations as described here and else-where.11

There is also a paucity of information aboutthe numbers of voluntary groups that engage inadvocacy. Although no central registry for non-profits incorporated under federal or provincialstatutes currently exists, recent estimates sug-gest that Canada has 180,000 organizations.12

These include almost every type of voluntaryassociation, club, charity, church, trade, profes-sional association, advocacy organization andmbrella group.13 The number of unincorporated,grassroots groups is thought to be substantiallylarger.14 There are better records15 of theapproximately 78,00016 registered charities thatcomprise a subset of the non-profit groups.17

5.0 Public Approval of Advocacy

In spite of government reservations, there isstrong evidence that the Canadian public sup-ports charities engaging in advocacy and politi-cal activities. In a survey18 of the perceivedimportance to Canadians of charities, includingtheir advocacy activities, it was reported that88% of Canadians think that charities shouldspeak out on social issues, the environment,poverty or health care. Most (79%) believe thatcharities understand the needs of the averageCanadian better than does government. A vastmajority felt that charities should speak outabout their cause and try to get things changed,including meeting with government ministers(93%), organizing letter-writing campaigns(89%), and placing advertisements in the media(85%). As expected, Canadians were lesscomfortable with holding street demonstrationsand protests (47%) and non-violent civil disobe-dience. The more familiar people are with thework of charities, the less likely they are tosupport limits on the amount of advocacy theydo; as well, donors are more likely to support theuse of resources being used for advocacy thanare non-donors. This last finding hints thatopposition to charities doing advocacy may beaddressed, at least in part, by increasing Cana-dians’ awareness of the work of charities in theircommunities.


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1.0 Government Provides DirectSupport for Advocacy

In spite of funding cuts, government hascontinued to provide direct funding for somekinds of public policy input. Interviewees repeat-edly noted that a variety of federal departmentsfund advocacy programs and initiatives aimed atimproving the life circumstances of individualsand bringing about systemic change for women,children, the aged, and persons with chronicillnesses. One interviewee wryly observed thatgovernment has no qualms about funding advo-cacy directed at other levels of government.Interviewees from charities noted that theyreceive or are aware of funding to charitable andpublic benefit groups for “policy development,”“research,” “public education,” “sector and publicconsultations,” “policy and regulatory advocacy”and “representation.” Although more research isneeded on the kinds of advocacy activities thatgovernment currently funds, there is strongevidence that a number of federal departmentshave an appreciation for the benefits of advo-cacy, even where it involves challenges to anexisting government policy.

2.0 When Good Relations withGovernment are Not Enough

Individuals interviewed for this paper19

stated that they seek to change policy in anyway that is apt to be persuasive, reflects thevalues of the group,20 is sensitive to the needsand particular vulnerabilities of their clients,21

is unlikely to attract criticism from donors orpartners, and is permitted by law. Having saidthat, interviewees explained that when theybelieve legislative or policy change is desirable,their first approach is to make direct represen-tations to decision-makers. Direct contact isapt to be more immediate, more effective andless expensive than indirect routes.

Massive staff layoffs from federal depart-ments during the Program Review cuts of themid-1990s left program and field offices withoutsufficient experienced staff or adequate institu-tional memory. Interviewees related how juniorstaff, now carrying significant responsibility,proposed controversial policy changes withoutgiving adequate thought to the policy implica-tions. Staff were either unaware of the exper-tise that existed outside government or weretroubled about looking uninformed and sodeclined to ask for advice or input. Even afterinitial negative reaction, staff dug in and re-fused to consult front-line groups. Intervieweesnoted that in these circumstances they have“gone public” to put pressure on government tochange its position and that such an approachis often quite effective.22

PART III – THE FEDERAL GOVERNMENTENVIRONMENT


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3.0 Devolution of Service DeliveryHeightens Need for Advice

As operational divisions have been‘downsized,’ alternative service delivery isoccurring through private for-profit and volun-tary non-profit entities and other operatorsexternal to the line departments.23 In additionto the anticipated cost savings from contractingservices out, the devolution of responsibility fordelivering social services to the voluntarysector is grounded in the belief that the sectoris less bureaucratic and therefore potentiallymore responsive than government.24 Whetheror not this is accurate, it is certainly true thatas government has withdrawn from the frontlines of service delivery, it has come to dependincreasingly on the voluntary sector for itsexpertise and knowledge of the conditionsunder which services are delivered.

Service providers from the sector canadvise on the operational implications of policyproposals, propose solutions, implement them,and carry out policy and program evaluations.According to Mel Cappe, Clerk of the PrivyCouncil: “The voluntary sector reaches outand touches parts of society which the govern-ment cannot easily or efficiently reach. Andone of the best ways to gauge the efficacy ofthe services we offer or support is to engagethe sector in dialogue, and listen andlearn…”25 These factors appear to be drivingnew interest by government in obtaining inde-pendent advice from the voluntary sector aboutprogram delivery and community conditionsand in sharing the load for operational plan-ning.

The government’s enthusiasm for alterna-tive service delivery and contracting out forservices is regarded by the sector with trepida-tion. Interviewees noted that depending ongovernment contracts makes them fearful ofthe consequences of voicing opposition togovernment policies.26 Although they wereunable to provide evidence that the risk oflosing contracts is real, it is likely that fewgroups are willing to test it.

4.0 New Demands for Policy Input

An important consequence of the shift ingovernment’s role is that it has lost considerablepolicy capacity.27 The loss resulted in part froma cost-cutting strategy based on the belief thatpolicy advice could be contracted when needed.Senior bureaucrats now acknowledge the diffi-culty of separating policy from operations andthat the decision to delegate the two functions todifferent groups no longer makes sense. De-signing good policy without a good understand-ing of how it is administered has proven diffi-cult.28

Compounding this unease about govern-ment’s policy capacity are the increasing com-plexity and horizontality of the issues with whichit must contend. In recent years, the top chal-lenges on the government agenda – globaliza-tion of trade, labour market adjustment, theimplications of an aging society, health care,crime prevention, sustainable development andAboriginal issues – have all been cross-cutting,intractable issues.29 The resolution of policyissues has been complicated enormously by theeffects of globalization and social fragmentation.The policy process is being re-framed as inter-disciplinary and requiring the involvement ofmultiple departments and stakeholders.30

Government is no longer able to managealone; it needs the sector’s expertise, uniqueaccess into the community, attentiveness tosocial need, and ability to facilitate the voices ofCanadians in public policy formulation. Govern-ment has acknowledged that because charitableand public benefit groups are close to thecitizenry, they can act as an early warningsystem with respect to emerging policy issues.31

In announcing the Voluntary Sector Initiative lastyear, the Privy Council’s Voluntary Sector TaskForce stated:

For many federal departments, partnershipwith the sector is essential to the fulfillment oftheir mandates and is a cornerstone to thedelivery of programs and services, and in-creasingly to robust policy development….


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Over time, the Accord will change the way theGovernment of Canada works with the sectorto develop new policies, programs and serv-ices for Canadians. Departments howeverneed to engage voluntary sector organiza-tions now, to work more effectively together torealize common objectives within existingdepartmental mandates…32

While conceding that the sector has animportant role in contributing to the public policydebate, government also seems ambivalentabout why it is supporting increased policyparticipation. A clue to this appears in a 1999speech by Mel Cappe where he acknowledgesthat the sector’s capacity to enlighten the publicpolicy debate is tied to: “in depth research andsubject matter expertise.” The challenge, henotes,33 is “to bring the sector’s viewpointssystematically into play in the making of publicpolicy” – a comment that hints of government’sunease at relying on policy submissions thatarrive unsolicited, in diverse formats and ofuneven quality in terms of their reliance on “in-depth” research. It is important that governmentnot discount the insights of sector representa-tives just because their material is not easilyaccommodated with the government’s currentinternal policy processes.


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PART IV – THE REGULATORY FRAMEWORK FORREGISTERED CHARITIES

2.0 Why Charitable Status Matters

Given the restrictions on advocacy andpolitical activities, why would non-profit groupsseek to be registered under the Income Tax Actas a charity? Managers of non-profits andcharities interviewed for this paper confirmedthat the most important reason is that regis-tered status makes it easier to raise funds.Like all non-profits, charities are exempt frompaying income tax. Unlike non-profits, regis-tered charities may issue tax receipts to do-nors. Tax receipts entitle a donor, whether anindividual or corporation, to claim a tax creditfor a portion of the donation thereby reducingthe income tax they would otherwise pay. Theavailability of the tax credit is important todonors39 and surveys show that the higher theamount of the credit, the more donors willgive.40

A daycare advocate indicated that theworking parents who comprise her donorconstituency are not indifferent to the benefitsof a tax credit. “When they weigh the relativeadvantages of donating to us [an unregisterednon-profit] or, say the Kidney Foundation, theywill feel their money is better spent where theyget a tax credit. It’s not that they think thecause is any better.” For this executive direc-tor, extending registered charitable status togroups doing measurable and significant workin the public benefit levels the playing fieldbetween them and those already possessingregistered status.

Being a registered charity also establishesthe bona fides of an organization. It communi-cates to prospective donors, grant-makingbodies, volunteers, partners, employees andclients that the group is engaged in work ofsignificant public benefit. This is true even ifthe group is membership-based.41 Charitablestatus facilitates fundraising by reassuringdonors that their donations contribute to acharitable cause, saving them the trouble ofmaking their own due diligence inquiries.42 In

1.0 Restrictions on Advocacy

Unlike simple non-profits and grassrootsgroups,34 charities are restricted in the kinds andextent of advocacy and political activities inwhich they may engage.35 For example, chari-ties cannot:

• be established for political purposes;36

• support a political party or candidate forpublic office or promote a political or socio-economic ideology;

• have as one of their purposes a mandate tocampaign for retention or change in law orpolicy; or

• have as their purpose to persuade the publicto adopt a particular opinion on social issues.

The rules under the common law and theIncome Tax Act37 limit the nature and extent ofpolitical activity in which charities may partici-pate to those that are: (a) non-partisan; and (b)incidental and ancillary to their charitable work.Charities are obliged to devote “substantially all”of their resources to charitable activities. CCRAinterprets “substantially all” as meaning at least90% of an organization’s resources. Further, itinterprets the words “political activities” asembracing a wide range of activities that have incommon the goal of bringing about changes inlaw and policy. Sector groups can find it difficultto distinguish between activities that are charita-ble and those that are “political.” In addition,what the courts have found to be charitable isoften different and narrower than what Canadi-ans might consider to be charitable.38


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addition, the public believes that the financialaffairs of charities are more closely monitoredand better regulated than those of non-charitablegroups. This reassures donors and funders thattheir contributions will be spent appropriately.

In an intensely competitive fund-raisingenvironment, registered charitable status offers areal advantage. Foundations, trusts and grant-making organizations are an important source ofproject and program funding for the sector. Yetthe “qualified donee” rule requires that founda-tions and other registered charities disburse theirfunds to donees who themselves have registeredcharitable status or qualify for a limited numberof exceptions. The United Way, for example,specifies that only registered charities areeligible for long-term support; non-charities arelimited to receiving a single non-renewable grant,usually in relatively modest amounts.43 Manyfoundations do not offer grants for non-chari-ties.44

Although private giving is an importantsource of revenue for registered charities, at14% of their overall income, it ranks far belowthe 26% derived from earned income, and the60% from government grants and payments.45

So why does charitable status for groups en-gaged in advocacy remain the single largestissue for many organizations?46 The answeris that the voluntary sector seeks a tangibleacknowledgement from government that itscontribution to public debate and public policydevelopment is a legitimate and significantaspect of its work.

3.0 Advocacy and the Regulation ofCharities

The complexity of charity law has been thesubject of well-researched and thoughtful writ-ings by Canadian legal scholars, making itunnecessary to do more than briefly summarizethe high points here.47

3.1 Limited federal authority to regulatecharities

Responsibility for charitable trusts is a matterof exclusive provincial jurisdiction but with theexception of Ontario, where a separate statutoryregime exists, the common law role of the Crownis simply delegated by the Provincial Attorney-Generals to their respective Public Trustees.48

Although certain privileges are attached tocharitable trusts, for most practical purposes,those advantages are overshadowed by thefiscal privileges achieved by registering as acharity under the federal Income Tax Act. Oncea charity is registered, it is subjected to federalauthority and oversight. The federal govern-ment’s authority over registered charities, how-ever, derives solely from its taxing powers; it hasno power over the regulation of charities per se.

3.2 Charity interpreted narrowly under the lawof trusts

There is no definition of “charity” in theIncome Tax Act. Accordingly, recourse must beplaced on common or “case” law interpretationsof what constitutes a charitable trust and whichactivities are properly charitable. Under theEnglish and Canadian common law, charities are“purpose trusts,” as opposed to trusts for identifi-able beneficiaries. Generally, a trust with noidentified beneficiaries is invalid. A narrowexception exists for purpose trusts where theirpurposes are framed to benefit the community ina specific way. The significance of this is that forthe past 400 years, judges have approached thequestion of what constitutes a charitable pur-pose from the restrictive perspective imposed bytrust law.


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3.3 Headings of charity

The law of charity in Canada has its genesisin the judgement in the 1891 English case ofPemsel.49 There, “charity” was defined ascomprising four principal divisions: (1) the reliefof poverty; (2) the advancement of education;(3) the advancement of religion; and(4) other purposes beneficial to the community.The basis of these divisions was the preamble tothe Charitable Uses Act of 1601,50 which con-tained an illustrative list of projects consideredcharitable in Elizabethan England.51 Thesepurposes are supplemented by a further require-ment that the purposes must be for the benefit ofthe community or of an appreciably importantclass of the community. An organization’spurposes or objects are contained in its LettersPatent, or incorporating document. To obtainregistered status, a group must satisfy CCRAthat its purposes fall within one of the fourheadings of charity.

3.4 Prohibition on political purposes

Not all objects of public benefit, even thosethat the public might consider charitable, neces-sarily qualify as charitable. To be recognized bythe law as charitable, they must fall within thespirit and intent of the Elizabethan statute.

Today’s courts consider whether the purposefalls within one of the first three headings orwhether by analogy it resembles a charitablepurpose recognized by previous courts.52 Be-cause political purposes are not explicitly in-cluded under any of the three headings, thecourts have considered whether they qualifyunder the public benefit heading. In 1917, inBowman v. Secular Society,53 the House of Lordsruled that:

. . a trust for the attainment of political objectshas always been held invalid, not because itis illegal, for everyone is at liberty to advocateor promote by any lawful means a change inthe law, but because the Court has no meansof judging whether a proposed change in thelaw will or will not be for the public benefit . . .

This case has become the touchstone of themodern prohibition against political purposes.Purposes aimed at promoting or advocating achange in the law or in its administration, or achange in public policy, are not regarded ascharitable. The argument that the court has noability to judge whether the proposed change willbenefit the public has been criticized by legalscholars on several grounds,54 but it continues tobe cited in Canadian judgements.55

The courts have also been reluctant toencroach on the power of the legislature. Theconcern to judges is that by recognizing a politi-cal purpose as valid, they may be inadvertentlyacknowledging that the law targeted by thepurpose warrants change. Determining if a lawneeds changing is a political and legislativedecision, not a judicial one, they have held. InNational Anti-Vivisection Society,56 the House ofLords held that courts should on principle as-sume the law is right as it stands.57

In McGovern v. Attorney General,58 the courtwas asked to determine whether the objects ofthe Amnesty International Trust were exclusivelycharitable under English law. Amnesty’s objectswere “to secure worldwide observation of theUniversal Declaration of Human Rights in regardto prisoners of conscience.” The court acceptedthat the trust was aimed at the relief of humansuffering. However, it was held that its activitiescould prejudice British foreign relations becauseits object was to secure changes in foreign laws.Therefore, the court was unable to know if thetrust was for the public benefit. In ruling that theobjects were political and not charitable, thecourt summarized its views on trusts for politicalpurposes as follows:

Trusts for political purposes include (interalia), trusts of which a direct and principalpurpose is either (i) to further the interests ofa particular political party; or (ii) to procurechanges in the laws of this country; or (iii) toprocure changes in the laws of a foreigncountry; or (iv) to procure a reversal of gov-ernment policy or of particular decisions ofgovernmental authorities in this country; or (v)to procure a reversal of government policy orof particular decisions of governmental au-thorities in a foreign country.59


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3.5 The restriction on political activities

Although a charity cannot be dedicated topolitical purposes, it may engage in limitedpolitical activities but only insofar as they furtherits charitable purposes. In 1985, the FederalCourt of Appeal ruled in Scarborough Commu-nity Legal Aid Clinic60 that influencing policy-making could be acceptable so long as it wasnon-essential and incidental to other charitableactivities. Faced with this judicial interpretation,the government amended section 149 (1) of theIncome Tax Act to allow political activities ancil-lary and incidental to a charity’s purpose. Al-though charities are required to devote theirresources exclusively to charitable purposes,under subsections 149 (1) (6.1) and (6.2) theymay pursue non-partisan political activities thatare ancillary and incidental to their purposes solong as substantially all of their resources con-tinue to be directed to activities that are properlycharitable. CCRA followed up with InformationCircular 87-1 specifying that “substantially”meant at least 90% of everything the charity canuse calculated annually. This is called the “10%rule.”

The provisions at section 149 (1) do notexplain or define “political activities.” CCRA’sposition is that “political activities” include “awide range of activities that have in common thegoal of bringing about changes in law andpolicy.”61 CCRA identifies three kinds of activ-ity:62

1) partisan political activity, which is alwaysprohibited;

2) government-related activity which is deemedcharitable and permitted without limitation;

3) political activity which is permitted provideda) it is incidental and ancillary to the charita-ble purposes, andb) substantially all the group’s resources aredevoted to its charitable work.

Government-related activity is distinguishedfrom political activity by determining whether thecharity’s intention was to inform people (which ischaritable), or whether it was to persuade people(which is political). The test is not whethergovernment or public opinion was actuallyinfluenced by the presentation of facts and

knowledge but what the intention was. Oral andwritten representations to politicians, a publicservant or a government body are consideredcharitable as long as they are designed primarilyto allow a full and reasoned consideration of anissue rather than to influence public opinion or togenerate controversy. As charitable activities,they are subject to no limits.

Political activities, however, are subject tostrict spending limits. Information Circular 87-1lists examples:

a) publications, conferences, workshops andother forms of communication which areproduced, published, presented or distributedby a charity primarily in order to sway publicopinion on political issues and matters ofpublic policy;

b) advertisements in newspapers, magazines oron television or radio to the extent that theyare designed to attract interest in, or gainsupport for, a charity’s position on politicalissues and matters of public policy;

c) public meetings or lawful demonstrations thatare organized to publicize and gain supportfor a charity’s point of view on matters ofpublic policy and political issues;

d) mail campaigns – a request by a charity to itsmembers or the public to forward letters orother written communications to the mediaand government expressing support for thecharity’s views on political issues and mattersof public policy.63

A second theme arises out of the dichotomyin the case law between activities and purposesaimed at supporting government policy prefer-ences and the enforcement of existing legisla-tion, versus those that seek change to the statusquo. The law of charitable trusts has usually charac-terized the former as charitable and the latter aspolitical.64 CCRA, taking its cue from the courts,argues that government-related activity that is helpfuland informative is charitable but interaction for thepurpose of change is not.


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To help determine whether a charity’s intentwas to support or to change government policy,CCRA uses a test which inquires if governmentinvited the interaction. CCRA has produced draftpublication RC4701 (E) Registered Charities:Education, Advocacy and Political Activities,65 toreplace Information Circular 87-1. Draft RC4107(E) gives the following examples of charitableactivity:

• a charity expressing an expert opinion on anissue, at the invitation of a government bodyor the media; (underlining added)

• a charity speaks at the direct invitation ofothers, or responds to an indirect invitationsuch as a general call from governmentauthorities that are seeking public input indeveloping policy; (underlining added)

• having given the government or public thebenefit of its experience and expertise, itdoes not intervene further; (underliningadded)

• it avoids language (and images) designed toappeal to the emotions.66

3.6 The limits of public education

Because public education campaigns areused to sway public opinion, the courts have alsoconsidered whether to characterize these activi-ties as charitable (under the educational head-ing) or as political. In the majority judgement inthe Supreme Court of Canada in VancouverSociety of Immigrant and Visible Minority Womenv. M.N.R.,67 Mr. Justice Iacobucci states:

To my mind, the threshold criterion for aneducational activity must be some legitimate,targeted attempt at educating others, whetherthrough formal or informal instruction, train-ing, plans of self-study, or otherwise. Simplyproviding an opportunity for people to educatethemselves, such as by making availablematerials with which this might be accom-plished but need not be, is not enough. Nei-ther is “educating” people about a particularpoint of view in a manner that might moreaptly be described as persuasion or indoctri-nation.68

The mere provision of information to thepublic is not sufficient because it lacks structure.To qualify as charitable, education can featureinformal training aimed at teaching necessary lifeskills or providing information toward a practicalend, so long as these are truly geared at thetraining of the mind and not just the promotion ofa particular point of view.69

Permitted charitable education should in-volve a full, fair presentation of the facts sopeople can draw their own conclusions. CCRAconsiders this to occur when all sides of an issueare presented. On this basis it would appearthat what is often involved in a “public education”campaign – distributing written and visual mate-rials, seeking media coverage possibly supple-mented with paid advertisements, participating inpublic meetings and demonstrations, and send-ing mass mailings out to members and decision-makers – would not qualify as charitable.

Lastly, some courts have deemed thatactivities that ultimately seek to create a climateof opinion, or to advocate a particular cause orthat arouse strong feelings because the subjectmatter is controversial, are not charitable.70

CCRA has chosen to rely on this line of judicialthinking. Draft RC4107 (E) states: “The morecontroversial the subject matter, the greater thecare the charity must take not to prejudge theissue in its courses and publications.”71

There is another line of judicial thinking inCanada and it acknowledges that the voluntaryand charitable sectors have traditionally been anindependent centre for pioneering social activity.At times, the sector’s work may be considered tobe controversial. For example, in the 1999Alliance for Life case,72 Mr. Justice Stone said:

…It may well be that a charitable organizationwould want to adopt a relatively strong andcontroversial posture in order to effectivelyadvance its charitable objectives even to theextent, if necessary, of advocating a changeof law or policy or of administrative decisions,without incurring the risk of losing its statusas a registered charity.73


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PART V – PROBLEMS WITH THE RULES

1.0 Regulation is Unreasonable andOverly Broad

1.1 The difference between facts and opinion

The distinction CCRA makes between pro-viding facts to inform, and offering opinion topersuade is unrealistic and untenable. Theselection and communication of ‘facts,’ like ‘truth’and ‘beauty,’ depends on an individual’s valuesand the existing social context. Opinion andjudgement are involved in assessing which ‘facts’are relevant. ‘Facts,’ in turn, inform opinion.They are inextricably linked. It is impractical toinsist that organizations distinguish between thetwo.

1.2 Intention to persuade will always bepresent

It is unreasonable to expect that organiza-tions will be able or willing to provide facts thatare not supportive of the opinions they haveformed. An invitation to present facts to officialsand policy-makers is, in truth, an opportunity topersuade. Organizations may present their‘facts’ and information in a way that appearsunencumbered by subjective judgements buttheir intention will surely be to persuade.

Under CCRA’s rules, this imparting of ‘facts,’and indeed many forms of informal daily commu-nication between organizations and government,is rendered “political.” Although it is not CCRA’sintention to broaden the category of limitedactivities, that is the effect when such distinc-tions are drawn.

1.3 The rules mandate the subordination ofcharities to government

Charities are disturbed by the implications ofgovernment control implicit in the distinctionCCRA makes between being invited to makesubmissions to government, which is charitable,and speaking out, uninvited, against a govern-ment policy choice or law, which is deemedpolitical.

RC4107 (E) indicates that a charity respond-ing to an invitation from government or themedia to share its expertise is engaging incharitable activity but it becomes political if theycontinue to speak out after having provided theiradvice. As one interviewee pointed out, the testfor whether the activity is restricted appears tobe whether government welcomes the input ornot. The implication of this, perhaps unintendedby CCRA, is that the rules reward passivity anddeference by imposing no restrictions on chari-ties that wait for an invitation to speak but limitthose that have the temerity to take the initiative.Such limits are difficult to reconcile with thesector’s acknowledged role as an early warningsystem.

1.4 The ban on influencing any person isoverly broad

The boards of voluntary organizations expecttheir senior staff to take every opportunity tospeak about the issues that are of concern to theorganization, its clients and members. Theseactivities support fund-raising and build commu-nity networks, and it is hoped that enlightenedaudiences “will take the message back” andthereby influence public opinion.

The specification in RC4107 (E) that anintention to influence any person in order to swaypublic opinion, to bring pressure on a govern-ment or to influence law or policy renders theactivity political means that organizations speak-ing in virtually any forum are guilty of politicalactivity.

1.5 Requiring charities to present both sidesis unreasonable

Although it may sound reasonable to requirecharities to present both sides of a controversialissue, in practice it is not. Even if a publiceducation initiative is designed to provide astructured training of the mind, the additionalrequirement that the group present both sides ofthe issue forces charities to defy common sense.An environmental group would be required to


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present arguments in favour of the activities ofpolluters.74 A charity providing support forpeople receiving treatment for cancer wouldneed to provide information on studies disprov-ing the link between treatment wait times andtreatment outcomes. Anti-poverty organizationswould be required to present facts in support ofcuts to welfare payments. The imposition of thisrequirement denies the reality of how conten-tious issues are debated.

1.6 Tiptoeing around socially controversialissues

RC4107 (E) places a greater onus on chari-ties to present both sides for more controversialissues. The question is: what constitutes asocially controversial issue and in whose opin-ion? Charities are asked to consider whether:the subject arouses strong feelings in people; themedia produces editorials, columns and debateson the subject; the subject forms the basis oflitigation; governments, political parties and themedia commission public opinion polling on thesubject.75 Arthur Drache points out that if this isthe threshold, almost any subject that makes thenewspaper is apt to be off-limits.76 The onus ofestablishing that an issue is not controversialfalls to charities. This is an extremely difficulttask because even seemingly benign issues canarouse passionate opposition from a smallminority.

2.0 Problems of Clarity: Where toDraw the Line?

2.1 When do language and images becomeemotive?

The requirement that charities limit theiradvocacy on controversial issues presentspractical difficulties because judicial opiniongoes both ways on whether social controversy isinconsistent with charitable activity.77 CCRA haschosen to take the conservative view. RC4107(E) states that activity can become political if itrelies on language and images designed toappeal to the emotions.

How should a charity that works with childrenliving on the street characterize its policy recom-mendations for coping with child prostitution, forexample? Does inserting realistic but disturbingimages of these children to illustrate their cir-cumstances cause the document to be politicalspeech?

2.2 Subjectivity and other difficulties inmeasuring intention

Separating the intent to inform and the intentto influence carries with it significant problems.The judgement requires that credulity be sus-pended in determining that a group did notintend to persuade.

RC4107 (E) states that two charities can dothe same activity but for different reasons anddepending on their intent, one may be political,and the other charitable. There is truth to theassertion78 that acts do not present themselveswith labels identifying their true form as eithercharitable or political. It is an impossible task,however, for a charity to differentiate betweentwo similar activities based on the actors’ mo-tives. The reality is that organizations will judgewhat is permissible with reference to the activi-ties, not the intention, of other groups in thesame field. Although not suggesting that mo-tives are unimportant, the practical challenges inrequiring groups to distinguish between differentactivities based on the actors’ intentions aresignificant.


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2.3 Insufficient clarity among the regulatedabout what is being regulated

In the view of charity lawyer Laird Hunter,the single biggest problem with the rules is that“the people being regulated don’t know wherethe line is.” The rules are too complex, toosubjective, and too arcane. The result is theyare often ignored. “Charities don’t realize therisk they face” because they do not understandhow CCRA’s rules might apply to them.Moreover, “if they seek legal advice, there is nopractical way to arrive at a legal answer be-cause the costs of going to court are prohibitiveand there are no court cases on the hardcases.”79

The current morass of conflicting commonlaw cases and CCRA legal interpretations, bothpublished and non-published, when combinedwith the highly subjective judgements that mustbe reached, has meant the regulation ofcharities’ advocacy appears inconsistent andmysterious to the sector. The Canadian Centrefor Philanthropy recently reviewed the legal filesof a number of groups that ran afoul of the ruleson political activities and concluded that evenCCRA’s application of its rules wasinconsistent.80

2.4 Advocacy chill

The uncertainty about how the rules will beapplied, especially when considered in light ofthe severe consequences that flow from an error(deregistration or annulment81 of registeredstatus), create an ‘advocacy chill’ in the sector.Charities are unsure about the line betweensharing views with government and the publicand influencing law, policy or public opinion.This often leads them to err on the conservativeside.

Interviewees related that their boards havebecome deeply anxious about the risk of beingderegistered without truly understanding the riskor where the line is drawn. For parts of thesector, advocacy and any kind of political inter-action (restricted or not) have come to beviewed with suspicion. As a result of the chill,many charities engage in far less public educa-tion, advocacy and political activity than they

might wish or should do to achieve their pur-poses. Entirely permissible activities are limitedbecause of the advocacy chill. Intervieweesfrom non-profits indicated that even their fundersand government contacts may be uneasy withtheir advocacy, illustrating the extent of confu-sion generally about who and what is limited.

2.5 Difficulties with the 10% rule

Charities are troubled by the “substantiallyall” test, and CCRA’s interpretation that thismeans at least 90% of their resources. At apractical level, the rule has differential impactson large and small organizations. Interviewsrevealed that large national health charities withannual budgets of $30 million to $120 million areable to carry on substantial advocacy work andkeep their expenditures well under the 10%ceiling. Small charities, however, felt that 10% isnot sufficient given the costs of carrying outadvocacy work and the importance this work hasto the achievement of their charitable objectives.

Charities also find it difficult to calculate 10%of all their resources. Uncertainties in how tocharacterize certain activities means that themanner in which charities allocate and report ontheir resources in the Annual Information Returnis imprecise and subjective. Interviewees feltboth the rule and the process by which they areexpected to report on their compliance lackintegrity.

Moreover, legal commentators have arguedthat 10% is far more restrictive than is supportedby the case law. “The key consideration,” saidMr. Justice Stone in Alliance for Life, “must bewhether the [political] activities actually engagedin, though apparently controversial, remainancillary and incidental to the charitable activi-ties.”82 Other scholars have recently argued thatthe Supreme Court in Vancouver Society recog-nized that political purposes and activities thatare merely ancillary and incidental to charitablepurposes are themselves charitable.83 There-fore, the so-called 10% rule has no application tothem.


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3.0 The Rules Prevent Charities FromAchieving Their Charitable Purpose

3.1 Necessary for achievement of charitablepurposes

Charities are less willing than in the past tolimit their response to deep social need by onlyengaging in those activities traditionally consid-ered charitable. They argue that it is their legaland fiduciary duty to pursue systemic policychange where it clearly advances the achieve-ment of their charitable purposes. They alsoperceive a moral responsibility to ‘bear witness’to the effects and causes of need.

3.2 Advocacy empowers those denied socialjustice

New approaches to social and public policyissues are proving inconsistent with the ruleslimiting political activity. For example, empower-ment models for addressing poverty emphasizethe capability of vulnerable people, the impor-tance of self-help strategies and the role ofadvocacy as a tool for change. These are notcompatible with the concept of the ‘needy poor’enshrined in the Elizabethan-era law and per-petuated in more recent judicial pronounce-ments. Poverty is re-framed in contemporarydialogue as an issue of social justice rooted inthe economic status quo. Calls for systemicchange flow from this approach. The growth ofsocial justice groups world-wide and the increas-ing focus on advocacy by the voluntary sectorpoint to an emerging consensus that advocacy isa legitimate tool for addressing the root causesof a number of societal problems.

3.3 Controversy is part of helping people onthe margins

Additional precautions imposed on charitiesthat speak on socially controversial topics seemat odds with their purpose to help the mostmarginalized sectors of society. Issues thatpeople on the margins face may well be contro-versial. A leading U.S. commentator onceobserved:

There is a tendency to regard charity asintrinsically free of controversy because itincludes activities that are ‘good’ or ‘beneficialto the public.’ This notion…represents afundamental misunderstanding of the institu-tion [that] not only perverts its historicaldevelopment, but also destroys its essentialvalues…The role of philanthropy in competingwith, supplementing, and even displacinggovernment is particularly significant wherecontroversy abounds. It is here we havespecial need for the initiative to create andspread ideas and the diversity of outlook andmethod that come from the many centers ofcreative thought and experimentation, freefrom uniformity that is often subtly trans-formed into conformity by the atmosphere ofgovernment responsibility.84


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4.0 The Appearance of DiscriminatoryApplication of the Rules

Uncertainty in the application of the rules,compounded by the subjective judgementsregulators are forced to make, leads to unevenand selective enforcement. The sector’s percep-tion is that enforcement is arbitrary or discrimi-natory. Charity lawyer Arthur Drache hasargued:

There is a double standard, whether RevenueCanada [sic CCRA] will admit it or not. Thereis a huge anti-tobacco lobby that comprises,in part, registered charities. The group isextremely active politically, but perhapsbecause the lobby is funded in part by gov-ernment, there is a “hands off” attitude tocharities that are involved… When this issueis raised with Revenue Canada, the usualresponse is that the specific actions of organi-zations cannot be discussed because of theconfidentiality rules of the Income Tax Act.85

According to the Canadian Centre forPhilanthropy’s research into CCRA’s handling ofapplications and audits, CCRA carries out auditson only about 600 registrants a year, mosttriggered by complaints.86 The voluntary sectorstrongly believes that charities whose activitiesare objectionable to CCRA officials and thoseinvolved in socially controversial issues aresingled out for investigations.87 It is hard toblame CCRA for this. Budgetary restrictionsmean that a highly selective enforcement policyis a practical necessity. At the minimum, a moretransparent and systematic risk assessment toolfor audits would combat the perception that theagency is not above politics.88

5.0 Group Interests Can Support theBroader Public Interest

RC4107 (E) distinguishes between advocacyon behalf of individuals and advocacy on behalfof groups, concluding that advocating on behalfof individuals is acceptable, but advocating theinterests of a group is rarely charitable.

CCRA’s approach is problematic. Advocacyon behalf of individuals may be necessary forthe reason that the person is a member of adisadvantaged group. As the anecdote belowillustrates, there are instances where advocacyon behalf of a group should be consideredcharitable.

One interviewee, whose charity offersservices to and advocates on behalf of individu-als with a particular disability, has an advocacyprogram funded by a federal department. Thisprogram allows it to provide legal representationto individual clients denied disability benefits bya provincial government by appealing theserefusals to a special tribunal. After winning500 tribunal appeals in three years, using identi-cal scientific and medical evidence, the charityfelt the province’s policy of denying these appli-cations had been demonstrably undermined.Continuing to appeal individual cases wasclearly wasting resources; the solution was toseek to change the provincial policy on behalf ofthe group of persons with disabilities. Thisstrategy, however sensible under the circum-stances, may not be considered charitable. Asan interesting aside, the federal department wasimpressed with the systemic approach proposedby the group and extended its funding for theadvocacy program.

The second difficulty is that CCRA presumesthat “advocacy” is always self-interested andtherefore not of public benefit. Although charita-ble status should not be extended to groupswhose goals do not accord with a broader publicinterest, membership interests can coincide witha broader public interest. This is particularly sowhen the membership group represents “anappreciably important class of the community.”89


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6.3 Difference between advocacy expendituresand donations to political parties

Although charities must limit their advocacy,there is no limit on the size of donation anindividual or corporate taxpayer may make to apolitical party or candidate. Moreover, at thelevel of political donation made by most Canadi-ans (e.g., under $300 annually), the tax benefitsof political donations usually outstrip those forcharitable donations of an equivalent size.91

The historic rationale for extending preferen-tial tax treatment to donors to political parties isthat democratic governance of society is en-hanced by the participation of properlyresourced political parties. However, whatensures that a political party is properlyresourced (and most parties in opposition rarelyare) is their proximity to power now or in the nearfuture and not the availability of a political taxcredit.

Both political parties and charities enhancedemocratic participation through which thecollective and disparate interests of citizens canbe aggregated and resolved. The motives forengaging in charitable and political activity mayactually be the same; in both instances, theactors seek to contribute to the public good andare presumed to be acting altruistically.

6.0 Inconsistent Treatment ofAdvocacy by Charities and OtherEfforts to Change Policy

6.1 Unclear why litigation is treated differently

Registered charities face no restrictions ifthey seek to change the law by means of re-course to the courts. Why there is a distinctionbetween litigation and other ways of bringingabout legislative change is unclear to the volun-tary sector. Litigation is only one way to changelegislation and to draw attention to injustice. It isnot unknown for groups to use lawsuits, not togain a judicial opinion or ruling but rather as astrategy to force government’s hand outside thecourtroom.

6.2 Difference between advocacy in thecharitable sector and lobbying andadvertising expenses in the private sector

Under the Income Tax Act, expendituresmade by a business in making representationsrelated to its affairs to government or regulatoryauthorities are deductible. This ability to deductlobbying expenses seems unfair to the charitablesector. For example, an anti-poverty charity thatadvocates for rent controls has to abide by the10% rule. Yet a landlord is subject to fewfinancial limits on expenses incurred throughlobbying to lift rent controls, and the expensesare deductible.

Commentators have argued that the charity’snon-taxable expenses for advocacy and thebusiness’s deducted expenses for lobbying areboth being diverted from tax coffers.90 However,for the charity the favourable tax treatment is foran activity pursued in the broader public interestwhereas for the business the state is subsidizingthe pursuit of private commercial gain.

The same tax policy applies to business’sadvertising expenses. The end tax effect tobusinesses for their advertising is the same asthe end effect for charities’ expenditures onpublic education. The former is limited only bythe proportion of the expenditure to revenues,the latter by an arbitrary rule of 10%.


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2.0 England

A key advantage of the English system isthe presence of a Charity Commission towhich applicants for registered status maydirect questions and seek rulings that, in turn,are available to help inform applicants of theCommission’s position. It regularly providesguidance and rulings on what constitutes anappropriate level of political activity. Overall,the English system ensures more transpar-ency and clarity than is available under theCanadian regime.

The law in England is that only politicalactivities that are ancillary and incidental tocharitable purposes are permitted but unlikeCanada there is no additional test requiringcharities to devote substantially all of theirresources to charity. The Charity Commissionfor England and Wales has published guide-lines on political activities94 which draw adifferent – and in our view more sensible – linearound permitted activities. We believe theEnglish guidelines have much to offer and areworth examining closely:

…A charity may engage in political activi-ties if:

· there is a reasonable expectation that theactivity will further the stated purposes ofthe charity, and so benefit its beneficiariesto an extent justified by the resourcesdevoted to the activity;

· the activity is within the powers which thetrustees have to achieve those purposes;

· the activity is consistent with these guide-lines; and

· the views expressed are based on a well-founded and reasoned case and are ex-pressed in a responsible way.95

1.0 The United States

In most U.S. jurisdictions, the fact that a trusthas as its purpose the promotion of advocacy orchanges in the law or policy does not affect itsvalidity as a charitable trust.92 In terms of thetax regime, the fundamentals are not markedlydifferent from Canadian regulation but overall aremore flexible and accommodating of advocacy.

A tax-exempt organization is allowed toinfluence legislation so long as it is not a sub-stantial part of its operations.93 Between 5%and 20% of a charity’s total expenditures may bedevoted to advocacy. “Attempting to influencelegislation” is defined more broadly than itsequivalent in RC4107 (E). In particular, the U.S.definition excludes: “examining and discussingbroad social, economic and similar problems.”Provision is also made for public education“grass-roots” campaigns, which cannot exceed25% of total lobbying expenditures up to$250,000. Other organizations can spend up to$1 million on lobbying, provided their budget is atleast $17 million. If a charity exceeds either limitby more than 50% over a four-year period itcould risk losing the exemption altogether – asignificantly more liberal rule than applies inCanada.

PART VI – OTHER JURISDICTIONS


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The guidelines indicate that the thresholdtest for acceptability is that the efforts to per-suade are based on a well-founded and rea-soned argument. For example:

• A charity may seek to influence governmentor public opinion through well-founded,reasoned argument based on research ordirect experience on issues either relatingdirectly to the achievement of the charity’sown stated purposes or relevant to the well-being of the charitable sector.

• A charity may provide information to itssupporters or the public on how individualMembers of Parliament or parties voted on anissue, provided they do so in a way which willenable its supporters or the public to seek topersuade those Members or parties tochange their position through well-founded,reasoned argument rather than merelythrough public pressure.

• A charity may provide its supporters, ormembers of the public with material to sendto Members of Parliament or the government,provided that the material amounts to well-founded, reasoned argument.

• A charity must not base any attempt to influ-ence public opinion or to put pressure on thegovernment, whether directly or indirectlythrough supporters or members of the public,to legislate or adopt a particular policy ondata which it knows (or ought to know) isinaccurate or on a distorted selection of datain support of a preconceived position.

• Except where the nature of the medium beingemployed makes it impractical to set out thebasis of the charity’s position, a charity mustnot seek to influence government or publicopinion on the basis of material which ismerely emotive.96

The extent to which charities are allowed topromote, support or participate in political activi-ties has to be considered in each case in light ofall the relevant circumstances. It is not sufficientfor the trustees to simply believe that theiractivities will effectively further the purposes ofthe charity: there must be a reasonable expecta-tion that this is so. Trustees are encouraged toseek the advice of the Charity Commission.


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PART VII – RESPONSES TO ARGUMENTSAGAINST CHANGE

1.0 Advocacy is Not Included in theTraditional Justification forSubsidizing the Charitable Sector

The traditional justification for subsidizingcharities through the tax system has been thatthey provide public goods and services thatwould otherwise be provided by the state.Hence, government is not losing revenue byextending a tax credit because without thecharity, it would need to pay for the goods andservices directly.97 In the case of advocacy,however, the argument is that government wouldnot otherwise pay for it so there is no tax policyjustification for extending a tax credit to dona-tions for advocacy activities.

In response to this argument, we offer thefollowing observations. A variety of federaldepartments and agencies currently providedirect funding for a range of advocacy activities,some of which are directed at policy change. Inmaking such payments, government acknowl-edges the value and necessity of this work. It islikely that in the absence of funding to thirdparties, government would need to set up alter-native mechanisms to obtain independent policyinput.98

Some commentators have also suggestedthat the foremost function of the voluntary sectoris not to provide services at all but to act as abalance to the state and an independent centrefor social experimentation. Under this view, thesector provides independent oversight, monitorsgovernment, ‘hurries along’ new ideas, andchallenges the status quo – roles that deservesupport through the tax system.

2.0 Indirect Subsidy to OrganizationsOpposing Government

Carl Juneau, a senior official at CCRA,points out that the courts have held that it is notin the public benefit to provide an indirect sub-sidy (in the form of a tax break) to organizationswhose purposes may be to oppose the very lawsthe public and the state want implemented.99

We believe that this concern relies on an overlysimplistic view of the process inherent in policydevelopment where there are diverse perspec-tives and interests at stake and where partici-pants modify their positions in response to newinformation.

It is wrong to presume that governmentseeks nothing more than to enforce existing lawsand policies. Governments continually re-evaluate the effects of policy and laws with aview to determining if change is needed. Thesector’s public policy input assists government inidentifying needed changes and improving thequality of governing. This surely is the rationalefor permitting charities to engage in litigationchallenging government policies and legislation.Beyond allowing groups to help fund their activi-ties, there is nothing in the system of tax creditsthat undermines government’s basic ability andobligation to enforce laws it considers appropri-ate and in the public interest. There will inevita-bly be some inconvenience to government indeflecting unwanted input or in justifying theusefulness of existing laws but that, we argue, isa small cost compared to the benefits of ahealthy democracy.


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3.0 Government Loses Control OverWho to Exclude

3.1 Government loses control over groupswhose political views are consideredextreme

Under the current regime, CCRA is thegatekeeper denying registered charitable statusto groups whose mandate or activities arepolitical. Groups whose politics find favour withmost Canadians, e.g., groups opposed to tor-ture, as well as groups whose politics are morecontroversial, e.g., conservative opponents ofthe women’s movement, are both excluded,claims CCRA. If the rules limiting public policyinput were liberalized (and if CCRA ceased itspractice of denying registered status to allgroups who mention advocacy or public educa-tion as activities they pursue),100 it would beharder for CCRA to disguise its reasons fordenying status.

One senses that underlying these argumentsmade by defenders of the system is not concernabout the integrity of the rules but with thepolitical risk to government of extending privi-leges to so-called questionable or fringe groups.This depends partly on whether access to thetax system is viewed as a privilege or an entitle-ment. Americans regard tax advantages as aright, whereas Canadians have tended to con-sider them as a privilege afforded only to thedeserving.101 This may be changing, however,as Canadians’ core values and beliefs about therole of government shift. In a democracy it isuseful to hear diverse views, even those manywould consider repugnant, provided they are notillegal or promoting the abuse of fundamentalrights and freedoms. Granted, charities withunpopular views might find audiences unrecep-tive, but government should make no apology forsupporting the ability of such groups to speakout.

3.2 Government loses flexibility to makejudgements most Canadians would support

CCRA has argued that the current systemcreates flexibility for the regulator to exercisejudgements that Canadians would support. Weunderstand this flexibility is seen to arise pre-cisely because the rules and their administrationare impenetrable and the law is inconsistent.Moreover, regulating primarily by gatekeepingrather than audit (due perhaps to resourceconstraints) has the advantage of forcing CCRAto focus its regulatory attention only on thosecharities whose conduct has attracted com-plaints and to ignore the rest that are smartenough to ‘lie low.’ Far from seeing these cir-cumstances as a disadvantage, CCRA mayperceive that the current regime works efficientlyand fairly.

The goal of regulation should be to addressissues requiring a remedy in a manner thatcitizens perceive as fundamentally fair, even-handed, accountable and with a minimum ofinterference. An approach that puts all thepower into the hands of the regulator through thefollowing methods – denying the public access toits decisions; removing it from meaningful super-vision by the courts or administrative oversight;and allowing officials to shield their politicaljudgements under the guise of applying broadpolicy – is not apt to engender public confidence.

Regulatory efficiency should not be judgedsolely by regulator convenience. Nor should itbe the role of the revenue collection system todetermine the political acceptability of groupsthat believe they have a contribution to make tothe public good. The responsibility for creatingpolicy in this area lies with politicians and if theysee risk in exercising this function, it should notbe delegated to officials who operate free fromscrutiny. The challenges related to this providean argument for the development of a third-partybody to regulate or oversee the manner in whichregistered charitable status is granted andrevoked.


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4.0 Not in the Best Long-term Interestof the Charitable Sector

It has been argued that it is not in the bestlong-term interests of the sector to permit chari-ties to engage in unlimited advocacy. If advo-cacy increases overall and if charities repeatedlytake unpopular positions or use manipulativetechniques to attract attention, their credibilityand public support will decrease. Charities aresensitive to public opinion. Their obligations todonors and their stakeholders ensure that theyare unlikely to pursue unpopular positions unlessthey believe they are in the public interest. Thevoluntary sector has acknowledged this issueand developed guidelines for accountability andethical fund-raising designed to ensure thatinappropriate practices are discouraged. Possi-bly, there is a need for the sector to invest indeveloping codes of conduct and minimumexpectations in conducting public policy workand public education campaigns. This maypresent an opportunity to reassure governmentthat the sector’s approach overall to advocacy isinformed by good intentions and a commitmentto responsible conduct.

5.0 Loss of Taxation Revenue

CCRA’s mandate is to uphold the integrity ofthe taxation system and to maximize revenuecollection for the federal government. Its officialshave expressed concern that broadening thecategory of groups eligible for registered statuswill increase the amount of lost revenue as moretaxpayers use credits to reduce their tax payable.This view assumes that charities consume publicfunds that would otherwise not be spent. Econo-mists have argued that the service performed bycharities has the direct effect of freeing govern-ment from performing the service; furthermore,by granting a charitable tax exemption, the stateis subsidizing itself, to the extent it acknowl-edges some responsibility for meeting thesesocial needs.102 This view also assumes that therate at which Canadians give to charity will keeppace with any increase in the number of groups

that can offer tax receipts, e.g., that there is noceiling on the global amount of donations. Thegovernment has offered no evidence that this willoccur, whereas some in the voluntary sectorargue that an increasing number of organiza-tions will increase the competition for funds.

6.0 Advocacy Groups and Charities DoNot Contribute Usefully to thePolicy Debate

This concern relates to the quality of infor-mation and advice supplied to government. Heregovernment may be troubled that it is supportingsubmissions that are of little benefit to it, eitherbecause it cannot make effective use of theinformation, or the information is not a reliablebasis on which to develop public policy. Weacknowledge the government’s concern aboutquality of “in-depth research” and the capacitychallenges facing the sector in this regard.However, government may need to adjust itsexpectations, and to value the input it receivesfrom the sector for what it discloses about thecommunity and from the front-line observationsof individuals who work with the populations whoreceive charitable services. Just as significantly,the concern may reveal an institutionalizedelitism on the part of some federal departmentsthat can hamper efforts to build a collaborativerelationship.


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7.0 Difficulty in Measuring the Impactsof Advocacy

Here the concern is with the difficulty inascertaining whether expenditures for publicpolicy input contribute to the public good. Advo-cacy and public education campaigns often takeyears to bear fruit and when change happens itis rarely attributable to the actions of only oneplayer. How, then, can the federal governmentknow whether the change sought is feasible;whether the group’s approach to the issue issensible in the circumstances; whether theexpenditure is proportionate to its goals; whetherthe advocacy is usefully connected to theachievement of the group’s charitable goals oreven to the policy or legislative change when it isfinally achieved? The 10% rule caps a charity’srisk exposure to bad strategic and spendingdecisions on advocacy. If the rule were attenu-ated, what would stop some charities frompursuing impractical plans and wasting donatedfunds?

This determination is what boards of direc-tors are meant to do. Directors have a fiduciaryresponsibility to ensure the prudent managementof the organization’s resources. If an expendi-ture or commitment of staff time to an advocacyinitiative is ill-advised for any reason, but particu-larly if it is disproportionate to the benefit ex-pected, it is the board’s responsibility to makeinquiries and, if necessary, to halt it.

It is not clear why government needs toscrutinize these matters any differently thanother spending and program decisions made bycharities. A service or program offered to clientsmay be more visible and directly related tomeeting a client’s immediate needs, but it doesnot necessarily optimize the charity’s resourcesor provide the best means to achieve its pur-poses.

The experience of charities in England andWales using the Charity Commission’s guide-lines on Political Activities and Campaigning byCharities103 would be helpful in learning howthese judgements are made elsewhere. Trusteesmust be able to demonstrate there is a reason-able expectation that a political activity willfurther the organization’s purposes. Consider-able precedent and experience in that jurisdic-tion, on which we could rely and build in Canada,is available.


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PART VIII – OPTIONS FOR CHANGE

1.0 Our Purpose and a Caveat

This section outlines some of the proposedoptions for change. Out of deference to theongoing work of the Regulatory Joint Table andsensitive to the limitations of space and thereader’s patience, we have selected only a fewoptions for analysis. We acknowledge that viableoptions have been excluded and for this weapologize to their proponents and hope they willurge us to include these alternatives in upcomingconsultations. This is not intended to be adetailed analysis of the options but to highlightkey issues for further thought and discussion.


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Society Voluntary Sector Charities Government

Impact Analysis

2.0 Working Together Proposal:Re-define Political Activities

In Working Together, the Regulatory Tableproposed that the Income Tax Act be changed topermit “political activities” by charities – providedcertain conditions are met. The political activi-ties have to:

• (have a reasonable expectation that they will)contribute to the achievement of the charity’sobjects;

• be non-partisan;

• be based on fact and reasoned argument;

• not be based on information the charityknows or ought to know is inaccurate ormisleading, and

• not constitute illegal speech.104

This definition draws heavily on the Englishguidelines Political Activities and Campaigningby Charities105 cited above in Part VI, Section2.0. Presumably, administrative guidelines mightalso be developed to further explain the newstatutory tests.

Would be supported bypublic.

Public interest served inallowing freedom ofspeech by charities,whether or not critical ofgovernment.

Places emphasis onwhether advocacy is aptto achieve charitablepurposes rather than theactivity.

Addresses concernsabout governmentcontrol andsubordination of sector.

Requires standards ofaccuracy, fact andreason so ensuresminimum quality insubmission.

Requirement for factualbasis and not misleadingwould prevent ‘flatearthers’ and ‘Holocaustdeniers’ from promotingsuch views at all.

Provides needed signfrom government that itphilosophically supportsadvocacy by charities.

In ensuring minimumquality of advocacysubmissions, reflectswell on advocacypractices of the sector,hence building publicconfidence in sector as aresponsible participant inpolicy process.

Publicly defensible –difficult for politicalopposition to challengebecause it looks soreasonable and is basedon English practice.

No revenue losses as notexpanding number ofgroups eligible forcharitable status.

No new regulatory regimeso costs of start-up andpreparing guidelinesminimal.

Can build on rulings ofEnglish CharityCommission so expeditesdrafting guidelines andreduces regulatory risk oferror.

Deprives government ofability to limit criticism bycharities.

Leaves current charitableregistration regime intactso minimum disruption.

Regulatory audits will beless subjective andrequire less judgement –although test of what isreasonable will requiremore training for auditors.

Clarifies basis ofjudgements whetheractivities are political andsubject to limits.

Expands range ofacceptable politicalactivities and endsunreasonable andsubjective requirements.

Draws on a regime that isknown to work elsewhereso reinforces confidencein and efficiency ofregulation for those beingregulated.


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Impact Analysis

Supported by public – inMuttart survey of publicattitudes, 62% indicatedthat charities should beable to allocate morethan 10% to advocacyand 47% thought limitsshould be greater than20%.

3.0 Working Together Proposal:Replace the 10% Rule with theRequirement that PoliticalActivities be Incidental andAncillary

The Regulatory Table saw little merit inquantitative limits, whether set in law or CCRApolicy, although it agreed that such activitiesshould not predominate. It argued that the 10%rule should be significantly attenuated. Thisrecommendation flows from its proposal aboveand is assumed to accompany it.

Regulatory audits willrequire more judgementby auditors indetermining what isincidental and ancillary;further training ofauditors required.

More closely resemblesthe American model andcan build on and learnfrom U.S. experience ininterpreting similarprovisions.

Probably permits higherexpenditure on advocacy –so good for small charities.

In combination with pro-posal 1.1, it gives increasedclarity and flexibility but lesscertainty for charities; butdoes not obviate need forjudgements about whetheractivities are political.

Re-focuses attention oncharitable purposes asbasis for any expenditure.

Allows for more flexibility indiscussions with CCRAabout permissibleexpenditures.

More closely resembles theAmerican model whicheffectively allows 5% to 20%to be spent on advocacy.

Because this is part ofproposal in 2.0 clarifyingpolitical activities, itprovides a needed signfrom government that itphilosophically supportsadvocacy by charities.


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Impact Analysis

4.0 IMPACS Proposal: List ProhibitedPartisan Political Activities in theIncome Tax Act

In late-2001, the Institute for Media, Policyand Civil Society (IMPACS) and the CanadianCentre for Philanthropy proposed106 that theIncome Tax Act be amended to clearly identifywhat charities cannot do. The problem, theysaid, is that confusion has arisen as the distinc-tion between “charity” and “partisan politics” hasbecome blurred. As a result over the years,CCRA has developed rules that limit non-parti-san activities and advocacy. Although IMPACSdescribes it as a technical problem, this newapproach seems to start from the proposition

that Canadian judges and regulators may havemisinterpreted the older case law as limitingnon-partisan political activities. The proposal isthat under the heading of “partisan politics,” a listof prohibited activities would be set out. So longas a charity avoided the enumerated activities, itwould be free to engage in unlimited amounts ofdesired public education, advocacy or non-partisan activity – terms that could be aban-doned because the distinctions would no longermatter. The “incidental and ancillary” require-ment would also be removed. The list of bannedactivities would be short: (1) support for oropposition to a political party or candidate; and(2) promotion of a political ideology.

Unclear if this optionwould be supported bythe public; public opinionsurveys have not askedCanadians what theythink of charities pursuingunlimited non-partisanactivities.

Some charities mayreduce their servicedelivery to devoteadditional funds toadvocacy. Change couldbe good if advocacyreduces need for serviceor if it forces other parties,such as government orprivate sector to do more.Could be bad if charitiesdecide unwisely to re-direct funds from urgentlyneeded programs toadvocacy with littlechance of success.

Can be difficult for donorsand public to assessfeasibility and success ofsome advocacy efforts.

Provides clearest sign ofall options thatgovernmentphilosophically andtangibly supportsadvocacy by charities.

Would eliminateadvocacy chill.

Only distinction betweenpermitted activities ofnon-profits and charitiesis ability of the former tosupport partisan politics.

Number of registeredcharities would increaseas some applicants nowexcluded solely becauseof their advocacy wouldbecome eligible.

Probably not a largeincrease in registrationsbecause current legalrequirements to registeras charity would stillapply.

Provides an objective toolfor making determinationson political activities.

Less uncertainty forregulators; easier and lesscostly to administer thancomplicated rules.

Requires statutoryamendment, which wouldbe politically contentious,especially with populistpoliticians.

Probably supported inQuebec; sovereignistcharities there can spendon non-partisan activities;could be new issues thatarise on what is a politicalideology.

Less flexibility forregulators and governmentto exclude and deregistergroups with extreme views.

May be opposed byprovincial governments,especially Ontario, on legaland political grounds.

Permits much higherexpenditures onadvocacy – especiallygood for small charitiesthat wish to developadvocacy expertise.

Eliminates confusionand difficulties inapplying current rules;provides certainty andreduces risk, advocacychill and expenditures onobtaining legal advice.

Places greater onus onboards of directors toprovide policy andstrategic guidance tomanagement, to assesslikelihood of advocacyachieving purposes andto monitor costs. Boardswill need support andresources.


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Impact Analysis

5.0 Press for More Guidance FromCourts or Tribunal

Laird Hunter and others have argued thatthe paucity of judicial interpretation in thiscountry of what is permissible political activityor advocacy has retarded the evolution of theissue and left charities and their advisors withlittle guidance. This policy and legal vacuum

has allowed CCRA to enjoy virtually unfettereddiscretion to develop and apply its policies andprocedures narrowly to meet its prime objective:the preservation of tax revenues. Additionalguidance is urgently needed. This recommenda-tion is assumed to be stand-alone although itsproponents may expect that it would accompanyany other structural reforms.

Obtain neededclarification on thebounds of politicalactivities.

Increased costs andresources spent in legalproceedings arguing thelaw.

Decreased regulatorflexibility as “gray areas”cleared up.

Obtain needed clarificationon the bounds of politicalactivities.

Given the legal precedents,it is unlikely that the courtswould rule in a mannersubstantially inconsistentwith the existing jurispru-dence – which may notbode well for expanding thelimits on advocacy.

A specialized tribunal with acarefully constructedmandate, jurisdiction andpolicy framework willaddress the sector’s desirefor liberalizing the rules.

Society benefitsindirectly by havingclearer rules & coherentlaws & policiesregulating charities –increasing the efficiencyof the charitable sectorin delivering publicgoods.

Obtain needed clarificationon the bounds of politicalactivities.

Initially, some groups willneed to devote resourcesto obtaining judicial input oradministrative guidance.

In the longer term,increased clarity will savethe sector money, time andresources and will reduceor eliminate advocacy chill.


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Impact Analysis

Would address host ofdefinitional problemsover charities and wouldrecognize benefit ofmany organizationsexcluded from charitablestatus.

Consistent with existingtrends to legislating newcategories of “quasi-charities.”

Diminishes practicaldistinction betweencharities and non-profits.

6.0 Drache Proposal: Create NewCategory of Public BenefitOrganization

Arthur Drache and Frances Boyle107 haveproposed that a new category of ‘public benefit’organization be established by statute to getaround the definitional complexities of whatconstitutes a charity at law and yet is responsiveto contemporary needs. An explicit list of quali-fying kinds of organizations, whose activities areof broad public benefit, would be deemed publicbenefit organizations. The list includes umbrella

organizations, charities (that would be grand-fathered by the new regime), and non-profitorganizations dedicated to the public benefit,including groups whose advocacy consumed asubstantial part of their resources. There wouldbe no limits on advocacy, i.e., the disseminationand debate of ideas and opinions that are sub-stantially and demonstrably true and related tothe organization’s objects. Non-partisan politicalactivities that are not advocacy would be subjectonly to a requirement that they be incidental andancillary to the organization’s purposes.

As new regime is areplacement forcharitable registration, itwould require creatingnew rules and attendantcosts, considerableresearch andconsultation necessaryto determine whichgroups qualify for PBstatus.

Politically problematicfor government todefend some categoriessuggested.

Entails additionalrevenue losses as moregroups could issue taxreceipts but insufficientinformation availableabout number ofnon-profits that mightwish to apply for PublicBenefit status.

Deprives government ofsome control over whichgroups receivegovernment support.

Clarifies regulation ofadvocacy for charities.

Significantly widenspermissibility of advocacyand political activities andwhile advocacy must besubstantially anddemonstrably true, it doesnot appear that permittedpolitical activities are sorestricted.

Added burden and costsfor non-profits currentlydoing advocacy to registerand report on theiractivities.

As number of qualifyinggroups increases, so doespotential competition forfund-raising.

Provides needed signfrom government that itphilosophically supportsadvocacy by charities.

Additional groups wouldreceive support fromgovernment through taxsystem.

Some non-profits may notwish to register for newstatus due to increasedregulation and monitoringof their activities.

The system subjectsadvocacy by non-profits tocloser supervision bygovernment than tolobbying by business.


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Impact Analysis

7.0 Webb Proposal: Create NewCategory of Registered InterestOrganization

Kernaghan Webb has proposed that a newcategory of “Registered Interest Organizations”(RIOs) be created to extend more favourable tax

treatment to non-profit organizations engaged inadvocacy and political activity. RIOs would be tax-exempt, registered and able to offer tax receiptsfor donations at a level equivalent to the deduc-tions available to corporations for lobbying ex-penses at the average effective tax rate.

Start-up of RIO regimewould require creatingnew rules and attendantcosts.

Entails additionalrevenue losses as moregroups could issue taxreceipts.

Deprives government ofsome control overwhich groups receivegovernment support.

Would leave currentcharitable registrationregime intact.

Consistent with existingtrends to legislating newcategories of “quasi-charities.”

Allows for systematiccollection of data onadvocacy activities –information that is notnow being collected.

Allows opponents ofadvocacy to obtaininformation on file and topublicize or use againstorganization.

Clarifies regulation ofadvocacy for charities tosome extent.

Potential competition forfund-raising with RIOs.

Replaces burden ofincorporating separatenon-profit for advocacywith greater burden ofincorporating separateentity and registering it.

Need to clarify that onlythose charities seeking todevote more resources toadvocacy than permittedby incidental and ancillaryrule would need toregister.

Unclear how RIO systemwould clarify currentuncertainties in rulesregulating advocacy bycharities – may just addnew complexities.

Obtain acknowledgementfrom government thatadvocacy is worthextending support to viatax system.

Additional groups wouldreceive support fromgovernment through taxsystem.

Some non-profits may notwish to register for RIOstatus due to increasedregulation and monitoringof their activities – is therean opt-out provision?

Subjects advocacy bynon-profits to closersupervision bygovernment than tolobbying by business forwhich the reportingrequirements are apt to beless onerous.


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PART IX – CONCLUSIONLiberalizing the rules that limit political

activities by registered charities has interestedCanadian non-profit groups for many years.Concerns with the policy objectives of the federalregulatory regime for registered charities as wellas the conceptual and practical difficultiesarising out of the case law, scant as it is, arelong-standing. What is adding new urgency tothese issues is the insistence with which charita-ble and voluntary groups are calling on govern-ment to acknowledge, in a very tangible way, thatthe vitality and effectiveness of the sector aretied to its contributions to public policy proc-esses. Behind the sector’s new assertivenessare structural and philosophical changes in therole of government and a shifting of responsibili-ties to the voluntary sector. Public policy advo-cacy by charities, perhaps more than any otherissue facing Canadians and their government,highlights the policy, legal and political chal-lenges of adopting a new paradigm of govern-ance based on collaboration and partnership.Responding to these challenges in a way thatsatisfies charities, the broader voluntary sector,the federal government and the Canadian publicmay be difficult. It will test our democraticresilience and our capacity for acknowledgingthe unique contributions and changing responsi-bilities of each partner in governance.

The process by which a solution can bereached will require consultation, debate andcollaboration. The Advocacy Working Group isdeeply committed to furthering the process. Thispaper and the consultations that follow will, ontheir own or in conjunction with the RegulatoryJoint Table, the Canadian Centre for Philan-thropy, and the IMPACS Charities and Advocacyproject, amongst others, contribute to the identi-fication and assessment of various options forreform. We look forward to this next phase.


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ENDNOTES1 The Muttart Foundation, Talking About Charities: Canadi-

ans’ Opinions on Charities and Issues Affecting Charities(Edmonton: Canadian Centre for Philanthropy, 2000) at pp.4, 6 and 10-11.

2 Cited in Neil Brooks, Charities: The Legal Framework(Ottawa: Secretary of State, February 1983) at p. 131.

3 Susan Phillips describes this new paradigm as governance(as opposed to government) and writes that it refers to aprocess of governing through collaboration with voluntary,private or other public-sector actors in the planning, designand achievement of government objectives in a manner thatshares policy formulation, risk and operational planning.Susan D. Phillips, “More than Stakeholders: ReformingState–Voluntary Sector Relations,” Journal of CanadianStudies, vol. 35, no. 4 (Spring 2001), pp. 1-22 at 18.

4 Described as fundamental to an effective partnership by thePanel on Accountability and Governance in the VoluntarySector, on p. 34 of Building on Strength: ImprovingGovernance and Accountability in Canada’s VoluntarySector, Final Report (Ottawa: February 1999) [hereinafterthe Broadbent Report]. Available at http//www.vsr-trsb.net/pagvs/Book.pdf.

5 Neil Brooks, “The Role of the Voluntary Sector in a ModernWelfare State,” in Jim Phillips, Bruce Chapman and DavidStevens (eds.), Between State and Market: Essays onCharities Law and Policy in Canada (Montreal andKingston: McGill-Queen’s University Press, 2001) at p.202. Available at http://www.nonprofitscan.org/state-and-market.htm.

6 Government of Canada, Voluntary Sector Task Force, PrivyCouncil Office, Working Together: A Government ofCanada/Voluntary Sector Joint Initiative: Report of theJoint Tables (Ottawa, PCO, August 1999) at p. 50 [hereinaf-ter the Working Together report]. Available at http://www.vsi-isbc.ca/eng/reports.

7 This view was shared with the author by senior policy staffwith the federal government. Carl Juneau, then AssistantDirector of Charities Division, Revenue Canada, haswritten: “Essentially, the difference between education andadvocacy (of the unacceptable type) involves the presenceof bias or propaganda.” Carl Juneau, “Defining CharitableLimits: Advocacy, Education and Political Activities,” Fitto be Tithed II: Reducing Risks for Charities and Non-Profits (Toronto: Osgoode Hall, November 28, 1998) at p. 15.

8 Definition of public benefit organizations provided byA.B.C. Drache with K.F. Boyle, Public Benefit and theCanadian Income Tax System: A Proposal for Reform(Toronto: Kahanoff Nonprofit Research Initiative, 1998) atpp. 69-79.

9 Peter Broder, Legal Definition of Charity and CanadaCustoms and Revenue Agency’s Charitable RegistrationProcess (Toronto: Canadian Centre for Philanthropy,August 2001) at p. 55. Available at http://www.ccp.ca.There is a strong correlation between the goals andactivities of these public benefit groups and a workingdefinition of charity devised by the Ontario Law ReformCommission (OLRC), Report on the Law of Charities(Toronto: Publications Ontario, 1996) at pp. 148-152.Available at:http://www.qut.edu.au/bus/ponc-new. The OLRCconsidered charity to be the altruistic provision to others of“the means of pursuing a common or universal good.” Thegoods associated with charity encompass the basic formsof human flourishing, including life, knowledge, religion,aesthetic experience, and friendship.

10 Broder, ibid., p. 25. This list is based on a review by theCanadian Centre for Philanthropy (CCP) of a number ofrefused or revoked charitable registrations. Copies of therecords are available at CCP’s offices in Toronto. Anadditional piece of information about these groups, notesBroder, concerns the level of private financial support theyreceive, most or all of which is donated with no tax creditbeing supplied to the donor. Donations to organizationsidentified as civic and advocacy organizations totalledapproximately $19 million; environmental groups weregiven $7 million; international organizations focusing onexchange programs, peace or human rights drew another$7 million; and groups promoting volunteering received$100,000. This is to be compared to the $9.4 billion thatindividuals and businesses donated to registered charities.

11 Drache, op cit., note 8.

12 The figure of 180,000 is cited in “Facts about the Volun-tary Sector in Canada” released on December 5, 2001 bythe Voluntary Sector Initiative in the announcement of theAccord. Available at http://www.vsi-isbc.ca/Accord.Previously, the figure of 175,000 was cited in the WorkingTogether report, op cit., note 6 at p. 18. Also see: MichaelHall and Keith G. Banting, “The Nonprofit Sector inCanada: An Introduction,” Keith G. Banting (ed.), TheNonprofit Sector in Canada: Roles and Relationships(Montreal and Kingston: McGill-Queen’s UniversityPress, 2000), pp. 1-28 at 11; and Don K. Embuldeniya,Exploring the Health, Strength and Impact of Canada’sCivil Society (Toronto: Canadian Centre for Philanthropy,July 2001) at p. 10. The data source in both instances is J.Quarter, Canada’s Social Economy (Toronto: JamesLorimer & Company, 1992). Erwin Dreesen, “What WeShould Know about the Voluntary Sector but Don’t,”ISUMA, Vol. 2, No. 2, Summer 2001, under “Non-charitable non-profit organizations,” available at http://www.isuma.net, explains the paucity of data on the non-profit sector:

Statistical data on non-profit organizations that are notregistered charities are limited to a few categories


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surveyed by Statistics Canada in 1973 and 1974, data ontrade unions, the collection of which was discontinued after1995, and data on non-financial co-operatives published byAgriculture and Agri-Food Canada’s Cooperatives Secre-tariat and on credit unions and caisses populaires providedby the Department of Finance….As well, since 1993 thelargest non-charitable non-profit corporations have beenrequired to file an annual return with Revenue Canada (nowthe Canada Customs and Revenue Agency). Efforts by afew researchers to estimate the total number of non-charitable non-profit organizations suggest that the availabledata cover only a small portion of this component of thevoluntary sector.

13 Working Together, op cit., note 6, p. 16.

14 Hall and Banting, op cit., note 12 at p. 11, suggest that if inthe United States there are 30 groups per 1,000 population,the Canadian count of grassroots associations could yield acount of 870,000.

15 Currently, data on the organizations in the non-profit sectorare scarce, partial and scattered; and where these data exist,it is often impossible to separate them from data on marketsector organizations. This is both a cause and an effect ofthe lack of consensus in Canada and world-wide, on aconceptual and operational definition of the sector: Cana-dian Centre for Canadian Policy Research Networks, TheVoluntary Sector in Canada: Literature Review andStrategic Considerations for a Human Resources SectorStudy, 1998. Available at http://www.ccp.ca/information/documents/gd45.pdf. Currently, CCRA collects informationfrom a portion of non-profits that are not registered charities(those with revenues exceeding $10,000 or whose totalassets exceed $200,000).

16 The number of registered charities as of August 30, 2001was 77,716 according to CCRA in a written response toquestions submitted to it by the Advocacy Working Group.Although Hall and Banting, op cit., note 12 at p. 11 suggestthat the number of registered charities is growing by 3% peryear, this no longer appears to be correct. In June 1999,their data collection date, there were 77,926 registeredcharities. This shows a slight decline over the previous twoyears. Broder, op cit., note 9, also relates that in the late-1990s, CCRA approved approximately 2,500 charitableapplications a year. Despite a 38% increase in the numberof registrations in the 1990s compared to the previousdecade, the approval rate is falling from 84.6% in 1992-1993 to 67% in 1998-1999.

17 It is not an exact subset because to be registered as a charityusually, but not always, means that the group has beenincorporated as a non-profit. Charitable trusts and othernon-incorporated entities may also be registered charities.

18 Muttart Foundation, op cit., note 1. For a summary ofresearch findings on public attitudes, also see WinstonHusbands, A.-J. McKechnie and Fleur Leslie, Scan ofResearch on Public Attitudes Towards the Voluntary Sector(Canadian Centre for Philanthropy, February 28, 2001).Available at www.nonprofitscan.org and at www.ccp.ca.

19 We have relied on anecdotal information collected in theinterviews as we have been unable to find reliable empiricaldata on the range of advocacy activities carried on by thesector.

20 Many charities and public benefit groups have policies ondiversity, human rights, client confidentiality, handlingcomplaints, workplace rights, codes of conduct, etc., that alldelineate a set of organizational values.

21 For example, many groups have policies that prohibit thedisclosure of individual client personal information andidentity, even though their fund-raising and advocacy workmight be enhanced by ‘giving a face’ to their charitablework and even though the client may have no objections.

22 Kathy L. Brock, Sustaining a Relationship: Insights FromCanada on Linking the Government and Third Sector(unpublished paper presented at the Fourth InternationalConference of the International Society for Third SectorResearch (ISTR), Dublin, July 5-8, 2000), discusses at p. 13the risks to government in partnering with the third sector,particularly when bureaucrats lack expertise or technicalknowledge and worry that they may become beholden togroups with the resources and information to drive a policyagenda forward. She also points out that where a group haswide public support, it may be able to influence thepriorities and policy agenda of a weak or smaller govern-ment department.

23 Brian Mulroney, in a 1984 speech to the ProgressiveConservative Party, said: “One of the major priorities of mygovernment will be a complete revision of social programsin order to save as much money as possible. One way ofmeeting that objective is to encourage the voluntary sectorto participate more in the implementation of social pro-grams. Volunteer work is the most efficient method of workin Canada.” Brooks, op cit., note 5 at p. 171.

24 Royal Commission on the Economic Union and Develop-ment Prospects for Canada, Report, Vol. 2 (Ottawa:Minister of Supply and Services, 1985) at p. 826 (theMacDonald Commission Report).

25 Mel Cappe, Clerk of the Privy Council and Secretary toCabinet, Building a New Relationship with the VoluntarySector, Speech to Third Canadian Leaders’ Forum on theVoluntary Sector, May 31, 1999. Available athttp://www.tbs-sct.gc.ca/Clerksspeechesandmessages.


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26 Anecdotal evidence that their dependency on contractsmuzzles their opposition is to be contrasted with interna-tional findings that government support for third-sectoragencies may politicize them and give them new tools,access and knowledge that actually enhance the effective-ness of their advocacy work: Lester Salamon, “Govern-ment-Nonprofit Relations in International Perspective,” inElizabeth T. Borins and C. Eugene Steuerle, Nonprofit andGovernment: Collaboration and Conflict (Washington:Urban Institute Press, 1999) at p. 346-356. The sector isalso concerned that these contractual relationships withgovernment will tempt groups to stray from their coremissions.

27 John C. Tait and Mel Cappe, Rethinking Policy: Perspec-tives on Public Policy (Ottawa: Canadian Centre forManagement Development, October 1995) at p. 26 and IvanFellegi et al., Panel Discussion, Rethinking Policy:Strengthening Policy Capacity, Conference Proceedings(Ottawa: Canadian Centre for Management Development,January 1996) at p. 8, citing the findings of the Task Forceon Strengthening the Policy Capacity of the FederalGovernment, chaired by Ivan Fellegi and submitted to theCoordinating Committee of the Deputy Ministers (Policy) inApril 1993. Available at http://www.ccmd-ddg.gc.ca/pdfs/p60e.pdf. Scholars have also commented on the federalgovernment’s policy capacity deficit, including, forexample, Katherine Graham and Susan D. Phillips, “Citizenengagement beyond the customer revolution,” CanadianPublic Administration, Vol. 40, No. 2, 1997, pp. 255-273.

28 Cappe, ibid., at pp. 27-29.

29 Report of the ADM Sub-Group on the Management ofPolicy Personnel [the Kane Report], May 1997. Availableat http://www.tbs.gc.ca. Also see Fellegi, op cit., note 27.

30 Tait and Cappe, op cit., note 27.

31 Cappe, op cit., note 25.

32 Government of Canada, Partnering for the Benefit ofCanadians: Government of Canada–Voluntary SectorInitiative, Voluntary Sector Task Force, Privy CouncilOffice, June 9, 2000. Available at http://www.pco-bcp.gc/ca/reports.

33 Cappe, op cit., note 25.

34 Most charities registered under the Income Tax Act are alsonon-profit corporations established under either federal orprovincial incorporation statutes and subject to independentreporting and filing requirements as an incorporated entity.

35 Individual Canadians and non-charities, whether they arenon-profit or for-profit organizations, enjoy almost unlim-ited freedom to advocate for policy or legislative change.They may: conduct public education campaigns; engage the

media in critical commentary; pay to advertise their views;organize mail campaigns, petitions and demonstrations; givespeeches; and support political parties and candidates – allof which is protected under the Charter of Rights andFreedoms.

36 Information Circular 87-1, Registered Charities: Ancillaryand Incidental Political Activities, February 25, 1987.Available at http://www.ccra-adrc.gc.ca/E/pub/. Informa-tion circulars set out CCRA’s particular interpretation of thelaw. Also see CCRA publication RC4107 (E), Draft #2,Registered Charities: Education, Advocacy, and PoliticalActivities, p. 8. Available at http://www.ccra-adrc.gc.ca/E/pub/ [hereinafter RC4107 (E)]. RC4107 (E) is intended toreplace Information Circular 87-1.

37 Income Tax Act, R.S.C. c. 1 (5th Supp.).

38 For example, the Supreme Court of Canada recently heldthat although an organization devoted to helping immigrantand visible minority women find employment was offeringa useful service of public benefit, it was not, on the whole,charitable. Vancouver Society of Immigrant and VisibleMinority Women v. M.N.R. [1999] S.C.R. 10 [hereinafterVancouver Society].

39 Forty-five percent of donors indicate that they or someonein their household intend to claim a tax credit for charitabledonations. Caring Canadians, Involved Canadians:Highlights from the 2000 National Survey of Giving,Volunteering and Participating (Ottawa: Minister responsi-ble for Statistics Canada, August 2001), p. 29. StatisticsCanada catalogue no. 71-542-XPE.

40 Statistics Canada, ibid., note 39. Forty-nine percent ofdonors indicated they would contribute more if governmentsoffered them a better tax credit for their charitable dona-tions. This is a substantial increase from the 37% of donorswho indicated the same in 1997.

41 Many registered charities – particularly in the social service,health, arts, and international development sectors – arelegally structured as membership-based, non-profit corpora-tions. The public benefit of such entities is assumed evenwhen they are governed and run by members, demonstratingthat such organizations can coalesce membership interestsand public interests. Non-profit governance expert JohnCarver characterizes non-profit boards of directors asgoverning on behalf of the members and other owners, bywhich he means the community at large. John Carver,Boards that Make a Difference: A New Design forLeadership in Nonprofit and Public Organizations (SanFrancisco: Jossey-Bass Publishers, 1990) at p. 130.

42 John D. Gregory. “Establishing a Charity,” The Philanthro-pist, vol. XI, no. 4 (Winter 1993), pp. 53-68 at p. 54.

43 http://unitedwaytoronto.com_who_we_help-pdf.


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44 Sandy Houston of the Metcalfe Foundation in conversationwith the author, September 2001, observed that the “vastmajority of private foundations will only fund registeredcharities.” According to advice from CCRA, foundationsmay fund non-profits via a formal agency agreement, whichtightly controls how expenditures are made and reporting isto be carried out. As few foundations are prepared to go tothe trouble and expense of following this route, there is littleopportunity for non-profits to obtain foundation assistancewithout having registered status, according to Mr. Houston.

45 M. Hall and L. Macpherson, “A Provincial Portrait ofCanada’s Charities,” Research Bulletin, 4 (2 & 3) (Toronto:Canadian Centre for Philanthropy, 1997). Gordon Floyd,“Re Improved Tax Incentives for Modest-Income Donors,”Notes for Presentation to House of Commons StandingCommittee on Finance, 1998. Available at http://www.ccp.ca. Gordon Floyd cites 20% of donations comingfrom private giving, most of it from individual donors.Although both the 14% figure (which is cited in MichaelHall and Keith G. Banting, op cit., note 12) and the 20%figure rely on sources that originated with the CanadianCentre for Philanthropy, the differences are unexplained. Atany rate, the difference does not make a material differenceto the argument that private donations are a less importantrevenue source than earnings and grants.

46 Frances K. Boyle, Charitable Activity under the CanadianIncome Tax Act: Definition, Process and Problems (Toronto:Voluntary Sector Roundtable, 1997). Available at http://www.vsr-trsb.net/publications. Also see Broadbent Panelreport, op cit., note 4.

47 See, for example, Broder and the OLRC report, both op cit.,note 9, and Boyle, ibid., note 46. Richard Bridge, The Lawof Advocacy by Charitable Organizations: The Case forChange (Vancouver: IMPACS, 2000). Available at http://www.impacs.org/pdfs/charities.pdf. Patrick J. Monahan andElie S. Roth, Federal Regulation of Charities: A CriticalAssessment of Recent Proposals for Legislative andRegulatory Reform (Toronto: York University, 2000);Kernaghan Webb, Cinderella’s Slipper? The Role ofCharitable Tax Status in Financing Canadian InterestGroups (Vancouver: SFU-UBC Centre for the Study ofGovernment and Business, 2000); Abraham Drassinower,“The Doctrine of Political Purposes in the Law of Charities:A Conceptual Analysis” in Jim Phillips, Bruce Chapmanand David Stevens (eds.), Between State and Market:Essays on Charities Law and Policy in Canada (Montrealand Kingston: McGill-Queen’s University Press, 2001) atp. 288-315. Available at http://www.nonprofitscan.org/state-and-market.htm; Arthur B.D. Drache, The Charity &Not-for-Profit Sourcebook: Cases, Legislation and Com-mentary, Vol. 1 (Toronto: 1999); Donald Bourgeois, TheLaw of Charitable and Non-profit Organizations, SecondEdition (Toronto and Vancouver: Butterworth’s, 1998).

48 In Ontario, the Charities Accounting Act provides statutoryauthority for supervision over charities by the OntarioPublic Guardian and Trustee.

49 Commissioners of Income Tax v. Pemsel [1891] A.C. 531(H.L.) at p. 583.

50 (U.K.) 43 Eliz. I, 1601, c. 4.

51 The preamble to the Charitable Uses Act of 1601 states:Whereas land…goods…chattels…and money, have

been…given by Sundry…well-disposed persons…for…[t]he relief of aged, impotent and poor people; themaintenance of sick and maimed soldiers and mariners; themaintenance of schools of learning, free schools andscholars in universities; the repair of bridges, ports, havens,causeways, churches, sea banks and highways; the educa-tion and preferment of orphans; the relief, stock or mainte-nance of houses of correction; the marriage of poor maids.The relief or redemption of prisoner or captives; the aid orcare of any poor inhabitants…

52 Ontario Law Reform Commission, op cit., note 9, ch. 7. at p.5 of 28.

53 [1917] A.C. 406 at 442. The Court was asked to considerwhether a society established to promote the principle thathuman conduct should be based on natural knowledge andnot supernatural belief had a charitable purpose. The courtviewed with skepticism the Society’s goal of reducing therole of Christianity in public life and was concerned that theSociety was non-Christian, blasphemous and possibly, evencriminal.

54 Legal writers have argued that Bowman was wrong from thestart. Webb, op cit., note 47 at p. 130, argues that the Houseof Lords in Bowman relied on a commentator who hadmisinterpreted 19th century case law and planted the ideathat reform-oriented charities were against public policy.He points out (at p. 27) that in the 19th century, it wascommon for charities to overtly make use of politicalactivism such as charities devoted to legislation againstslavery, observance of the Lord’s Day Act, penal reform,promotion of anti-poverty laws, temperance and animalwelfare. Webb at p. 134 and Broder, op cit., note 9 at p. 43,offer several arguments why this concern by the courtsabout their suitability for determining whether a legislativechange would benefit the public is misplaced. In particular,they point out that determining whether a law is in thepublic benefit is no more difficult than assessing whether,under the Charter, a law is demonstrably necessary in a freeand democratic society. Brooks, op cit., note 2 at p. 146,argues:“The question is not whether a particular legislativeoutcome is in itself for the public good, but whether havingall sides presented on legislative issues is a public benefit.”Brooks goes on to cite another legal commentator asfollows: “There seems no reason why judges should be


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unable to determine whether the advocacy of change inparticular laws is for the public benefit. It may be possibleto decide it is, even if there remains doubt about the rightsand wrongs of the change itself. In a free democracy thepromotion of controversial views may well be for the publicbenefit” (Cotterell, “Charity and Politics,” 38 Modern LawReview 471, 474 (1975)).

55 For example, in Human Life International in Canada Inc. v.M.N.R., [1998] 3 F.C.A. 202 starting at p. 217, Strayer J.A.stated: “advocacy on opinions of various social issues” is“political activity” and “Courts should not be called upon tomake such decisions as it involves granting or denyinglegitimacy to what are essentially political views: namelywhat are the proper forms of conduct, though not mandatedby present law, to be urged on other members of thecommunity? Any determination by this court as to whetherthe propagation of such views is beneficial to the commu-nity and thus worthy of temporal support through taxexemption would be essentially a political determinationand it is not appropriate for this court to make.”

56 National Anti-Vivisection Society v. Inland RevenueCommissioners [1948] A.C. 31. The court consideredwhether the Society was charitable given that its purposewas, in part, to call on Parliament to suppress the practice ofvivisection on animals. Because vivisection was permittedunder an existing law, its suppression would involvelegislative repeal. This was a purpose that Lord Simondsheld could not be charitable.

57 National Anti-Vivisection Society, ibid., at p. 50.

58 [1981] 3 All E.R. 493, (1982) 2 W.L.R. 222 (Ch. D.) citedwith approval in Positive Action Against Pornography v.M.N.R. (1988) 2 F.C. 340 (F.C.A.).

59 McGovern, ibid.

60 Scarborough Community Legal Aid Services v. The Queen[1985] 1 C.T.C. 98 5102 (F.C.A.).

61 Appendix A to Information Circular 87-1, op cit., note 36.

62 This typology is set out in CCRA’s draft publicationRC4107 (E), op cit., note 36, p. 9 of 22.

63 Information Circular 87-1, op cit., note 36 at p. 3 of 9.

64 Juneau, op cit., note 7 at p. 6. Also see Inland RevenueCommissioners v. City of Glasgow Police Athletic Associa-tion, [1953] A.C. 380 (H.L.) where a trust to enforceexisting law was held to be charitable.

65 RC4107 (E), op cit., note 36.

66 RC4107 (E), op cit., note 36, page 11 of 22.

67 Vancouver Society, op cit., note 38.

68 Ibid., para. 171.

69 Ibid., para. 168.

70 Human Life International, op cit., note 55, Buxton andOthers v. Public Trustee and Others, (1962) T.C. 235 (Ch.D.), at p. 242.

71 RC4107 (E), op cit., note 36, p. 5 of 19.

72 Alliance for Life v. M.N.R. [1999] 3 F.C. 504 (C.A.).

73 Ibid., at p. 29 of 40.

74 This and other examples are taken from Webb, op cit., note47 at p. 42, citing Paul Tuns, “When is a charity consideredto be dealing in ‘propaganda’? Human Life InternationalCanada was stripped of its charitable tax status for being too‘political.’ Who’s next?” The Globe & Mail, February 1,1999. Also see Shira Herzog, “Give Charities a Voice:Advocacy as a form of free speech is an essential part ofdemocracy,” The Globe & Mail, December 13, 2000, p.A17.

75 RC4107 (E), op cit., note 36 at pp. 6 and 7 of 22.

76 Arthur B.C. Drache with Frances K. Boyle, Charities:Public Benefit and the Canadian Income Tax System: AProposal for Reform (Toronto: Kahanoff FoundationNonprofit Sector Research Initiative, 1998) at p. 61.

77 In Human Life International, op cit., note 55, the FederalCourt of Appeal explicitly held that the “advocacy ofopinions on various important social issues” was a “politicalactivity” and therefore not charitable in the context of thatcase. This position was put into question the next year bythe same court in Alliance for Life, op cit., note 72, whereMr. Justice Stone stated: “It seems to me that politicalactivities may well be “ancillary and incidental” despite thefact they involve the advocacy of a particular point of viewon controversial social issues.”

.

78 Ontario Law Reform Commission, op cit., note 9 at p. 5, ch. 6.

79 Laird Hunter in conversation with the author, Septemberand October 2001.

80 Broder, op cit., note 9 at p. 51.

81 CCRA uses annulment of registered status administrativelyto revoke registered status without imposing the penaltiesthat follow from deregistration such as disallowing deduc-tions for donations, disposing of assets, or paying a penaltytax.


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82 In Alliance for Life, op cit., note 72, Mr. Justice Stonestated:It seems to me that political activities may well be “ancillaryand incidental” despite the fact they involve the advocacyof a particular point of view on controversial social issues.This surely must depend on the scope of the organization’sobjectives and the activities undertaken in pursuit thereof.It may well be that a charitable organization would want toadopt a relatively strong and controversial posture in orderto effectively advance its charitable objectives even to theextent, if necessary, of advocating a change of law or policyor of administrative decisions, without incurring the risk oflosing its status as a registered charity. The key considera-tion initially must be whether the activities actually engagedin, though apparently controversial, remain “ancillary andincidental” to the charitable activities.

83 Patrick J. Monahan and Elie S. Roth, Federal Regulation ofCharities: A Critical Assessment of Recent Proposals forLegislative and Regulatory Reform (Toronto: York Univer-sity, 2000) at pp. 59-60, citing the judgement of Mr. JusticeIacobucci in Vancouver Society, op cit., note 38.

84 Sacks, “The Role of Philanthropy: An Institutional View,”46 Virginia Law Review, 516 at 531 (1960) as cited inBrooks, op cit., note 2 at 148 and 218.

85 Drache and Boyle, op cit., note 8 at p. 66.

86 Broder, op cit., note 9 at p. 38, based on data supplied to theCanadian Centre for Philanthropy by CCRA. We areindebted to Peter Broder and the Canadian Centre forPhilanthropy for the original research Mr. Broder hasconducted into CCRA’s handling of advocacy and otherissues related to files under regulatory review (applicationsfor registration and audits).

87 This was also the view in 1984 of Law Professor Brooks, opcit., note 2 at p. 200.

88 CCRA has recently released a draft Audit Protocol regulat-ing the conduct of audits by CCRA but nothing thereprovides further clarification on why certain charities aresingled out for investigation. Available at http://www.ccra-adrc.gc.ca/tax/charities/auditprotocol-3.html.

89 The importance of the public benefit test was reiterated inboth the majority and minority in Vancouver Society, op cit.,at note 38 at paragraphs 41 and 148.

90 Boyle, op cit., note 46 at p. 30.

91 Federal political donations attract a tax credit of 75% on thefirst $200 and 50% on amounts between $200 and $550.Hence, a political donation of $300 would attract a taxcredit worth $150. Charitable donations attract tax creditsbased on the donor’s marginal tax rate. Only incomeearners in the highest tax bracket attract a charitable taxcredit worth up to 50%; income earners in other tax bracketsattract a lower percentage rate on their charitable tax credits.

92 Brooks, op cit., note 2 at p. 153, observes that it is puzzlingwhy the U.S. courts following the same common lawprecedents and principles as the English courts reached theopposite conclusion about the charitable nature of advocacy.

93 Section 501 (c) (3) of the Internal Revenue Code.

94 CC9 – Political Activities and Campaigning by Charities,September 1999. Available at http://www.charity-commission.gov.uk/CC9.htm.

95 Ibid.

96 Ibid.

97 There are opponents of this perspective who suggest thatgovernment would not otherwise fund charitable servicesbut their argument is undermined by the following observa-tions: (1) There is strong evidence that government doesview these services as a necessary public good because 60%of charities’ revenue currently comes from government; (2)These opponents assume that the services are not necessaryor, if need is indeed sincere and pressing, altruistic elementsin society – such as churches and other religious institutions– will voluntarily address it. The inadequacy of informaland unsupported altruism to address the range and depth ofcharitable need seems to us obvious, and we assumeCanadians do not wish to see increased homelessness andhunger.

98 This role can be analogized to that played by the AuditorGeneral, commissions of inquiry, civilian oversight ofsecurity forces, and even the courts and Parliament (byfunding opposition parties) – all of which exercise inde-pendent oversight functions and may press for policychange.

99 Juneau, op cit., note 7 at p. 5.

100 Broder, op cit., note 9 at p. 50.

101 Working Together, op cit., note 6.

102 Adam Yarmolinsky, “The charitable deduction: subsidy orlimitation?” Nonprofit and Voluntary Sector Quarterly (SanFrancisco, March 2000). Available at http://wwwproquest.umi.

103 CC9, op cit., note 94.

104 Working Together, op cit., note 6 at p. 22.

105 CC9, op cit., note 94.

106 In Options for Change, a brochure prepared for IMPACSCharities and Advocacy Project cross-country consultationsin the fall of 2001, this proposal was identified as Option 1.Available at www.impacs.org.

107 Drache and Boyle, op cit., note 8 at p. 71.

regulation of advocacy in the voluntary sector, b harvie

Documents