Canada Without Poverty v. R. – OSCJ: CRA’s policy limiting non-partisan political activities of registered charities violates the Charter’s guarantee of freedom of expression

https://www.canlii.org/en/on/onsc/doc/2018/2018onsc4147/2018onsc4147.html

Canada Without Poverty v. Attorney General of Canada (July 16, 2018 – 2018 ONSC 4147 (CanLII), E.M. Morgan J.).

Précis:   CRA takes the position that a registered charity must confine its non-partisan political activities to not more than 10% of its resources:

[4]               The CRA has formulated an interpretive mechanism for determining when it is that a charitable organization that engages in some political activities meets the requirement in s. 149.1(6.2) that it devote “substantially all” of its resources to charitable activities. As a matter of interpretation and enforcement, CRA restricts the ancillary, non-partisan political activities of a registered charity to 10% of the charity's resources. As stated in CRA Policy Statement CPS-022, Political Activities (“CRA Policy Statement”), at s. 9, “We usually consider substantially all to mean 90% or more.” [emphasis in the original]

[5]               Registered charities receive favourable treatment under the ITA. In the first place, under s. 149.1(f) all income earned by a registered charity is exempt from income tax. Secondly, under s. 118.1 registered charities my issue donation tax receipts to their individual contributors and under s. 110.1 to their corporate contributors. In order to maintain these fiscal advantages, a charity must remain within the definitional guidelines set out in s. 149.1(6.2). Failure to adhere to the 10% limit on resources devoted to “political activities” can result in the revocation of the organization’s registration as a charity: Action by Christians for the Abolition of Torture v Canada (2002), 2002 FCA 499 (CanLII), 225 DLR (4th) 99, at paras 20, 59, and 68 (Fed CA).

While it is not entirely clear from the reported decision it seems that the Applicant applied for a declaration invalidating this policy.  Justice Morgan granted an immediate Declaration that the interpretation and enforcement by CRA of the “substantially all” requirement in s. 149.1(6.2) of the ITA by limiting to 10% a charitable organization’s use of its resources for political activities, as set out in the CRA Policy Statement, violates s. 2(b) of the Charter and is not saved by s. 1.  He also ordered that CRA immediately cease interpreting and enforcing s. 149.1(6.2) in that way.

Decision:   This decision is breath-taking in the wide swath it cuts through CRA’s administrative practices in regulating registered charities.  Justice Morgan’s argumentation is replete with odd references to fashionable contemporary intellectual analysis, e.g.,:

[10]           It is an understatement to say that, “There is no widely agreed upon definition of what is political”: Amitai Etzioni, “What Is Political?”, CSA Worldwide Political Science Abstracts (2006), at1. Accordingly, “it is difficult to say what, if anything, ‘political’ signifies in its various applications and how it signifies what it does”: Eugene F. Miller, “What Does ‘Political’ Mean?”, 42 Review of Politics 56 (1980). Contemporary debate in political philosophy reflects this difficulty insofar as it has focused more on deconstructing the “political” than defining it: Nancy Fraser, “The French Derrideans: Politicizing Deconstruction or Deconstructing the Politcal?” (1984), 33 Modernity and Postmodernity 127.

[11]           There is no definition of “political activities” in s. 149.1(1) of the ITA, the definition section specifically applicable to charities and their activities. Virtually all of the Applicant’s activities are communicative or expressive and, seen in that light, they are all in some sense of the word “political”. This raises both a practical and a philosophical question. In an era when the personal has long been considered political, see Carol Hanisch, “The Personal is Political”, in:  Shulamith Firestone and Anne Koedt, eds, Notes from the Second Year: Women’s Liberation (New York: Radical Feminism, 1970), can one coherently distinguish between political activities and charitable activities, or, for that matter, any other kind of activities?

However there is absolutely no analysis of the historical evolution of CRA’s treatment of political activities by charities.[1]  Specifically Justice Morgan does not appear to have been advised that since the late 19^th century the Courts in England have held that trusts for the purposes of changing the law (i.e., for political purposes) are not charitable. Canada has followed that line of authority for well over a century. 

Thus we are dealing with two established legal precedents clashing head on:

• Political speech and action are forms of freedom of expression.
• Political speech and action are not charitable activities.

Arguably then CRA’s treatment could be seen to be a compromise permitting limited political (ie., non-charitable) activity by registered charities in an effort to balance these competing imperatives. 

In A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency), [2007] 3 SCR 217 the Supreme Court refused to expand the historical heads of charity to include trusts for specific sports, leaving the issue to Parliament:

44                              Finally, it is necessary to consider whether what is proposed is an incremental change.  A.Y.S.A. argues that as some sporting organizations are already charities, it would be incremental to broaden charitable status to youth amateur fitness sports.  The government submits that 21 percent of all non-profit organizations in the country are sports and recreation organizations, and that the potential recognition of these organizations as charities could have a significant impact on the income tax system.  I agree with the government that this would seem to be closer to wholesale reform than incremental change, and is best left to Parliament.  While it may be desirable as a matter of policy to give sports associations the tax advantages of charitable status, it is a task better suited to Parliament than the courts.  In this regard, I note that in the United Kingdom, the charitable status of “the advancement of amateur sport” was brought about through statute (Charities Act 2006 (U.K.), 2006, c. 50, s. 2(2)(g)).  As stated by the majority in Vancouver Society, substantial change in the definition of charity must come from the legislature rather than the courts.

[Emphasis added]

In my view while Justice Morgan’s conclusions are attractive on one level and may ultimately be determined to be correct, the historical and evidentiary record before him, as disclosed by his reasons, is wholly deficient in terms of its understanding of the history and evolution of the law of charities.

This matter has to be reviewed by the Ontario Court of Appeal and perhaps should be referred by the Court of Appeal back to the Superior Court to establish a better evidentiary record.