Aug 16th, 2023
Jan 8th, 2019
By Daniel Frajman
As mentioned in my blog article of September 19, 2018, Draft Legislation Released by the Federal Government on Political Activity by Charities, the federal government has been moving to amend (to make more permissive) the provisions of s. 149.1 of the Income Tax Act relating to political activity by registered charities, and the CRA's related administrative positions.
The government did in fact pass new legislation on this on December 13, 2018, but questions remain pending the future release of new CRA administrative positions.
The draft legislation that I commented in my above-mentioned September/18 blog dropped the rule that a charity cannot use more than about 10 % of its resources on ancillary and incidental (i.e., secondary) non-partisan political activity. The final legislation passed in December/18 also drops that 10 % rule, which is quite welcome.
The government had received a number of comments on the September/18 draft legislation to the effect that it appeared to be applying a common law (rather than statutory) definition as regards what actually constitutes political activity, and that this perhaps would give the CRA too much discretion in applying the definition. The government seems to have responded in the December/18 final legislation by dropping the common law definition of political activity, and instead renaming the concept of political activity in this area as something called "public policy dialogue and development activity" of registered charities. As to exactly what public policy activity is, a lot of insight likely will be available when the CRA releases an administrative guidance on the concept, which the CRA had promised by the end of 2018. The administrative guidance has not yet been released, but could be released shortly.
Although we do not yet have new administrative guidance, public policy activity does seem similar to political activity, given the following brief statement from the government in the explanatory notes to the bill that set out the final December/18 legislation: "Public policy dialogue and development activities of an organization generally involve seeking to influence the laws, policies or decisions of a government, whether in Canada or a foreign country."
In a nutshell, a current reading of s. 149.1 of the Income Tax Act, as amended by the December/18 final legislation, shows that the concept of charitable activity is replaced by public policy dialogue and development activity, the 10% quantitative limit is gone, politically partisan activity remains prohibited and, as mentioned three times or so in the newly amended s. 149.1, a charity's public policy activity is not a charitable activity per se but rather must further or support (i.e., presumably, must be ancillary, incidental or secondary to) one or more of a charity's other stated charitable purposes. Apparently imminent new CRA guidance should flesh this out to a greater or lesser extent.
The new legislation is therefore more welcoming to political (now called public policy dialogue and development) activity, as the explicit need to somehow count the use of resources to stay below a quantitative limit is gone, but one must still tread carefully to assure the public policy activity remains supporting/in furtherance of/ancillary/incidental/secondary to another stated purpose in the corporate charter that is charitable. In other words, is the charity’s public policy activity in support of one of its charitable purposes (acceptable), or is the public policy activity itself a purpose of the charity (unacceptable)?
If you need more details or assistance in determining what a charity can and cannot do, please do not hesitate to contact the author.
This publication is of a general nature, is as of the date indicated and is not intended to constitute an opinion or legal advice. The facts and circumstances of your particular situation should be specifically identified and addressed before appropriate legal advice may be given.