Focus by media on CRA political activity audits - some preliminary thoughts

July 26, 2014 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA

In the last week there has been a large number of articles in the Canadian media on Canadian charities and political activities.  I would make a few preliminary points that sometimes get lost in the coverage.  

1) Canadian registered charities can carry on non-partisan political activities.

2) Canadian registered charities can spend up to 10% of resources on political activities.

3) The political activities have to be connected with the legal objects of the registered charity.

4) I personally believe that some of the most important work charities undertake is their political activities.  That being said there are rules that need to be followed and ideally charities should review those rules before conducting political activities not many years afterwards when being audited.

5) Over the last say 5 few years, 1 Canadian charity has lost its registered status for inappropriate political activities, about 200 charities have lost their status for serious non-compliance and about 3000 have lost their status because of non-filing of the T3010 annual return.  Not one environmental group has so far lost its charitable status for political activities and many organizations that Ethical Oil has complained about have not been audited by CRA. Thousands of charities will lose their status over the next year or two because they are Federal corporations under the old Canada Corporations Act and they will have failed to continue to the new CNCA and therefore they will be dissolved and if they are dissolved and don't exist they cannot be a registered charity.   But that is not a news story yet because it has not happened and because no blogger or student has connected it to the political issue yet!  By the way if someone wants to connect it I thought of a good headline "Stephen Harper uses CNCA drone with precision guided munitions to kill 5000 Canadian registered charities" Ok I could not work for a paper because that headline is way too long! 

6) CRA under s. 241 of the Income Tax Act, also known as the confidentiality provisions, is not allowed to discuss publicly specific registered charities.  CRA cannot release until revocation the reasons for revoking a registered charity.   If an organization is being audited by CRA the only party that can publicly discuss the audit, unless the charity consents in writing, is the charity.  Therefore ironically it is charities that have more ability to express their concerns about an audit than CRA has to respond to those specific concerns.  CRA maintains that it is fairly and evenly auditing charities for political activities.  If you are concerned about whether CRA is actually being fair would it not make sense that CRA disclose a list of all the charities that they are targeting so people can make up their own mind?  Unfortunately the Income Tax Act does not allow this - but it should and I have been advocating this for a few years.   Look at the Charity Commission in the UK and how they can identify that they are looking into certain charities. Journalist should obtain the complete letters from CRA to the charity and the complete letters from the charity to CRA.  It is quite simple - ask the charity for the letters.  

7) Charities who have gone to the media to highlight CRA audits have in some cases used this as effective tool to raise their profile and to fundraise.  This may be 'good' for those organizations but it is not at all clear that this coverage is good for the charity sector.

8) CRA audits about 800 registered charities per year.  Over this 5 year period CRA will audit 4000 charities and because of the heightened attention on political about 60 of these will be on the political issue. So far 52 are at various stages of audit.  A number of them have received "educational letters" or "compliance agreements".  So far none have received a notice of intent to revoke, that we are aware of.

9) If you want to do more political activities than is allowed under the Income Tax Act, then follow CRA's suggestion of setting up a non-profit organization (that is not a registered charity) that can do 100% political activities if it so chooses. Also such non-profit can make partisan political comments and can circulate material that is highly biased and even propaganda as such an organization is not held to the same standards as a registered charity.  Also individuals, as individuals and not representing a charity or using its resources, are free to say what they want, 

10) Transparency when it comes to political activities is important.  Still a very large number of Canadian charities, despite all this media attention over the last two years, are failing to disclose political activities on their T3010.  I am hoping that CRA will do more broad based education to encourage Canadian charities to understand what are political activities and that they should be properly disclosed.   


 

Here are some of the recent articles:

Pen Canada receives support amid political audit

Pen and the politics of charity 

Charities not looking for fight with Revenue Canada

Canada Revenue Agency says charities probe even-handed

CRA auditing church-based advocacy group Kairos

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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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