Recently, the federal government held a 10-week public consultation on the rules governing how charities engage in public policy. To ensure it was done collaboratively, Imagine Canada — with a mission of strengthening and supporting the charitable sector — put out a call for working group members to create a submission for legislative reform.

The submission was a simple one: end restrictions on free speech. How? By implementing a legislative amendment to the Income Tax Act that would change its regulatory focus from a charity’s activities to its purposes, finally clarifying a charity’s capacity to involve itself in public policy without scrutiny and claims of overstepping the restrictive 10% rule (whereby charities are only able to expend 10% of their efforts on political activity).

Breaking down the issue

The requested change, intended to alleviate much frustration, has been a long time coming, say experts. “We’re the only sector whose voice is regulated,” shares Bruce MacDonald, president and CEO of Imagine Canada, explaining that the 90-10 rule creates an artificial barrier. It’s particularly frustrating that charities, whose goal is public good, are restricted in their work while companies can spend unlimited amount of time and money to lobby the government with profit their end goal.

Tim Gray, executive director of Environmental Defence, would agree. “When you think about how society works and how public policy is developed, there are competitors in this space, whether self-interested individuals or, more often, corporations that have an agenda to ensure that the public policy regime favours their interest,” he says. Because the tax system is set up in a way that both limits the work charities can do up to the 10% limit, while not limiting the work that corporations can do at all, that’s a problem.

What’s more, the current legislation favours bigger charities over smaller ones, Gray adds. For health charities, for example, who tend to have larger resources, 10% of revenue can still represent a large amount of money. They can do more public policy than, say a small environmental charity.

The 90-10 rule also necessitates that all organizations carefully track what they’re doing to make sure they comply with the 10% if they were audited. But the very act of tracking is a burden. And in a world where society is reticent to support high administrative or overhead costs, “we’re caught between a rock and hard place,” says MacDonald.

Implications of the current regulation

According to many, the current regulatory environment is limiting charities’ ability to meet their mission and their day-to-day activities due to a lack of clarity over what constitutes political activity. The language is counterintuitive and it’s confusing, says MacDonald. For instance, most people would assume that meeting with a politician is a political activity. But in fact it’s a charitable one.

“There is a real fear about not understanding the specifics of the law, what it means, how it’s interpreted,” says Cathy Taylor of the Ontario Nonprofit Network. As a result, organizations are not getting involved in discussions where their voices would be valuable and are thus not serving vulnerable constituents as they could be.

“They should not be fearful to be able to call an MPP and say, ‘have you thought about this?’ That’s very different from saying I support a certain political party,” says Taylor. Effectively, the current situation is limiting their ability to get their job done. “We feel strongly that we have a moral obligation to participate in public policy discussion because we’re often on the frontlines.”

For Gray, the implications are even broader. The current legislative system effectively diminishes the ability of everyday citizens to engage in public policy discussions, from the environment to social justice to poverty alleviation, he says. An individual can’t easily take part in complex policy discussions so they donate to charities who they believe represent issues that they care about, with an expectation that public policy will be more effectively advanced through them.

Not only are they not meeting those expectations but the last few years have seen an increase in audits and reports, giving the public the impression that charities were partisan when they were engaging in public policy. All those accusations can undermine the public’s confidence in the charitable sector, says Gray.

Bottom line

“The broad implication is Canada is a better society when organizations like ours participate in the development of good public policy,” says MacDonald. Rather than feel they’re offside, organizations often err on the side of caution and limit their participation. And that’s problematic, “because we can have a better society if they were engaged.”

All one has to do is look at the changes that society has undergone over the years – from banning smoking in the workplace to removing harmful chemicals from baby bottles or enacting stiffer penalties on drunk driving – to see that many were spearheaded by charitable organizations. Their contributions are important.

According to Gray, an amendment would ensure that Canada no longer lags behind many other countries who have modernized their charitable laws. The Canada Revenue Agency (CRA) has, to their credit, recognized that the role of charity has changed significantly over the past 30 or 40 years. They’ve also recognized that the sector is overseeing a significant amount of public policy development and work in society – once the sole purview of government – and is responsible for a great majority of new ideas on how to solve complex problems.

But the legal framework is out of date. If Canada were to look to the UK, Scotland and New Zealand, they would have more effective models to emulate, Gray says.

Implications of proposed change

The working group – and a host of other charities who put forth their own submissions – are eager to adopt a new model, one that would see the Income Tax Act amended to shift focus from charitable activity to purpose. With their submission complete, a five-person panel created by the Federal Government will be tasked with providing recommendations based on input submitted to the Minister of National Revenue by the end of March.

Fingers are crossed, as that one simple amendment can have far-reaching implications. It would mean that once it’s decided that a purpose is charitable, a charity just has to ensure that their activities are consistent with it and would no longer have to define every intervention they participate in. “A focus on purposes would mean that charities are no longer restricted in the activities they undertake to achieve their purpose,” says Taylor. “As long as charities are doing activities that relate to charitable purpose and as long as they’re not doing partisan political activities, then they should be free to participate in public policy debate,” she adds.

If you say that the protection of environment is charitable and within the public interest, for example, then it’s up to organizations with that that purpose to figure out what is the appropriate balance between service delivery and public policy, says Gray. Environmental Defense, for example, pursues a mix of both. They have programs that are oriented completely to service delivery and education but also address toxic chemicals in consumer products. “One of the key ways to address that issue is to change laws around what you can put in consumers products,” he says. No longer being restricted to pursue those issues means they can be more effective.

Taylor agrees. “There are a lot of little bits of pieces that affect charities’ confidence to participate in public policy so we want to take a stand to say it’s to the benefit of all Canadians that they have a voice.” After all, charities touch every Canadian in some way or another, whether it’s a hospice or art community or sport organization.

And, though just one change to the Income Tax Act is being requested, the belief is that the amendment would have a ripple effect on other pieces of legislation too. In so doing, it would help move the conversation forward in terms of promoting free speech for the sector in innumerable ways.

“We’re hopeful that this is just the first part of a broader conversation to say, ‘how can we move to a more enabling regulatory environment for social good in this country’,” says MacDonald. “Political activity reform is just one element in having a healthy system in which charities can advocate, adapt and change.”

Elisa Birnbaum is a freelance journalist, producer and communications consultant living in Toronto. She is president of Elle Communications and Publisher & Editor-in-Chief of SEE Change Magazine and can be reached at: info@ellecommunications.ca.

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