CCVO Responds to Department of Finance’s Income Tax Act Amendments

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by Lina Khatib, CCVO Policy Analyst

Last week, in a joint letter with Imagine Canada, CCVO responded to the proposed Income Tax Act amendments from the Department of Finance. While we recognize the significant steps taken to modernize the regulatory regime for registered charities, we note that the changes are only an initial step toward a broader review.

The draft legislative proposals released by the Department of Finance were meant to address Recommendation 3 of the Report of the Consultation Panel on the Political Activities of Charities.

A Department of Finance backgrounder summarizes the proposed legislative changes as:

  • Largely removing the Income Tax Act provisions relating to the political activities of charities, including the provision that effectively allowed charities to devote approximately 10 per cent of their resources to non-partisan political activities.

  • Maintaining the prohibition on charities providing direct or indirect support of, or opposition to, a political party or candidate for public office.

  • Clarifying that charitable organizations, like charitable foundations, must be constituted and operated for exclusively charitable purposes.

While CCVO is supportive of the efforts from the Department of Finance in modernizing these regulations, we have two areas of concern with the current draft:

  1. The definition of charitable organization: If the proposed wording is maintained together with the removal of any reference to political activities elsewhere, an organization pursuing any amount of political activity can be at risk of being unqualified for charitable registration. We would like to see alternate wording that gives greater certainty to non-partisan public policy dialogue and development – that organizations can pursue this dialogue without limitation so long as it is related to its charitable purpose.

  2. The absence of a clear definition for direct or indirect partisan activity. There is little doubt as to what constitutes a “direct” partisan political activity. The confusion arises when defining what “indirect” partisan political activity is. While the subsequent release by Canada Revenue Agency of proposed guidance provides examples that address some of these questions, the continued reference to “indirect” partisan activities is concerning. We encourage the Department to remove the prohibition on “indirect” support, given its subjectivity. A further concern with the provision on partisanship is that “candidate for public office” is not clearly defined and a proper distinction is required to avoid further uncertainty.

CCVO recognizes that amendments to the Income Tax Act should be accompanied with improved guidance and communications. These improvements would help restore an emphasis on charitable purpose, rather than regulate how charities achieve those purposes. These notions stem from the belief that the more prescriptive the CRA becomes about how organizations conduct their business, the more problematic the practice of regulating activity becomes.  

We will release a response to the CRA’s proposed guidance, and encourage your organization to share your feedback. Please see our previous news post about the guidance documents for more information on how you can provide input

We are encouraged by the progress the current draft represents and will continue to work with the Department of Finance and Canada Revenue Agency to ensure that the Income Tax Act and accompanying guidance removes the barriers in engaging in permissible public policy advocacy on behalf of registered charities.