Government’s Response to Unconstitutional Political Activity Limits

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Government’s Response to Unconstitutional Political Activity Limits

Authored by Philip Milley, Associate Director, Legal Affairs

I have been watching the case of the charity Canada Without Poverty since their charitable status was revoked for exceeding the 10% amount of permissible political activity spending. As you may recall, Canada Without Poverty devoted over 98% of its resources to political activity.

In an article published in the September 2018 issue of the CCCC Bulletin, I note that the federal government announced that it would appeal the decision and also introduce new legislation in the fall of 2018 to address the issues surrounding political activity within the charitable section. The Government announced that it would address the recommendationsin particular, Recommendation 3stemming from the consultation panel report regarding political activity and specifically, the recommendation that charities be free to engage in public policy discussions without constraint. As I previously reported, the panel’s report largely reflected the sustained call of some charity lawyers, charities, and sector personnel.

Presently, the appeal of the decision and the filing of appeal documents have been delayed due to the proposed legislative changes recently published by the federal government. The parties are likely waiting to see whether the proposed changes adequately address the concerns raised by the Attorney General. On August 15, 2018, the Government of Canada announced its intention to amend the Income Tax Act (the “Act”) to implement changes to allow charities to pursue their charitable purposes by engaging in non-partisan political activities and public policy discourse. On September 14, 2018, the Department of Finance Canada released draft legislative proposals that remove the quantitative limits on political activities from the Act.

New Legislative Proposals

The draft legislative proposals are proposed to apply retroactively to related audits and objections that are currently suspended. The short draft proposals amend or repeal a handful of provisions with the primary effect of removing the quantitative limits on non-partisan political activity. The draft proposals are negative, meaning that they do not expressly identify political activity as permissible. The draft proposal makes clear that charities are still required to be constituted and operated for exclusively charitable purposes (ss. 149.1(1)(a)), meaning they cannot be constituted for a political purpose. In addition, all of a charity’s resources are expected to be expended on charitable activity (ss. 149.1(1)(a.1), and the restrictions against partisan political activities would remain (ss. 149.1(6.1) and (6.2)).

The most significant change includes the removal of the definition of political activity and the removal of the exemption for partial expenditure on political activity (former ss. 149.1(6.1) and (6.2)) such that the Act would consider the organization to still be constituted for charitable purposes or be devoting those resources to charitable activities when it carried out political activity to a permitted extent. Those provisions were replaced with general prohibitions regarding partisan political activity. Because the draft proposals are fairly limited, CRA issued supporting administrative guidance regarding these changes.

In summary, the changes

  • largely remove provisions relating to the political activities of charities, most notably the allowance for charities to expend 10% of their resources to non-partisan political activities;
  • maintain the prohibition on partisan political activities; and
  • restate the requirement that foundations and charitable organizations be constituted and operated for exclusively charitable purposes.
Draft CRA Policy Proposed to Replace CPS-022

On October 2, 2018, the Canada Revenue Agency issued draft guidance for consultation with the charitable sector on how it would implement the draft legislative proposals. The draft guidance is proposed to replace current CRA policy on political activity, CPS-022, and contains information about how CRA would administer the draft proposals. The substantive changes to the guidance include revised nomenclature, referring to former “permitted political activities” as “public policy advocacy activities.” The CRA policy indicates that “as long as a charity operates only for charitable purposes, it can carry out activities, including public policy advocacy activities, that are incidental to those charitable purposes.”

CRA defines public policy advocacy activities as those that seek to influence the laws, policies, or decisions of a government, in Canada or any foreign country, which includes, for example, speaking about the impact of a law or engaging with the public to persuade a government to change a decision. The meaning of incidental, which CRA often uses, is not clearly understood by many charities. Incidental activity, according to CRA, refers to activity that “helps or supports a charity in carrying out its charitable purposes” and “is subordinate to a charitable purpose.” CRA considers the expenditures of resources on incidental activities to be devoted to charitable activities. However, an incidental activity cannot be a purpose or the charity’s reason for operating. That is to say, an incidental activity must serve the charitable purpose and cannot become a purpose in itself.

According to the policy, when an activity becomes more than incidental, such as a public policy activity, it is an indication that the charity may exist for or have a non-charitable political purpose. Within the policy, CRA has provided examples of the type of activities it considers to be public policy advocacy, which may be permissible. Such examples include informing a government or the public and engaging with the public to persuade a government.

What This Means for Charities

While the legislative changes and the CRA policy are only in draft form, it is evident that CRA recognizes that charities are free to engage in public policy advocacy and has provided significant leeway to allow them to do so. However, such activity must remain not unrelated to the charity’s charitable purposes and must not be disproportionate in the amount of resources expended on the activity to deliver a public benefit. This is because disproportionate expenditures on public policy advocacy may indicate that a charity has a political purpose.


The Federal Government and CRA are consulting on the draft amendments and draft guidance. Comments on the draft legislation may be submitted by October 13, 2018. Comments regarding the draft legislative proposals should be sent to or mailed to:

Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5

Comments respecting the draft CRA policy may be submitted to or mailed to:

Charities Directorate
Attn: Policy, Planning, and Legislation Division
Canada Revenue Agency
Ottawa, Ontario
K1A 0L5

Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.

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