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Charity and Not-For-Profit

OSC decision repeals rule limiting charities

Windsor corporate lawyer Laura Stairs says she supports an Ontario Superior Court decision that quashes a long-standing Income Tax Act guideline limiting charities to using only 10 per cent of their resources for political activities.

"I was personally really excited about this ruling," says Stairs, an associate with Shibley Righton LLP.

“I enjoy working with charities and non-profits and think the provision restricting them from engaging in political activities reflects a very antiquated notion of charity,” she tells AdvocateDaily.com.

The decision was handed down July 16 by Justice Edward Morgan who heard a legal challenge by the Ottawa group Canada Without Poverty, one of 12 remaining in the 60 original charities under audit by the Canada Revenue Agency (CRA) that began in 2012.

CRA auditors claimed that 98.5 per cent of the group's work is political, violating Income Tax Act guidelines that restrict such activities, reports CBC.

The audits could result in the organizations losing their charitable status, a move that would be devastating for almost all, says Stairs, who comments generally and was not involved in the matter.

"When people want to donate to causes they believe in, they're more likely to give to an organization that offers a tax benefit," she says.

Stairs says the judgment clarifies the meaning of political activity and what the purpose of charity is, in light of how society's concept has evolved, but the CRA hasn't kept pace.

"We now understand political engagement is necessary to fulfil the charitable purposes that are acknowledged and set out in the Act," she says.

The decision also acknowledges that the way people used to think about charities is now considered to be "Band-Aid solutions," Stairs says.

She suggests a charity whose purpose is to alleviate poverty is OK if it wants to set up a homeless shelter or operate a food bank, "but once you start encouraging people to advocate for policy change, a line has been crossed.”

While activities such as beach cleanups and planting trees might be considered charitable, Stairs says "once you start promoting policy changes that would impact and prevent natural or environmental issues occurring, that is no longer considered charitable within the definition of the Income Tax Act."

Stairs references a Canada Without Poverty dinner to which Members of Parliament were invited and dined beside people who were living in poverty, allowing those citizens to discuss their issues and realities.

“That was considered a political activity,” she says.

The ruling will enable charities to focus their efforts on sustainable advocacy projects that have long-term implications for Canada, Stairs says.

"Since their inception, many charitable organizations have always been very conscious of the activities they are undertaking and making sure they are doing more of the traditional style of charity rather than the political engagement or advocacy we now know is critical to achieving their charitable purposes,” she says.

Stairs agrees the decision "was a long time coming" and says an audit cap program undertaken by the former Conservative government ultimately prompted it.

"Before that, while charities were hesitant or mindful of undertaking political activity, there wasn't always this very strict reading of this 10 and 90 per cent," she says.

Does Stairs expect the government will appeal the ruling?

"That is hard to say,” she says. “When the Liberal government came into power, they said they’d be looking specifically at this provision in an effort to stop the harassment of charities that the Conservative government had undertaken.

"So it would be contrary to the rhetoric they've been giving us to actually appeal this decision.”

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