Charity and Not-For-Profit

CRA limit on charities' political spending found unconstitutional

By Staff

An Ontario Superior Court decision removing limitations on the "non-partisan" political activities of charities is a "game changer," Toronto charity and not-for-profit lawyer Taras Kulish tells

He says the ruling removes the Canada Revenue Agency (CRA) restriction that charities spend no more than 10 per cent of their revenues on “non-partisan” political activities. The limit on partisan activities still stands.

“The question now is where is the line between partisan and non-partisan activities,” says Kulish, a senior associate with Steinberg Title Hope & Israel LLP. “Does advocating for a political party’s position or platform on an issue of interest to the charity constitute a partisan activity?

“This has been an elephant in the room for many years,” he adds. “Charities have always had to be careful about political activities but this ruling turns that on its head.”

An anti-poverty group brought the constitutional challenge in 2016, arguing that the CRA’s interpretation of the Income Tax Act section regarding charitable and political activities infringed on free expression.

A 2015 audit of the group found “virtually all of the applicant's activities involved political engagement in the nature of communications to the public advocating policy changes,” and, as a result, lost its charitable status.

According to the decision, the CRA held an activity is considered "political" where it:

  • explicitly communicates a call to political action
  • explicitly communicates to the public that the law, policy, or decision of any level of government in Canada or a foreign country should be retained ... opposed, or changed
  • explicitly indicates in its materials (whether internal or external) that the intention of the activity is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose, or change the law, policy, or decision of any level of government

In response, the anti-poverty group claimed all the activities complained of were “non-partisan.”

Justice Edward Morgan, who noted the applicant is not alone in finding the state of the law to be unduly restrictive of its charitable activities, found that the CRA’s interpretation was an infringement on free speech and issued an order that it immediately cease interpreting and enforcing the Income Tax Act in that way.

The decision was released July 16, 2018, and is still subject to possible appeal.

Kulish, who was not involved in the matter and comments generally, says the ruling opens the door to other challenges.

“Will the next issue to fall be the ban on sports, which the CRA excludes from charitable activities unless it’s a sideline to their main activities?”

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