THE SPECIAL SENATE COMMITTEE ON THE CHARITABLE SECTOR
OTTAWA, Monday, December 3, 2018
The Special Senate Committee on the Charitable Sector met this day at 4 p.m. to examine the impact of federal and provincial laws and policies governing charities, nonprofit organizations, foundations, and other similar groups; and to examine the impact of the voluntary sector in Canada.
Senator Terry M. Mercer (Chair) in the chair.
The Chair: I welcome you to this meeting of the Special Senate Committee on the Charitable Sector. I am Senator Terry Mercer from Nova Scotia, chair of the committee.
I would like to start by asking senators to introduce themselves, starting with the deputy chair.
Senator Omidvar: Ratna Omidvar, Ontario.
Senator D. Black: Doug Black, Alberta.
Senator Duffy: Mike Duffy, Prince Edward Island.
The Chair: Today the committee will continue its study to examine the impact of federal and provincial laws and policies governing charities, non-profit organizations, foundations and other similar groups, and to examine the impact of the voluntary sector in Canada.
For this meeting, we will focus on the advocacy and political activity as it relates to charities and non-profit organizations.
For our witnesses, we welcome, from Canada Without Poverty, Ms. Harriett McLachlan, Deputy Director; and Ms. Michèle Biss, Legal Education and Outreach Coordinator. And from the Canadian Bar Association, Ms. Karen Cooper, Member, CBA Charities and Not-for-Profit Section; and Ms. Gaylene Schellenberg, Lawyer, Legislation and Law Reform. Thank you for accepting our invitation.
I would invite the witnesses to make their presentations. I remind you, as per our instructions, of between five and seven minutes for presentations. Following presentations, witnesses will go to questions and answers from senators. Asking questions and answering questions should be succinct so we can get as many questions and answers in as possible.
Who’s going to lead the charge today? Ms. McLachlan, please begin.
Harriett McLachlan, Deputy Director, Canada Without Poverty: Good afternoon, and thank you for the opportunity to address this committee. My name is Harriett McLachlan. I am the Deputy Director of Canada Without Poverty. I am joined today by CWP’s Legal Education and Outreach Coordinator, Michèle Biss.
CWP, formerly known as NAPO, is a non-partisan, not-for-profit and charitable organization dedicated to ending poverty in Canada. For nearly 50 years, CWP has been championing the human rights of individuals experiencing poverty. Since our inception, we have been governed by a board of directors comprised entirely of people with a lived experience of poverty. This committee should know that though I am an educated professional, I lived in poverty for almost 35 years, 19 years as a single parent.
CWP approaches poverty from the perspective that, as a signatory to the Sustainable Development Goals, the International Covenant on Economic, Social and Cultural Rights and other human rights treaties and agreements, Canada is obliged under international human rights law to meet the rights to housing, food, work, health and an adequate standard of living.
Michèle Biss, Legal Education and Outreach Coordinator, Canada Without Poverty: As members of this committee are no doubt aware, in July 2018, Justice Morgan of the Ontario Superior Court ruled in our favour in the case of Canada Without Poverty v. Attorney General of Canada, which challenged section 149.1(6.2) of the Income Tax Act.
In that case, we argued the restrictions on non-partisan political activities restricted our ability to engage with our members and the public in pursuing our charitable purpose of relieving poverty. We argued the provisions stifled the voices of people living in poverty to share their experiences, identify the causes of poverty and publicize recommendations for necessary changes to laws, policies and programs to relieve poverty.
Justice Morgan agreed and said in his judgment that unlike old models of almshouses and soup kitchens, CWP’s work to relieve poverty by sharing ideas, achieving attitudinal changes and engaging in public policy dialogue was necessary for the achievement of our purpose.
He determined section 149.1(6.2) of the Income Tax Act is a violation of section 2(b) of the Canadian Charter of Rights and Freedoms under freedom of expression, and that such a provision was not reasonably justified in a democratic society. He therefore declared the restrictions on non-partisan political activities to be of no force or effect and ordered that, henceforth, charitable activities must be understood to include non-partisan political activities in furtherance of a charitable purpose.
As we have stated at the Standing Committee on Finance in our submission, we support the provisions in Part 1 of Bill C-86, as it is consistent with Justice Morgan’s order. It is also consistent with Recommendation 3 of the Consultation Panel on the Political Activities of Charities, as well as the concluding observations issued by the United Nations Human Rights Committee in 2015.
A backgrounder from the Department of Finance explained the new legislative provisions will permit charities such as CWP to devote time and resources without limit to public policy dialogue and development in furtherance of the charitable purpose of relief of poverty.
In some of the testimony presented by witnesses at this committee and in some of the public discourse on this issue, it has been suggested that Justice Morgan’s decision would “open the floodgates” for political entities and organizations with non-charitable political purposes to register as charitable organizations. This could not be further from the truth.
We emphasize the changes instituted by Bill C-86 and by Justice Morgan’s decision does not in any way allow groups that do not have an accepted charitable purpose to claim charitable status for political activities. Rather, these changes simply recognize that freedom of expression and participation in public policy dialogue are a critical component of the effective pursuit of accepted charitable purposes, such as the relief of poverty.
Justice Morgan’s decision does not mean that entities with a singular non-charitable political purpose — for example, as has been brought up opposing minimum wage — would be able to qualify for charitable status.
In order to qualify for charitable status, organizations still need to fit under the four accepted charitable pursuit headings: relief of poverty, advancement of religion, advancement of education and/or a purpose beneficial to the community in a way the law regards as charitable.
It is important to understand CWP never argued, and Justice Morgan never ruled, that the Charter requires governments to provide charitable status for organizations to express any views they wish. Governments make decisions all the time to provide tax or other benefits for particular expressive activities which are deemed to be of public benefit. CWP has never suggested the Charter prevents the government from doing just that. In fact, it is quite the opposite. We argued, and Justice Morgan agreed, the government is entitled to decide what purposes should benefit from charitable status. However, any restrictions on public expressions by those organizations, whose purpose has been accepted as charitable, must be justified. Muzzling public policy dialogue on issues of poverty prevents charities like CWP from pursuing their purposes as effectively as we can.
We will also note, in spite of the fact the changes in Bill C-86 essentially implements Justice Morgan’s order, the government has not yet indicated an intent to withdraw its appeal in the decision in Canada Without Poverty v. AG Canada and has not acknowledged the restrictions on public policy dialogue of charities violates the Charter.
Justice Morgan’s decision should be allowed to stand for its recognition that monitoring communications and speeches of member groups, like ours, in order to prevent people living in poverty from publicly recommending necessary changes to laws and policies is simply unacceptable in a free and democratic society.
Ms. McLachlan: I would like to take a moment to ask the committee to consider what the issue means to millions of people living in poverty in this country. At its core, this issue requires us to consider the question: How do we relieve poverty in Canada? Do we do so exclusively through frontline services which address solely the symptoms of poverty? Or do we go further and remove barriers to ensure first voices on poverty can speak to its root causes and help create solutions based on human rights?
Crucial to Justice Morgan’s decision was the understanding the restrictions on freedom of expression which apply to all charities originates in discriminatory and stigmatizing notions about the poor.
We have heard from members of our board of directors, all of whom have lived the experience of poverty, and from many organizations and individuals across the country. This decision, in this case, represents for them a historic vindication of their struggles for dignity and inclusion. Many have expressed to us that the judgment’s recognition of this important role to be played by people in poverty and decision-making and the rejection of stigmatizing understandings of charitable activity resonates with their lived experience in a way few legal decisions do.
We ask this committee not to forget the “chill effect” on charities in the context of the large-scale audits conducted in 2012. In November 2011, Canada Without Poverty was required to provide CRA the minutes of our meetings; copies of our email exchanges by staff, volunteers, and board members; all of our publications; and all of our communications for a three-year period. After its investigation, CRA found CWP members and staff frequently identified changes which needed to be made to laws or policies in order to alleviate poverty and publicly promoted the adoption of a national anti-poverty strategy. CRA also found some of CWP’s activities related to the promotion of human rights, created an atmosphere conducive to advocating for changes to laws and policies.
These activities included: One, hosting a dinner where people living in poverty ate a meal with Members of Parliament and other decision makers and discussed their experiences of poverty and ways to address it. Two, organizing policy summits where people living in poverty could collaborate with social policy experts and academics to develop recommendations for addressing poverty. Three, offering an online course on Canada’s obligations to address poverty under international human rights laws, where people living in poverty could join a community of learners to discuss topics of the day.
These activities are all considered political by CRA.
Our organization relies almost entirely on donations. We would likely not be able to survive if our charitable registration were to be revoked. You can imagine how upsetting it was for our members and staff to think their critical voice in Canada’s democracy might be silenced simply because they had publicly discussed ideas about what governments could do to relieve poverty.
In fact, our audit process has not officially concluded. Upon our last correspondence with CRA their decision to withdraw our status is on hold, pending the passage of Bill C-86. Until this legislation is passed, our status remains in danger of being revoked.
We urge the committee to support the passage of Bill C-86 to affirm the critical importance of allowing charities, like ours, to engage in public policy dialogue without fear of harassment or loss of charitable status in pursuit of our charitable purpose. Thank you for your time.
The Chair: God forbid parliamentarians would meet with poor people. God forbid. I’m sorry, I had to get that editorial comment in there. It drives me crazy.
Gaylene Schellenberg, Lawyer, Legislation and Law Reform, Canadian Bar Association: Thank you for the invitation to present the views of the CBA’s charities and not-for-profit section to the Senate special committee.
The CBA is a national association of about 36,000 lawyers, law students, notaries and academics. An important aspect of our mandate is seeking improvements in the law and administration of justice. It’s from this perspective we appear before you. This CBA section has members across the country specializing in all areas of charities and not-for-profit law and in every size of practice from large law firms to sole practitioners.
With me is Karen Cooper, a member of the CBA section and she will outline some key issues for the section and respond to any questions you may have. Thank you.
Karen Cooper, Member, CBA Charities and Not for Profit Section, Canadian Bar Association: Thank you for the invitation to share the views of the charity and not-for-profit law section of the CBA on the question of the political involvement of charities in light of the committee’s work in reviewing the charitable sector and currently proposed amendments to the Income Tax Act to enable charities to engage more fully in public policy.
I’m a lawyer in private practice with the firm of Drache Aptowitzer, specializing in charities and not-for-profits. I’ve acted for many of the organizations which have been subject to audits with respect to political activities. I’m a tax lawyer by training and also spent a fair bit of time with the Department of Justice and CRA. I did some time on that side of the fence. I also teach a course at the Faculty of Common Law at the University of Ottawa on the law of charities and not-for-profits. I get to hear every year about students’ views on some of these same issues.
The CBA section has a long history of providing input into the development of policy and legislation affecting the charitable sector, including a submission to CRA on political activities going back as far as — I found one in 2002. I was reminded of others before then.
More recently, we wrote to both the ministers of national revenue and finance to support the government’s engagement through their mandate letters in reviewing the rules governing political activity, with an understanding that charities make an important contribution to public debate and public policy. We then made submissions to the consultation panel on political activities of charities and it wrote in support of the panel, particularly its fourth recommendation.
As you may also be aware, many members of the executive of the section have already appeared before you — Susan Manwaring, Terrance Carter, Cliff Goldfarb, Adam Aptowitzer, Robert Hayhoe who you are hearing after me — they are all members of the executive of the section and would have participated in the development of the section’s views on these issues.
The Chair: You could have had a caucus meeting afterwards.
Ms. Cooper: We often do. The emails have been flying all weekend.
We are involved in the work of the CBA section because, as lawyers advising charities attempting to comply with the rules regarding advocacy or involvement in public policy, we have seen the application, or not, of these rules in real context on a regular and continuous basis.
We experience the chill on public policy involvement that preceded the recent reforms and have been fielding calls from clients trying to understand the current proposals.
In our letter on the draft legislative proposals prior to the introduction of Bill C-86, the section clearly indicated its support for the overall approach of the proposals, including the repeal of the 10 per cent limit on political activities; the clarification that a charitable organization must be constituted and operated exclusively for charitable purpose, so removing the reference to charitable activities we thought was a good thing; and the maintenance of the prohibition of partisan political activities. We thought that was also a good thing.
We were of the view the proposals would provide charities with more freedom to conduct nonpartisan political activities, such as public policy advocacy, and supported all of that.
We had some concerns with the draft legislation that Finance initially introduced and which remain with the introduction of Bill C-86.
They retained a reference in the definition of “charitable organizations” to “all the resources of which are devoted to charitable activities carried on by the organization itself.”
In my experience, that is one of the most overused and misunderstood phrases in the statute with respect to the regulation of charities. This language has created considerable uncertainty in the past and perpetuates unnecessary confusion about the distinction between a purpose and an activity that plagues much of the discourse surrounding the compliance obligations of charities.
If it was on my wish list, that phrase “charitable activity” would be deleted in its entirety. I will say that constantly, yet I am a bit of a realist.
In our view, the definition of a charitable organization should mirror the definition of charitable foundation and omit any reference to “charitable activities.”
We also support the reasonable prohibition on partisan activities but find the reference to indirect support or opposition problematic. Bill C-86 says, “direct or indirect support.” We find the reference to “indirect” problematic because it perpetuates much of the subjectivity and uncertainty that has created difficulty for charities in the past.
Repealing the 10 per cent resource limit on political activities, which we support, raises the question of whether there remains any limit on the advocacy or public policy activities of a charity.
We had some concern that if you go back to the common law, CRA will rely on the common law definition of “incidental” and would arbitrarily determine the level of public policy activities becomes such that a charity is pursuing an unstated charitable public political purpose. That is the degree, this question of how much activity can you engage in.
In our view, the term “incidental” is vague, and little case law emanates from Canada’s courts concerning political activities. The section is of the view that the concept of subordinate developed by the CRA in the context of its related business rules is a better concept since that term is defined in more robust terms.
This is really more a matter of CRA interpretation and application of any proposed changes than about the specific wording of the amending legislation itself.
We also noted in our initial submission to the committee that Canadian rules for carrying out activities either in Canada or elsewhere are different from other jurisdictions, including the U.S., the U.K. and Australia. Some of your other witnesses have spoken similarly. Broadly, the focus of those jurisdictions is on ensuring the purposes of the charities are promoted.
While the Canadian rules focus on the activities of Canadian charities and other examples, beyond a political activity context is on direction and control by charities of their own activities, business rules, earned income rules — all those kinds of things. As a result, Canadian charities must expend considerable time and resources on compliance rather than accomplishing their charitable mission, resulting in less effectiveness and efficiency.
Modernization and clarification of the Canadian rules would significantly help charities to focus on doing good work rather than interpreting and applying overly complex rules.
Thank you again for this opportunity. I will be happy to answer any questions.
The Chair: Thank you all for your presentations. That was very helpful. We will go to questions now.
Senator Omidvar: Thank you to all of you for being here. It was most instructive.
I think every panellist talked about the chill effect the current law has had on public policy dialogue, voice and freedom of expression. If this bill is passed, we will go from what some people say is the chill to the cacophony, with diverse voices from all sides of the political spectrum.
Ms. Biss, your organization likely advocates for fairer distribution of taxes to benefit the poor. The Fraser Institute — and I don’t know this for sure, but I think I do — likely advocates for lower taxes per se.
I want to ask each of you whether you have thought about the vibrancy of our democracy. Can it withstand going from a chill to cacophony, or will it just be music? I don’t know. Tell me.
Ms. Biss: I might suggest to speak first to the chill effect. I will turn to Ms. McLachlan, and perhaps she can talk to our experience. Then I can speak to your question a bit more.
Ms. McLachlan: As to the chill effect and what was expected of us from CRA, I have been with the organization since 2010, and when the audits were under way, I was president of the board. It required us to submit copies in full of itineraries, schedules, contents of materials presented by CWP workshops, forms, presentations, letters, minutes of meetings, emails and detailed emails of correspondence, many of which contained personal exchanges and private matters of students, volunteers, board members and staff.
As a person who lived in poverty for so long, these are violations of our rights to the freedom of expression. It felt like our efforts, work, hopes and aspirations for positive change toward eliminating poverty was like a candle about to be snuffed out. It added to the terrible history of stigmatization at the level that was stunningly incomprehensible.
This issue is still very much alive for us. It is still an axe over our head as a charity. It is still in process and can fall at any time. That chill effect is alive and well for us.
Ms. Biss: To speak to the question about the cacophony of voices, as I mentioned in our submission, it is critical to remember this does not change who can become a charity. An organization still has to fall under those four charitable heads.
What this changes is the ability for organizations, often organizations who represent marginalized voices, to participate in public policy discourse.
I will bring us back to the question of why we have charities. Often, we have charities in the non-profit sector to amplify those voices that often don’t get heard. It is often the voices of the most marginalized. To have a healthy democracy it is critical we value the voices of those who are marginalized.
Ms. Cooper: Briefly, the CBA can’t have a position on the answer to that question.
As a practitioner involved with charities and not-for-profits for more than 20 years, I lived the chill. The chill predated the audits.
Charities as a whole are so conservative — small C — in their approach to preserving their charitable status that I have no fear personally of a cacophony whatsoever. They guard their charitable status and are entirely good faith compliers to the extent possible.
The biggest challenge I find in my practice is explaining, sometimes, the incomprehensible to someone who wants to comply. I have no worries about a cacophony.
Senator Duffy: Thank you very much. I am shocked. I think my colleagues are as well, to hear that the chill is still going and your 2011 audit is not yet complete. I think most people thought that when the 2015 election was over, the nightmare would be over. You are telling me it is not?
Ms. Cooper: No.
Ms. Biss: No. Quite simply, no.
As I or Harriett might have mentioned, the decision is pending on the passing of this legislation. There are multiple court proceedings going on as a result of our Charter case. As it stands, CRA communicated that they would be withdrawing our status, as Harriett mentioned. That decision is put on hold, essentially, until the rest of this is decided.
For our organization, as Harriett said, the axe is still hanging over our heads.
Senator Duffy: Have you had any word from the Minister of Justice as to why they have not ordered the Department of Justice not to appeal this decision?
Ms. Biss: No, we have not.
Senator Duffy: Did you ask, or is that legally improper?
Ms. Biss: It is challenging when you are in the midst of litigation. We have not heard anything. We have worked with a number of parliamentarians to bring this issue forward. We have also worked with United Nations authorities to bring this forward.
As was clear in the concluding observations from the Human Rights Committee at the United Nations, as well as some of the communications a couple of years ago by the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression. To date, we have not heard word whether they will continue the appeal of our case.
Ms. Cooper: To be clear, CRA closed the audits that were in process, but there were five —
Senator Duffy: Several of them?
Ms. Cooper: The numbers have already been presented to you. They are in the 20 to 30 range.
There were five files where the director general issued notices of revocation. Those five were appealed to the internal appeals process within CRA, and those five remain live within the appeals process internal to CRA. There hasn’t been an explanation as to why. The general knowledge is that those won’t be resolved until the legislation is passed. How they will be resolved, there is no way of knowing.
Senator Duffy: What about the others besides those five? Are they just suspended?
Ms. Cooper: The other audits were closed. Compliance agreements might have been issued because there were other issues in the files, or they may have received education letters. They were just closed in the normal course of any other CRA audit of a registered charity.
Senator Duffy: You are one of the five?
Ms. Biss: That is right.
Senator D. Black: Thank you all very much for being here but, more important, for doing the work you have chosen to do. It is extraordinarily important work, and it is work that is often unsung. I want to let you know that is where I start.
I want to keep things as simple here as I possibly can. By way of feds, I am a substitute on this committee. I haven’t had the advantage to hear other witnesses, nor have I had the time to review what has come before.
Do I understand that, today, the relationship with CRA is that if an organization such as yours involves itself in what they define to be “political activity,” you lose your charitable status?
Ms. Cooper: The current rule is there is a safe harbour; that is, 10 per cent of your resources can be devoted to political activities as long as those activities are not partisan. The legislation would remove the limit on resources; you could potentially engage in political activities without limit. The debate is this: Could you do it 100 per cent? If you did, you might run afoul of common law prohibitions on organizations having political purposes.
Ms. Biss: To add to Ms. Cooper’s comment, part of the disclosure in our Charter case — to give some context, when CRA did an assessment of our organization, they found 98.5 per cent of our activities were political. As Harriett mentioned in her comments, that included things like having people in poverty sit down and have dinner with parliamentarians.
Senator D. Black: Their view, under the current legislation, was that offends your charitable status; therefore, it should be at risk. Is that what they are saying? I just want to understand.
Ms. Biss: Their finding was that you cannot engage in more than 10 per cent political activities.
Senator D. Black: I think we are aligned.
Does Bill C-86 give you the comfort you need to pursue your agendas? I understand you have some amendments; we will get to those, but from your point of view, if the legislation as drafted passes, does that solve your problem?
Ms. Biss: We believe it does. It is so critical that we go at that Income Tax Act provision itself rather than the surrounding regulations.
It is so critical to point out that we are engaging in this process right now, discussing this section, but Justice Morgan’s decision has rendered that section to be in no force or effect, because it is in violation of the Charter and it is not justified under section 1. We are engaging in this conversation, but this Charter litigation, this decision, has still found it’s a violation. It should not be, technically, in any force or effect. That is critical for us to consider.
Senator D. Black: If it moves into legislation, as you are suggesting, then the decision, basically, has been validated and there should be no need for an appeal. Is that your position?
Ms. Biss: The hope would be that the government, at that point, would appeal.
However, it is critical that the decision is not made to continue to appeal the case and also pass Bill C-86, because it is important that this was found to be a Charter violation. That allows the section to withstand the test of time and not to be subject to political whim. It recognizes, at its heart, it is a freedom of expression issue that is in violation of the Charter for people in poverty.
Senator D. Black: Got it. If this passes, you still have the risk of the appeal, which is likely dramatically reduced, I would suggest. However, there is nothing we can do about that, is there? Is that your view?
Ms. Biss: In terms of the question on the appeal, this committee could, perhaps, make a recommendation that the minister decides not to continue.
Senator D. Black: Okay. This is good.
Regarding your amendments, do you believe they add substantial value to the protection of charities, or are they just nice to have?
Ms. Cooper: We wouldn’t have made the recommendations — the CBA section — unless we felt they were important.
The refinement we’re asking for that has, probably, the most impact on lack of clarity is this reference to “indirect.” If I may use an example that comes up often, say you are in the midst of a campaign, and you are a charity. You have a policy on an issue — pick any issue. Let’s say you are an environmental organization. You’re doing a public education program on electric vehicles. There’s a beginning of a campaign, and a party has a platform that says it will provide rebates for electric vehicles.
Because of the reference to indirect support or opposition to a political party, there is a risk.
Your website may make no mention whatsoever of a political party, a candidate or anything like that, but because on your website you have a position that is similar to a position in a policy platform of a party, with indirect there is a risk you could be seen to be indirectly supporting or opposing a political party or a candidate for office.
That is one of the recommendations that we make that has a real impact in the day-to-day advice that I provide on real-life situations, for what it is worth.
The removal of “charitable activities” instead of “charitable purposes” in the emphasis, that’s a would I, could I. Vœu pieux is the French expression. People are constantly misunderstanding the difference between a charitable purpose and a charitable activity.
That is my own opinion on my own section’s recommendations.
Senator D. Black: Thank you.
The Chair: As someone who has worked in the sector for over 40 years, I have a hard time thinking of a situation in any office I have ever worked where this description of “political activity” didn’t happen. If you are going to operate in the world, you will have to interact with politicians at one level or another. There are at least three levels of government in every community. It boggles my mind.
My question, Ms. Biss, is about the work that you did to provide the answers to the questions of the CRA. You listed a number of things that they requested. Did you ever calculate the cost of preparing that? I know that is another calculation, but out of interest, did you ever calculate the cost of your complying with the CRA’s request?
Ms. Biss: The cost was enormous. The cost of the time spent responding and the time that could be spent working on furtherance of our charitable purpose is enormous.
I will pass it on to Ms. McLachlan to reflect on it further, because she was president of our board at the time.
Ms. McLachlan: We are a tiny organization of two full-time and two part-time staff, plus volunteers and students. As president of the board at the time, I was working yet I am in this volunteer position and it took an enormous time to get all the emails from the board members during that time. Some of them had left, some were on to other things in their lives and some had compromised health and it was difficult for them to dig up the materials that were needed. It took an enormous amount of time and energy. I collaborated closely with the executive director and worked closely with the staff.
In terms of dollars, it is hard to put a number on it. Our time was spent focused on that and not the critical work of relieving poverty and working to advance the issues. I don’t know what the dollar figure is, but it would be enormous.
The Chair: It would be nice to know that, but don’t go doing it because of the onerous cost.
Ms. McLachlan: We don’t have the time.
The Chair: I just thought perhaps someone might have it.
Senator Duffy: I’d like to follow up on all of this, which has been helpful to us, thank you.
I have two things. The boomers are retiring. It is my impression, which I have gleaned from demographers and others who follow it, that we will see more and more senior citizens in poverty because we did not plan adequately for our own retirement and have been blind to what happens when your working life ends.
I wonder if you have found this in your work and if it is something you believe is occurring and about to get worse. Is that another area where you are trying to educate people and governments? In other words, poverty is going to get worse before it gets better because of the age wave. That is my question.
Ms. McLachlan: It is a complex question and there is a broad range of people in that demographic. I can think of one demographic of charity organizations working at the front line, mostly women with poor salaries and no benefits. We are feeding into a whole generation of older, poorer women because a lot of them work at the charitable organizations in the communities doing that hard grunt work.
Senator Duffy: We have heard arguments there should be a benefit program. I believe in Ontario there is now an RRSP or pension plan for people working in the charitable sector. This is just one example.
Ms. McLachlan: I love good initiatives. I wish that had been in place during my time as a professional working in a charitable organization or the director of a community development organization. I was barely making ends meet and had no extra money whatsoever. I have lost teeth because I put my children’s needs before mine, buying one chicken on sale and making it last a week, making impossible choices between hydro and rent and living with rats and mould. Some of my colleagues were sleeping in their cars because they couldn’t afford rent on the salaries they were living on while working in charitable organizations.
It is great to have initiatives but let’s not fool ourselves: These aren’t realistic if you are requiring poor people to put money towards an RRSP when they can’t feed themselves on a day-to-day basis.
Senator Omidvar: Thank you for sharing your experiences with us. I feel for you in terms of the audit and, of course, I empathize greatly with you. I ran a private organization for 15 years. It was devoted to the reduction of poverty. We were audited three times because we were devoted to the reduction of poverty. At the end of the third audit, we put together a bill to send to the CRA because everything stops: the work stops and you stop so you can start providing upscale pieces of paper.
The Chair: What was the price?
Senator Omidvar: I forget, but it was not small.
I want to play back some of the other opinions we have heard and I want you to tell us what you think of them. All of these come from members of the bar who we have been hearing from.
Here is what we have heard:
This law will not help small charities because small charities primarily provide services as opposed to doing advocacy.
This will only help a few large charities and it will really be helpful to a few large donors who will flood the market with money for public policy activities for their personal point of view using a charity as their vehicle.
This decision was hastily made. The government has reversed itself. First, it was appealing, then it passed the law. Now we don’t know what is happening with the appeal.
This is a final one from a respected lawyer, Adam Parachin, who says this law could enable lobbyists to carry out lobbying activities under the guise of registered charities because, after all, registered charities could then hire a lobbyist.
Could you give us your responses to these conclusions that we have heard a number of times?
The Chair: And we only have a few minutes, please.
Ms. Cooper: The CBA section can’t provide its views on those comments because that is a consensus view of members of the section.
My own view is no, it will not just help a few large charities. Any charity that has a view or a cause struggles with how it engages with the public and with policymakers to have its views heard. Small or large, any charity goes beyond simply providing services, but there is no such thing as simply providing services in today’s complex regulatory environment.
Hastily made? Not at all. The CBA section has provided its views on repeated occasions with respect to how CRA interprets and applies these rules and the limits and the problems with these rules. This legislation came as a result of extensive consultations that was engaged in by the panel. This isn’t a hastily drafted piece of legislation. It came after careful and wide-ranging consultation with a good number of groups.
Whether it will allow a lobbyist to go off and lobby under the guise of a registered charity, Ms. Biss made the important point that you still have to meet all of the other requirements of a registered charity.
It means you need to have a purpose that falls within one of the four heads and your activities have to benefit the public. It’s a fairly complex determination that’s made by CRA. I just don’t believe it’s that possible.
Senator Omidvar: How do you think CRA audits will change?
Ms. Cooper: I’m not sure CRA audits will necessarily change, except they won’t have quite the same focus on political activities. And this whole idea of even counting resources. I have clients where you have this absurd question.
During the course of a year, the president, who is a volunteer, signed a letter that went to an MP. What’s that worth? Is it 1 per cent, 0.099 per cent? Yet organizations, in good faith, do all they possibly can to comply and will spin in circles needlessly, trying to come up with what is the right number for that.
Ms. Biss: If I may speak to that question, on the point of this change only benefiting large charities, I can speak as a small charity who this bill will enormously impact. We have received so much correspondence from colleagues who are also small charities, thanking us for the work through our litigation and saying how incredibly critical it is to them.
I can tell you how many small organizations, as Ms. Cooper said, count every single thing they do and how much it inhibits their abilities. It’s very problematic to consider small charities as only those who provide front-line services. Often it is those small charities, those small organizations, who are representing some of the most marginalized voices in Canada. They may be a small group and it is so critical that they are able to participate in public policy discourse, apart from the front-line services they provide.
It’s also critical to keep in mind about big donors. Often, to qualify for grants as small organizations, you need to have charitable status. It’s not just your ability to distribute charitable receipts, which is very important. It also has to do with your ability to access grants and other programs. There are many other benefits that are provided with being a charity.
I also wanted to second Karen’s point; this is not a hastily made decision. Let me tell you how many years of litigation we have been going through for the Charter challenge that was received. The recommendations panel, the human rights committee concluding observations, the communications from the Special Rapporteur on freedom of expression and human rights defenders. This has been a long time coming. I really do not think it is accurate to say it was hastily made.
Senator Omidvar: Congratulations.
The Chair: I’d like to thank the panel. I apologize; normally in these meetings if we go over our time, we’re fine. But in the case of today’s panel, the Senate sits at 6:00. We’re allowed to sit when the Senate is not sitting. When 6:00 comes, we’ve got to stop sitting. We have another panel. I want to make sure that we allow time for them. I want to thank the four of you. It has been very informative.
I think you may notice you have some sympathy at the table. I am appalled the government continues to not finish the decision that they said they were going to make and come to a full stop.
Yes, there’s a need for monitoring charities. Yes, there’s a need to make sure that people are adhering to the rules. But if there’s not a need for an organization, for Canada Without Poverty, I don’t know what any other organization we need in this country. Come on, people; this is to the people watching.
Thank you all. We do appreciate it.
Colleagues, we will now hear from our next witnesses. We welcome Mr. Robert Hayhoe. From Philanthropic Foundations Canada, Ms. Hilary Pearson, President.
Thank you for accepting our invitation to appear. I know you were both here for the previous presentations. You understand the process. You get five to seven minutes each to make your presentations. Then we go to questions. As you saw in the last round, questions and answers need to be short and succinct. Ms. Pearson, please go ahead.
Hilary Pearson, President, Philanthropic Foundations Canada: I’ll try and speak quickly but not too quickly because I know the translators have to keep up. They have a copy of my speaking points. Hopefully that helps. I’m also conscious of the limited time you have.
Thank you for your invitation to reappear, since I appeared in September. Today I’m providing you with a view on the question of the activities and purposes of charities in light of the currently proposed amendments to the Income Tax Act to enable charities to engage more fully in public policy development.
As Senator Mercer said, I am President of Philanthropic Foundations Canada, which is a network of charitable funders. These funders support a wide range and number of charities that work in areas from environment to poverty, to the arts, to international development and many more. Some of these charities engage in advocacy activities as part of pursuing their charitable purpose.
I’m here to discuss very important amendments that are contained in Bill C-86. These amendments, as you know, remove the provisions relating to so-called political activities of charities. They do two other things: They maintain the prohibition on charities providing direct or indirect support or opposition to a political party or candidate; and they clarify that charitable organizations, like charitable foundations, must be constituted and operated for exclusively charitable purposes. You’ve just heard from the last panel the importance of focusing on purposes.
Charities have a role to play in the evolution of public policies and laws in Canada. It’s for this reason that my organization has been engaged in the discussion over this issue, in close collaboration with other sector organizations, such as Imagine Canada, Community Foundations of Canada and the Ontario Nonprofit Network. We all believe charities have unique facts, input and ideas to contribute to the evolution of public policy in this country. We all believe they need to be encouraged to make these contributions.
Now, we’re very pleased to see the federal government agrees with our position, a position that was fully articulated by the Consultation Panel on the Political Activities of Charities and supported by hundreds of charities that participated in the consultations of 2016. This has already been referred to. It has been a lengthy and open discussion between the federal government and the charitable sector. The amendments are the result of much thought and effort. They are no hasty act but a considered and clear change.
Why are these amendments so important? Why should they be implemented?
First, because they amend the governing legislation, which sets the mandate and direction of the Charities Directorate of the CRA. Much of the uncertainty that has been experienced by charities in knowing whether, how and if they could engage in public policy and advocacy work has been because of a use of words in the act itself that have led to confusion and to implementation by the CRA in a way that is restrictive and prohibitive, not encouraging of charities. In amending the act, the Minister of Finance has given clear direction to regulators. We hope this means there will be less inconsistency in interpretation by regulators or auditors.
Second, the definitional issues that hindered so many charities, and indeed policy makers and others in trying to understand this debate, are eliminated by the removal of the words “political” and “activities.” The word “political” has been widely misunderstood by charities and others, including the media. The most frequent confusion has been in assuming “political” meant “partisan.”
In fact, “political” has been used to mean specifically a call to action to change a law or policy of any level of government. The way in which a charity might engage in such work has nothing to do with elections or partisan political activity. It can mean anything from putting out a position paper on a needed policy change to asking the supporters and members of a charity to advocate for the needed policy change. That might mean having breakfast with senators.
Usually this policy change is justified by the charity based on the facts or the data or direct experience that it can claim in the issue area in which it works. You previously heard this from Canada Without Poverty. Whether that is working to protect the environment, to change the living conditions of poor Canadians or to protect the health and well-being of Canadians, charities must provide reasoned arguments and ground their arguments for change on the facts.
Since “political” has been widely misunderstood, it is much better to have an affirmative statement made by the Minister of Finance that clarifies that the government’s intention is to recognize that charities can pursue their charitable purposes through engagement and the development of public policy.
A third reason for the importance of these amendments is they put the focus on purposes and not on activities. This is, in fact, the emphasis of the common law. Charities under the common law are defined by their purposes, not their activities. A recognition in the Income Tax Act that charitable purposes are paramount and that charitable organizations must be constituted and operated for charitable purposes is very significant.
We hope this recognition eventually extends to other provisions of the act and that the recognition of charities as being charitable because they pursue recognized charitable purposes will allow for a change in the treatment of earned income. This is a central question for many charities. If they can be allowed to engage in unrelated business activities for the purposes of earning funds that can be destined to charitable purposes, they will be able to address an enormous constraint today, which is how to secure enough sustainable funding to carry on.
We have stated before this committee that the current federal regulatory system, in our view, unnecessarily constrains the deployment of capital and prevents effective partnerships within the charitable sector and between the charitable sector and the private and public sectors. These constraints include an excessive focus on the activities rather than the purposes of charities.
Why does the Income Tax Act have such a focus on activities rather than simply purposes? Charities are monitored and forced to report by the CRA on various kinds of activities, some of which are charitable, some fundraising, some administrative and, of course, some political. You’ve already heard how difficult that can be for charities.
How to decide consistently and report clearly? The courts themselves have pointed out the confusions and difficulties posed by focusing on various activities instead of on purposes. We hope the current amendments will be a first step in encouraging charities to pursue their charitable purposes as flexibly and productively as possible. We urge the committee to focus on the broader question of how to modernize the act to help charities move forward sustainably.
Thank you for your time. I look forward to your questions.
The Chair: Mr. Hayhoe, I didn’t complete your introduction. Robert Hayhoe is with the firm of Miller Thomson LLP. Mr. Hayhoe, please go ahead.
Robert Hayhoe, as an Individual: Thank you, Senator Mercer. Thank you, senators and committee, for inviting me to appear here today to address the extent to which charitable purposes and political activities are permitted to overlap.
I’m a tax partner with Miller Thomson. My practice, along with that of a number of my colleagues, is restricted exclusively to charities and non-profits. We don’t do anything else. We have acted on a significant number of audits of registered charities from, frankly, all parts of the ideological spectrum that were accused by the CRA of engaging in excessive political activities, in many cases without much warrant on the part of the CRA in taking that position.
I’d like to speak to the common law background that underlies these rules because I think a proper understanding of the common-law rules that underlie the tax rules will help assist an understanding of what the tax rules are designed to do. I would suggest that understanding will also assist in addressing concerns that the present changes to the proposed bill are radical and unnecessary.
My suggestion is going to be that the current bill is not radical and does not represent a break from the common law but in fact represents a return to the common law caused by some mistakes by the CRA and the Federal Court of Appeal.
Until 1985, the Income Tax Act did not address charities and politics in any way.
Registered charities were required to have exclusively charitable purposes, based on the common law. I’ll suggest that this was understood to preclude a charity from having a political purpose. It was understood to preclude a charity from engaging in partisan politics.
Until 1985, neither the common law nor the Income Tax Act operated to prevent advocacy as a way of carrying out a charitable purpose. What changed? In 1985, the Federal Court of Appeal — and I think it’s fair to say it was then and remains today ill-suited to deciding charity registration appeals or revocation appeals as a matter of first instance, at least — upheld then-Revenue Canada’s refusal to register something called Scarborough Community Legal Services. Scarborough Community Legal Services was prevented from having charitable registration on the basis it engaged in too much politics. Some of its people participated in a rally to address changes to a family benefits program. It had been involved in a municipal committee dealing with some Scarborough bylaws.
The then view of the CRA was that ought to prevent Scarborough Community Legal Services from being a registered charity. The court looked at that refusal to register and, in my view, wrongly and unnecessarily suggested the following: While a charity could carry out political activity, it had to be “quite exceptional and sporadic activity in which the charity may be momentarily involved.”
This decision, as you might expect, caused considerable consternation in the charitable sector. The then government responded in the 1985 budget with what they described as “a relieving measure to clarify that registered charities are allowed to engage in non-partisan political activities that are ancillary and incidental to their charitable purposes.” This relieving measure that was enacted in 1985 is what we referred to as Income Tax Act subsections 149.1(6.1) and (6.2), the provisions that are now being criticized for being too restrictive.
What went wrong? I would suggest the CRA took what was meant by Parliament to be a relieving provision designed to restore the common law and interpreted it as yet another limit on political activities. If the Federal Court of Appeal and the CRA hadn’t gotten it wrong, first in Scarborough Community Legal Services and then in their interpretation of the 1985 amendments, we would essentially be in a position that’s more or less what the result was from Canada Without Poverty and what is now the result from these 2018 proposed amendments.
The 1985 amendments were intended to provide charities, in my view, with essentially a safe harbour. If a charity devoted substantially all of its resources to charitable activities and carried on some political activities that were ancillary and incidental to those charitable purposes and activities, it would be viewed as devoting its resources to charitable activities. This was a safe harbour because it would keep the charity from having to enter into a somewhat complicated common law analysis of whether the charity was operating fully for its charitable purposes.
It was not intended to be the only way in which charitable purposes could be carried out. It was designed to be a safe harbour as a way of overturning the Federal Court of Appeal Scarborough Community Legal Services case.
Unfortunately, that’s not the approach the CRA took. The relieving nature of the 1985 amendments was very quickly interpreted by CRA — both in a 1987 information circular addressing this issue and in what they thought was going to be a further relieving guidance put out in 2003 — as limiting charities to spending 10 per cent of their resources on political activity.
In my view, the essential fact that the common law permitted more was forgotten by CRA and, frankly, by most commentators who looked at this issue.
That takes us to Canada Without Poverty. When Canada Without Poverty challenged the CRA’s position that it was involved in excessive political activity — a challenge I state clearly and unequivocally that I support; I would not wish to be taken as suggesting that what CRA did with Canada Without Poverty was appropriate in any way. When Canada Without Poverty challenged the CRA’s position, Canada Without Poverty accepted the assumption that the 1985 amendments were a complete code on political activities. Similarly, Mr. Justice Morgan, in finding there was a Charter breach, also approached the 1985 amendments as a complete code.
However, I would suggest if the common law on advocacy by charities was or is understood properly, there’s no Charter breach in Canada Without Poverty. The Charter breach does not occur as a result of the statute; it occurs as a result of the mistake in interpretation of the statute and its interplay with the common law.
I therefore view the 2018 amendments — the bill we’re here talking about today — as Parliament’s further attempt to correct the CRA by reminding the CRA, and perhaps the Federal Court of Appeal, of what political activities the common law has always regarded as charitable.
What do the 2018 amendments do, and what do they not do? They remove the misunderstood safe harbour provisions from the 1985 amendments; they make clear a registered charity must, as was referred to earlier, continue to have exclusively charitable purposes; and they make it clear a charity may carry out any activities that advance these purposes, other than partisan political activities. This, in my view, is exactly what the common law permits and what it permitted prior to 1985.
The 2018 amendments also confirm that charitable activities include public policy dialogue and development activities carried on, again, as always, in furtherance of a charitable purpose. This is also consistent with the common law.
The finance explanatory notes issued with this bill do appear to suggest that the 2018 amendments will permit a charity to spend all of its resources on such activities. That may be so in very limited circumstances. It’s arguably not entirely consistent with the common law, which would likely not permit a charity to engage only in advocacy on a long-term basis.
Frankly, if the federal government wishes to permit an organization to have charitable purposes, or ostensibly charitable purposes, but do nothing other than advocacy, which in the traditional understanding would give it a political purpose, then Parliament needs to create a new category other than a charity. No new category is proposed in this bill. Thus, I would suggest the 2018 amendments should not be interpreted as permitting a charity to do only advocacy. I would suggest the explanatory notes to the 2018 amendments to this bill should be paid the attention that explanatory notes are usually paid in tax matters: none whatsoever.
I would like to take a moment to address the spectre that I understand has been raised on a number of occasions by presenters: the spectre of the Citizens United decision from the United States. I understand this committee has heard from others who have suggested these 2018 amendments — this bill — will cause the U.S. Supreme Court’s decision in Citizens United to be the law in Canada: essentially unlimited quasi-partisan electioneering by charities.
With all due respect, there is no basis whatsoever for that suggestion. First, Citizens United was a case that involved the free speech rights, not the charity status, of a U.S. organization that wasn’t even a U.S. charity; it was a U.S. entity of a different classification entirely. Second, I’ve already expressed my views that the 2018 amendments should not be read as permitting a Canadian charity to engage exclusively in advocacy activities for the long term. Finally, as was the case in Citizens United, which was fundamentally an election speech limit case, the proper place to address the scope of limits on purely political speech by Canadians generally, whether individuals, businesses, charities or other organizations, is in election law, not tax law.
Thus, in closing, we’re left with a situation where, if the 2018 amendments are passed, as I would urge they ought to be, we will have clarification that the law in Canada, consistent with the law in England and Wales, and the law in Australia and New Zealand, is that a charity may engage in policy development in support of, and only in support of, charitable purposes.
A Canadian charity will still not be able to engage in any partisan political activity. There will be, as I addressed earlier, some uncertainty on whether a Canadian charity may spend all of its resources on political activity, although I would suggest even that will not be and perhaps ought not to be possible.
Thank you again, senators, for the opportunity to address you. I would be happy to take questions, along with my fellow panellist.
The Chair: Thank you both for your input.
Senator Omidvar: Thank you to both of you for being here and to Ms. Pearson for the second or third time. You have been generous with us.
Ms. Pearson: It might be a third, I don’t know.
Senator Omidvar: I want to pick up on something both of you said. You talked about the uncertainties associated with the use of words. We have seen how the intent of legislation was interpreted by the CRA, as per your submission, Mr. Hayhoe, in a highly restrictive manner in the 1985 amendments.
Do you think the confusion and uncertainty around the use of words will come into play again with the language around “direct” and “indirect” partisanship? Is it possible the CRA would issue highly restrictive guidelines again, creating another set of confusion? What can we do in this report, in this study, to ensure that doesn’t happen?
Ms. Pearson: It is true the CRA interpretation is potentially going to be a restrictive interpretation.
Part of the problem is the charities directorate is housed in the tax department. You have heard this from other witnesses. When you have a regulator housed within a department which is very much focused on ensuring the fisc is protected and appropriate revenues are collected from the citizens of Canada, the thinking is going to — and this is obviously a personal point of view on my part — tend to go toward restriction and monitoring as opposed to encouragement and facilitation of activity.
The charities commission in the U.K. is outside of the tax department. The way in which the charities commission has approached its work is not perfect by any means. On the whole, the attitude has been more permissible and encouraging; a facilitating approach to monitoring charities than the CRA has been.
The direction the government has expressed is a strong one in the direction of encouraging charities to participate in policy development. The audience of charities is hearing a positive message. I hope the people in the charities directorate at CRA are hearing a positive message.
I think one other announcement the minister made recently in the fall economic statement will be helpful. He announced the reinstatement of a permanent advisory committee the CRA will run which will involve people from the charitable sector. This came originally, in 2005, out of the work of the joint regulatory table, which was a successful effort. You have heard from Bob Wyatt from the Muttart Foundation. He was co-chair of that table. It was an effort by the government and the sector to work through a number of regulatory issues and discuss these kinds of confusions and uncertainties about policy direction. That committee, unfortunately, was disbanded by the Harper government. It is now being reinstated. It will be a helpful way of allowing the sector and sector representatives to talk to the CRA on a regular basis and remind them of the importance of encouraging charitable participation in policy development.
Senator Omidvar: Maybe I can ask Mr. Hayhoe a different question and you can answer the first one, if my time permits. Our chair is fair but strict, as he must be.
An example was given to us that it would be possible under this legislation for an organization which has a charitable purpose of conducting research and doing public awareness and education activities on matters of immigration, for example, could it, in its activities, be promoting anti-Semitic and anti-Muslim messages. Caution has been urged on us. The proposal has been made that 10 per cent is too little, 100 per cent too much, maybe we should meet in the middle at 50 per cent. Could you give me your response to that proposal?
Mr. Hayhoe: I don’t believe it is possible to register a charity which is really a disguised anti-Semitic or anti-Muslim organization. That would be contrary to public policy, and therefore it ought not to be registered under any set of facts, unless it was lying. These rules were not set up to protect against lying beforehand. It wouldn’t be possible to get it registered. These rules make it no more possible to get such an entity registered. If it was to be registered, the CRA would have the same tools it currently has, which would be to audit it and come to the conclusion that while it pretends to be an educational charity devoted to immigration research, it is not really. It is really an anti-Semitic organization at its core and therefore never should have been registered and CRA would, quite appropriately, revoke it.
Senator Omidvar: Thank you.
Mr. Hayhoe: Senator Mercer would you like me to address the earlier question?
The Chair: Yes, please.
Mr. Hayhoe: While it would be wonderful to have a charities commission, I point to the difficulty we have had getting a national securities regulator, where the stakes are high and we still can’t do it. It is presenting a serious constitutional obstacle to ever getting a charities commission.
It would be easier if the Canada Revenue Agency and charities matters could be made subject to a trial court which could ensure the law develops and the CRA is held accountable. Currently, charities registration and revocation matters go directly to the Federal Court of Appeal. The administrative law that has developed around those appeals would suggest any basis which is suggested for a revocation, which is advanced by the CRA, is enough to support the revocation. This has resulted in the CRA going in on every audit and raising 25 grounds, one of which they care about but all of which are enough individually to uphold their registration revocation. This means it is impossible to tell a client in good faith they should spend money on an appeal to the court which causes CRA, in charity matters, not to be accountable to anyone.
The Chair: We have had a number of suggestions that we should recommend moving it to the tax court, which might alleviate that and speed things up.
As a lawyer who acts in the field on a daily basis, what is your opinion on that?
Mr. Hayhoe: My opinion would be entirely in support of that. However, it is important not just that the appeals go at the first instance to the tax court but the underlying administrative law test which is applied by the tax court be different. The tests should not be: Is there any ground to support the revocation the CRA has advanced? The test ought to be: Should the revocation happen or should it be referred back to the Canada Revenue Agency with instructions to make the decision again on appropriate grounds?
The combination of those two changes would enable the charitable sector to hold the CRA to account, when appropriate, in a way which it is not able to do.
The Chair: I want to go back to the subject of the previous committee which had been in place but was cancelled by the previous government.
In those days, I was actively working in the sector. I remember the elation in the sector by active people who were saying, “they are finally listening.” The story related to me by one member of the committee was that CRA was asking simple questions of their own staff. After they asked the charities how much it cost and how much time was spent delivering the information CRA had asked for and getting the answers.
They turned to the staff at the CRA and asked them a simple question: What do we use this data for? In the case of going data by data, many pieces of data were not used by CRA for anything.
It has always dawned on me, maybe switching to the Tax Court would help this; however, I don’t know enough about the Tax Court. There is a total lack of understanding of what charities do, how they do it, how they function, how they are funded and how Canadians interact with it. The charitable sector is a huge sector. There are millions and millions of Canadians involved in this process. Millions and millions of Canadians are giving their money to charities. I don’t know what CRA has missed here, but that means Canadians like it.
Is it an education of CRA? Is it the leadership of CRA? Or is it just the regulations?
Ms. Pearson: It is partly contextual. Being embedded within the CRA makes it hard for the charities directorate to perhaps think in facilitating rather than restricting terms. I think that has been the issue.
I think the setting up of this committee will be a good thing. I look forward to that.
Mr. Hayhoe: I don’t mean anything I have said to be critical of the individuals who staff the CRA and fulfill these functions. They fulfill these functions in a context that drives certain kinds of behaviour. In my view, it ought to be accountable to a court that has a real ability to review in the same way that all government functions ought to be subject to the oversight of a court with a real ability to exercise that oversight.
The Chair: I am the son of a public servant and the brother of several public servants. I do have to go home. I want to be on the record that I am not being critical of the public service. I am being critical of the rules under which they operate.
Senator Duffy: Finally, I wanted to ask about advocacy for the charitable sector in this town.
We have had a number of ideas put forward — a Minister for the charitable sector. I had almost forgotten the Honourable Walter McLean was briefly a minister of state and had some responsibility for the charitable sector perhaps in Joe Clark’s government. It was some years ago.
I had someone else tell me there should be a department or a secretariat but that it should operate like an SOA, a special operating agency that would go out and actively pursue, encourage Canadians. There would be people; not just a minister. Other prominent Canadians would be enlisted in a kind of volunteer army to go out and raise awareness in the new generation of the importance of the charitable sector and why they should get involved and donate.
The data we get here slows a declining number of donors. As they age out, as it were, who will replace them? Many of the new fabulously wealthy entrepreneurs do not have the same historical background related to charity that some of the others of the current day have.
What do you think of trying to create some kind of agency or person or place in the government that would be charged with that kind of a positive, as opposed to the CRA which looks to see whether all the i’s are dotted?
Ms. Pearson: I have mixed feelings. I think there are a number of reasons why it would be not possible to have a single minister or a single department. Part of it is constitutional, in that provinces are responsible for charities under the Constitution. The only reason the federal government is involved is through the Income Tax Act and taxing power.
That is why, of course, the policies are made by the Department of Finance and the Minister of Finance and monitored by the Canada Revenue Agency.
More broadly, there is a federal policy interest in supporting the growth of a sustainable, healthy charitable sector. I completely agree with that. It has been an anomaly that the government would have set itself up and spent as much time as it has on small- and medium-sized business and not had a similar focus on the support of small- and medium-sized organizations that are also charitable or non-profit.
There are policy interests in the sector you see implemented through what is now the Department of Innovation, what used to be Industry Canada, but the corporations section of that department. It administers the Canada Not-for-profit Corporations Act, which governs the governance and makeup of federally incorporated charities. There is an important policy area there, which is well run. There has been a change in that area through the introduction of that act.
Also, Employment and Social Development Canada has a social policy group that has looked at not just social service charities but more broadly at organizations in the charitable sector that are contributing to social policy development.
Can you have a single ministry? I’m not sure. I don’t think that is a good idea because there would be a tendency to assume that minister would be responsible and other departments in government that have important policy interests with the charitable sector — Canadian Heritage, Environment, Solicitor General, Indigenous affairs, a number of other departments — might assume that somehow this other ministry was going to be responsible for that. I don’t think that is a good idea.
On the issue of giving and the promotion of giving in Canada, which appropriately is done through tax policies or incentives that promote giving, can be done in other ways than setting up a ministry, should it even be constitutionally possible. The Rideau Hall Foundation is an example of a foundation that was set up recently to do exactly this, to promote a culture of giving in Canada, to understand more about giving. That was set up through the former Governor General. I think it is entirely possible to pursue a promotion of giving through that vehicle rather than considering setting up a separate ministry.
Senator Duffy: Thank you very much.
The Chair: Thank you. That was excellent. I remind colleagues who are looking at the walls and see a light flashing — when that light stops flashing, we will stop talking.
Senator Omidvar: Mr. Hayhoe, I want to go back to your argument that the CRA has misunderstood relieving amendments in the Income Tax Act in 1985. In fact, that is a position that has been stated not in the particular but in the general by a number of witnesses, namely that the CRA seems to have a history of interpreting intentions in a different way than they were originally meant to be.
Do you think this permanent advisory committee that is now attached to the CRA will, should and must play a vibrant role in ensuring the interpretations of the CRA and its guidelines are in keeping in the spirit of the bill?
Mr. Hayhoe: I think there is no doubt that it will be of some assistance in doing that. We had a similar committee in the past and we had these same offensive and inappropriate interpretations then. I don’t think it is a complete answer. I believe the complete answer involves real court oversight.
Senator Omidvar: Okay. Through the Tax Court.
Mr. Hayhoe: Through the Tax Court is the appropriate place for it to be in our judicial system and then to the Federal Court of Appeal if the Tax Court gets it wrong. At least the Tax Court will have an opportunity to look at it to begin with instead of inadequately because that is the way the current rules work.
Senator Omidvar: In conclusion, for both of you, I think we have heard you say this is a much-needed clarification that is long overdue and will benefit Canadian society. There may be some fears on the edges but the mainstream will function as it should.
Ms. Pearson: I think we would like to think so. That is well put, Senator Omidvar. I agree.
The best principle to apply on this is really good sense. It is impossible to write laws that can take care of every situation. It can’t be black and white. What CRA and the Charities Directorate need to do is apply good sense in situations that may be ambiguous and create more trust so the sector will feel it has a way of talking to the public servants in the Charities Directorate and expressing their perspective on these issues.
If we have that vehicle and can build trust, have good communication, believe that good sense is being used and have a recognition that not everything is black and white, then I think the situation will improve considerably.
Mr. Hayhoe: I do not have anything to add other than to agree.
Senator Omidvar: Thank you.
The Chair: To our witnesses, thank you very much. This has been a very informative and stimulating discussion. You have hit on a lot of the topics we have been wanting to hit on and some we have hit on. You brought up a few things that we missed because we don’t see everything; we need your help.
I go back to my discussion about the committee and the thought that we would reestablish a committee that would monitor and there would be some discussion within the sector.
If they establish a committee, my recommendation would be that it be permanent in the sense that no government, without some authority, would be able to operate without the committee. What the sector needs is some permanence. It needs to have someone who will always be monitoring this because governments change. We saw a government change and we thought we saw policy change, but we saw governments change and policy go into limbo to a certain extent. That is something to think about.
I want to remind both of you that while you will not be at the table in the future, please feel free to let us know if you see things we have missed or things that, as you walk down the street tonight, make you think, “I forgot to say this,” don’t hesitate to contact us through the clerk. The clerk will get us that information. We value your input. As you monitor our proceedings as well, don’t hesitate to add to something we have seen or suggest something we haven’t seen.
I thank you both for your input and opinions.
The Chair: The Senate sits in five minutes. You have five minutes to get across the street, or not.
(The committee adjourned.)