Judge blows up long-standing charitable rule

There is nothing so dangerous, perhaps, as a judge with good intentions. If you look at Canadian case law on what counts as charitable activity for tax purposes, you’ll see that much of it involves churches, religious groups and the occasional racketwith-a-religious-veneer, such as the “House of Holy God,” the appellant in a 2009 Federal Court case, which was judicially found to be “solely engaged” in the business of selling maple syrup.

The federal government has, on the whole, been pretty successful at circumscribing the availability of charitable tax breaks. We are stuck with tax-exempt historic churches that might or might not ever help any actual human being, but the principle that a charity cannot be just for preaching someone’s notion of important truth has not spread uncontrollably to the secular realm — even though lots of people might like to operate a “charity” that pays them to advocate politically and does nothing to give money or stuff away.

Which brings us to Canada Without Poverty, a charity at the centre of an important case that has just been fought to a conclusion in Ontario’s Superior Court. Canada Without Poverty is, by design, almost all talk. This group does not accept the idea that tax breaks for charity ought to be limited to the transitory relief of particular instances of poverty by the handing out of soup or socks or $20 bills. That, friends, is futile, obsolete Victorianism. No, CWP seeks a total, permanent cure for poverty by means of advocating for legislative change.

A Canada Revenue Agency audit of the group, performed between 2009 and 2012, found that it engaged almost exclusively in nonpartisan political activity. Its work, over that period, included “organizing and hosting policy summits with social policy experts, offering an online course on international human rights, issuing a survey to members of ethno-cultural communities which contained general advice on how to advocate for the elimination of poverty, and formulating a national strategy to alleviate poverty.” There is no mention of soup. (Notice that some of CWP’s activity is not even advocacy, but meta-advocacy: advocating to other activists on how to advocate.)

Should the tax advantages available to classical-model charities be available to such cutting-edge up-tempo ones that attack social ills indirectly? It can probably be argued either way: as long as a group like Canada Without Poverty can persuade voluntary donors or their agents that it is doing good, we might not want the CRA to fuss with the details. The important issue may be that if we want a new standard for defining charity, it has to be tenable and consistent. There is a long queue of potential political “activists” standing behind Canada Without Poverty. (Wait, are those the Koch brothers? I bet they have some ideas for curing poverty!)

This is now overwhelmingly relevant, since CWP won its case with a novel legal attack on the CRA. The intention of the CRA has traditionally been to deny charitable status to pure advocacy groups, but to recognize that charities will want to, and ought to be permitted to, engage in a limited amount of that advocacy. When expressed as a rule, this policy goal became a very awkward numerical standard: charities are allowed to devote 10 per cent of their “resources” to political advocacy.

This is why you need professional auditors, and three years of data, to detect whether a charity like CWP, which has no real intention of honouring the rule at all, is in violation of it. (The rule is a pretty enormous pain in the bum even for less woke, more soup-friendly charities.)

The CRA has always argued — and remember, these arguments have usually been made against religious conservatives — that turning packs of barking auditors loose on charities is legitimate under the Charter, because even though expression is protected, there is no positive justiciable right to charitable status. The classic statement in Haig vs R. goes: “the (guarantee of ) freedom of expression prohibits gags, but does not compel the distribution of megaphones.”

CWP broke through that protective shield around the CRA by observing that it had had charitable status but then lost it after being audited. Superior Court trial judge Ed Morgan seems to have been persuaded that this is more like taking someone’s megaphone away. CWP also observed that the 10 per cent rule is somewhat arbitrary, and that it is incoherent for the CRA to accept political advocacy as pertinent to a valid charitable purpose, but only up to a certain limit.

Morgan’s remedy is an immediate total nullification of the 10-per cent rule: the phrase “charitable activities” in the Income Tax Act will now include political advocacy “without quantum limitation,” though explicit partisanship will still be out of bounds. This leaves the Liberal government with a tricky problem: whether or not to accept a policy redesign implemented with nitroglycerine.

The Liberals had expressed an official intention to reform charitable status and make life easier for groups like Canada Without Poverty. But, well, you know how it goes with the Liberals and good intentions. The judge’s order is so sweeping and unpredictable in its effect that the Trudeau cabinet may wish to appeal it anyway. That, in turn, would annoy the do-gooder and activist population — already in a low-level fury over failed election reform — to no end.

LEAVES THE LIBERAL GOVERNMENT WITH A TRICKY PROBLEM. — COLBY COSH

CWP WON ITS CASE WITH A NOVEL LEGAL ATTACK ON THE CRA.