February 10th, 2014
Environmental Charity Analyst Canada’s Environmental Charities Audited for Advocacy
According to recent media reports, the Canada Revenue Agency has been auditing several Canadian environmental charities. The focus of these audits is apparently on advocacy activities.
What is advocacy and why can it be a problem? There is no reason why charities should not work to promote causes that their donors believe are important. However, Canada’s tax laws prohibit charities from spending more than 10% of their “total resources” on “political activities”.
Some of us might think that this policy simply means that charities aren’t supposed to spend large amounts of money promoting a political party. But in fact the definition of “political activity” is much broader. According to the Income Tax Act, if a charity recommends “to retain, oppose, or change” any “law, policy, or decision of any level of government in Canada or a foreign country” that will be considered a political activity. So, for example, if an environmental charity publishes a recommendation that the government should do more to protect the habitat of the woodland caribou, that can be considered a “political activity”. Similarly, a recommendation to the City of Toronto to increase the number of homeless shelters could be considered a “political activity”.
Of the face of it, it may seem unreasonable that any public action by a charity in favour or against any government policy is “political”. Nonetheless, this is how the legislation is worded.
Donors to Canadian environmental charities should have no concerns about giving to charities they support, provided that the charity keeps its CRA registration in good standing. Charity Intelligence’s recent comprehensive report on Environmental Charities identifies those charities that include advocacy as a significant portion of their activities. Donors might want to discuss this issue with charity management if they have concerns about the CRA actions.
The forthcoming Federal Budget may include further restrictions on activities by Canadian charities. Charity Intelligence will be following these issues closely and will provide an update following release of the Budget if required.