Does Canada’s registered charity regime withstand Charter scrutiny? The interplay between charities, politics, and freedom of expression following Canada Without Poverty

by Megan Walwyn, winner of the 2024 Charities and Not-for-Profit Law Section's student essay contest.

INTRODUCTION

What is political?

This is the question that Justice Morgan of the Ontario Superior Court of Justice led with in the 2018 decision Canada Without Poverty v AG Canada,¹ and is one that the voluntary sector and the Canadian government had grappled with for decades prior. In Canada Without Poverty, Morgan J found that paragraphs 149.1(6.2)(a) and (b) of the Income Tax Act,² which prohibited registered charities from devoting more than 10 percent of their resources to non-partisan political activities, unconstitutionally and unjustifiably infringed the applicant’s right to freedom of expression under section 2(b) of the Canadian Charter of Rights and Freedoms.³ In doing so, he suddenly and unceremoniously brought an end to the long-established and controversial registered charity regime. Parliament was quick to respond with amendments to subsection 149.1(6.2) of the ITA that signified a new era of charities regulation in Canada.

The Canadian charitable sector celebrated these amendments. The changes to subsection 149.1(6.2), and the accompanying policy guidance, provided directions and leniency for registered charities to participate in public policy development activities, thus reducing the ‘chilling effect’ that the prior regime had on charitable advocacy. However, subsection 149.1(6.2) continues to restrict charities from engaging in partisan political activities and from pursuing any political purpose. The present regulatory scheme raises two critical questions that this essay seeks to address: do these remaining prohibitions on the expression of registered charities also violate section 2(b) of the Charter, and if so, can they be justified under section 1?

This essay first outlines the common law and statutory rules governing charities’ political activities prior to and following Canada Without Poverty. Then, building on Kathryn Chan’s paper “Constitutionalizing the Registered Charity Regime,”⁴ this essay presents a hypothetical Charter challenge to test whether the current subsection 149.1(6.2) could withstand a section 2(b) challenge, and if so, whether the provision may be justified under section 1. The question at the heart of this essay is not quite “what is political?”, as posed by Morgan J. Rather, this essay seeks to answer the question: why are politics not charitable?

REGULATING CHARITIES’ POLITICAL ACTIVITIES

A. Common law position: Prohibition against political purposes

At common law, there are two criteria for a purpose to qualify as charitable: it must fall within one of the four broad categories of charity described in Commissioners for Special Purposes of Income Tax v Pemsel,⁵ and it must provide a public benefit.⁶ Regulating and limiting charities’ political expression has been a long-standing concern in Canada. This stems from the common law doctrine of political purpose, which bars charities from pursuing political purposes.⁷ The political purpose doctrine originated from obiter dicta in the 1917 House of Lords case Bowman v Secular Society, where Lord Parker commented that trusts with political objects have “always been held invalid,” because courts cannot assess “whether a proposed change in the law will or will not be for the public benefit.”⁸

Today, the leading case on the political purpose doctrine is McGovern v Attorney General, where Justice Slade held that trusts for political purposes were non-charitable.⁹ Slade J employed logic akin to of Bowman in finding that a court cannot assess a political purpose’s public benefit, as required for a purpose to be considered charitable at law.¹⁰

B. Pre-Canada Without Poverty political activities regulatory scheme

Prior to 2018, subsections 149.1(6.1) and (6.2) of the ITA stipulated that charities could engage in limited non-partisan political activities, as long as “substantially all” of their activities were charitable (and thus non-political). As tax authorities generally interpret “substantially all” to mean over 90 percent, this is often referred to as the “10 percent rule.”¹¹ As a matter of interpretation and enforcement, the Canada Revenue Agency (the “CRA”) divided political activities into two categories: submissions to the government and public advocacy.¹²

The CRA interpreted subsection 149.1(6.2) to mean that submissions directly to the government were entirely charitable and could be pursued by charities without limit, provided they were connected to the organization’s purpose. However, the CRA considered advocacy that communicated similar policy messages to the public to be a political activity, subject to the 10 percent rule.¹³ The CRA also required that less than 10 percent of the political activities be ancillary to the organization’s charitable activities and that they be non-partisan, pursuant to paragraphs 149.1(6.2)(b) and (c) of the ITA; this was regardless of whether the subject matter of the charity’s advocacy fit within the pursuit of its charitable purpose.

The voluntary sector generally felt that this regulatory regime provided unclear guidance regarding political activities, as it “marrie[d] imprecise rules with dire consequences for non-compliance.”¹⁴ Many charities complained of an “advocacy chill,” whereby they reduced their advocacy work or refrained altogether for fear of having their registered charity status revoked.¹⁵

C. The Canada Without Poverty decision

Canada Without Poverty (“CWP”) is a non-profit corporation that has operated as a registered charity for over 45 years with the stated charitable purpose of “relieving poverty in Canada by” numerous means, including providing information to the government and public “to increase knowledge of poverty related issues and how to more effectively relieve poverty.”¹⁶ CWP engaged in public advocacy for “policy and attitudinal change.”¹⁷

In 2014, the CRA audited CWP for the period of April 1, 2009 to March 31, 2012. The audit report concluded that “virtually all” of CWP’s activities were communicative or expressive, and thus all “political” in some sense of the word.¹⁸ The Charities Directorate notified CWP that it intended to revoke its charitable status. CWP responded by filing a Notice of Application in the Ontario Superior Court of Justice (the “ONSC”), seeking a declaration that subsection 149.1(6.2) of the ITA unjustifiably violated sections 2(b) and 2(d) of the Charter.

CWP argued that it was asserting a negative section 2(b) right: subsection 149.1(6.2) restricted expression “within an existing statutory scheme or platform” aiming to limit the “public communications of charities based on content.”¹⁹ CWP submitted that this restriction violated section 2(b) of the Charter, and could not be justified under section 1. Conversely, the Attorney General of Canada argued that CWP was claiming a positive right to “government financial support through subsidized funding,” by virtue of being granted registered charity status under the ITA.²⁰ The Attorney General submitted that subsection 149.1(6.2) did not violate section 2(b), but if it did, that it was justified under section 1.²¹

Morgan J ultimately held for the ONSC that subsection 149.1(6.2) and the CRA’s 10 percent rule violated CWP’s section 2(b) rights. However, Morgan J’s reasons for judgment deviated significantly from both the parties’ written submissions and the well-established legal framework for adjudicating freedom of expression claims.²²

Morgan J first discussed CWP’s purposes and activities. He drew specific attention to CWP’s submissions regarding the incoherence of the ITA’s distinction between non-partisan “political activities” and charitable activities, and noted that the CRA’s interpretation and enforcement of subsection 149.1(6.2) “restrict[ed] virtually all of [CWP’s] communications to the public regarding law reform or policy change.”²³ He also highlighted the conclusion of a government report, which found that “the restrictions on political participation in subsection 149.1(6.2) of the ITA were outmoded and required legislative change.”²⁴

In his section 2(b) analysis, Morgan J made two significant factual findings: that CWP could not pursue its “charitable purposes … while restricting its politically expressive activity to 10 percent of its resources as required by the CRA,” and that CWP could not function, or would struggle to function, without registered charity status.²⁵ Morgan J did not explicitly determine whether CWP was claiming a positive or negative section 2(b) right. Ultimately, relying on section 2(a), 2(b), and 2(d) authorities, Morgan J held that the “shortcomings of [this] legislative regime undermine[d] or burden[ed]” CWP’s exercise of its section 2(b) rights, impairing it from taking advantage of a “state supplied platform that it could otherwise freely access were it not for its insistence on exercising that right.”²⁶ Morgan J concluded that subsection 149.1(6.2) and its accompanying policy measure infringed CWP’s freedom of expression.

On the question of justification under section 1, Morgan J found that the Attorney General failed to identify a pressing and substantial objective for the provision, contra both parties’ written submissions.²⁷ The Attorney General submitted that the objective of subsection 149.1(6.1) was to permit registered charities to “use political means to further their views on matters pertaining to the wholly charitable ends, within reasonable limitations designed to ensure that those activities do not predominate.”²⁸ Morgan J found that, read differently, this measure ensured “that registered charities [could not] engage in most political activities,” and thus its objective was to “limit political expression” without further rationale.²⁹ Morgan J also noted that this purpose seemed to minimize the activity that the government supposedly sought to encourage – “a registered charity’s ability to participate in public policy dialogue where these activities advance its charitable purpose.”³⁰

Without a pressing and substantial objective, Morgan J concluded that subsection 149.1(6.2) and the 10 percent rule unjustifiably violated CWP’s right to freedom of expression under section 2(b) of the Charter.³¹ The ONSC ordered an immediate declaration that the CRA cease to interpret and enforce subsection 149.1(6.2) with the “substantially all” requirement, and that the phrase “charitable activities” used in that section be read to include unlimited non-partisan political activities.³² This decision thus brought the long-established rules limiting the political activities of registered charities to an “abrupt and rather undignified end.”³³

D. Post-Canada Without Poverty political activities regulatory scheme

The Attorney General ultimately did not appeal Canada Without Poverty, and subsection 149.1(6.2) of the ITA was amended in 2018 through Bill C-86.³⁴ This omnibus bill made three key modifications to the ITA’s registered charity provisions: (1) the definition of “charitable organization” was amended to clarify that an entity must be “constituted and operated exclusively for charitable purposes”; (2) the definition of “charitable activities” was amended to include “public policy dialogue and development activities” carried out to further a charitable purpose; and (3) a clause was added to the definition of “charitable organization” stipulating that an entity that devotes part of its resources to support or oppose any political party or candidate was not constituted and operated exclusively for charitable purposes.³⁵ An Explanatory Note added that the extent to which a charity could engage in non-partisan political activities would be determined by reference to the common law, rather than the “substantially all” condition.³⁶

The CRA also released a policy guidance to replace policy statement CPS-022, which elaborated on what constituted permissible public policy dialogue and development activities (“PPDDAs”) under the amended subsection 149.1(6.2).³⁷ PPDDAs include activities that a charity carries on to participate in the public policy development process, or to facilitate the public’s participation in that process. The policy guidance outlined that a charity can engage in unlimited PPDDAs as long as it carries out these activities in furtherance of its stated charitable purpose.³⁸ Permissible PPDDAs include an organization providing accurate information related to its charitable purposes to persuade the public with regards to public policy, and advocating to retain, oppose or change a law, policy, or decision of the Canadian government.³⁹ However, PPDDAs are strictly non-partisan. Any activity that directly or indirectly supports or opposes a political party or candidate is not a permissible PPDDA.⁴⁰

E. Outstanding issues with the current regime

Following the 2018 ITA amendments, the voluntary sector’s advocacy regarding political activities has largely quieted. There are, however, some outstanding questions following the Canada Without Poverty decision. In Canada Without Poverty, CWP framed its section 2(b) challenge specifically with regard to the ITA’s restrictions on non-partisan political expression. The current regulatory regime reflects this distinction between non-partisan political activities (now permitted) and partisan political activities (still prohibited). Further, the Canada Without Poverty decision addressed only political activities, not political purposes – and the amendments maintained the general prohibition on charities pursuing political purposes.

This raises the question of whether the ITA’s remaining prohibitions on registered charities participating in partisan political activities and pursuing political purposes also violate section 2(b) of the Charter. If so, is there a “pressing and substantial” objective for these remaining prohibitions, and are they proportional to their objective?

CHARTER ANALYSIS OF SUBSECTION 149.1(6.2)

The following sections of this essay consider whether subsection 149.1(6.2)’s continued ban on charities conducting partisan political activities and pursuing political purposes violates section 2(b) of the Charter, and whether this infringement is justified under section 1. The following fictitious fact pattern will guide the analysis:

• ABC, a registered charity with the purpose of relieving poverty in Canada, is generally politically active and posts on its website endorsing specific political candidates whose platforms align with ABC’s views on a policy issue related to poverty relief.
• In 2023, the CRA audits ABC and issues an audit report which concludes that ABC’s posts are impermissible partisan political activities, contravening subsection 149.1(6.2). Moreover, the report finds that ABC’s high degree of participation in non-partisan political activities suggests that its purposes are actually political, also contravening subsection 149.1(6.2). ABC is notified that its charitable status will be revoked.
• ABC challenges the revocation, on the basis that subsection 149.1(6.2) unjustifiably infringes its rights under section 2(b) of the Charter. ABC challenges both the restrictions on charities engaging in partisan political activities and pursuing political purposes.⁴¹

A. Preliminary issue: Registered charities as constitutional rights-holders

For a registered charity to invoke a right to freedom of expression under section 2(b), it must be recognized as a constitutional person entitled to Charter protection. Morgan J’s reasons for judgment in Canada Without Poverty did not address this issue. Given the “complex and in large part unsettled” state of the law on the constitutional personhood of corporations and unincorporated associations, it is “unclear upon what basis Morgan J recognized CWP as a constitutional rights-holder.”⁴² Thus, ABC’s Charter challenge could fail at the outset if ABC does not provide a well-reasoned basis for extending section 2(b) protection to registered charities. However, for the following analysis, I will accept the precedent set in Canada Without Poverty that registered charities are protected under section 2(b) of the Charter.

B. Section 2(b) analysis

Section 2(b) of the Charter states that everyone has the “fundamental … freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication.”⁴³ Freedom of expression has been described as “the foundation of a democratic society.”⁴⁴ While section 2(b) protects all manners of expression, political speech is the “linchpin” that “lies at the core” of freedom of expression.⁴⁵ Based on its fundamental importance, courts tend to interpret section 2(b) expansively.⁴⁶

It is tempting to simply conclude that, because the ONSC in Canada Without Poverty found that the former ITA subsection 149.1(6.2) violated charities’ freedom of expression, it logically follows that the new subsection 149.1(6.2)’s ongoing prohibitions on partisan political activities and political purposes continue to violate charities’ section 2(b) rights. However, in Canada Without Poverty, Morgan J did not follow the well-established section 2(b) analytical framework, which would almost “certainly” have been an issue on appeal.⁴⁷ Thus, the issue of whether the ITA’s current prohibitions on partisan political expression and political purposes breach ABC’s section 2(b) rights merits further reflection.

i) Positive or negative rights claim?

Section 2(b) jurisprudence firmly distinguishes between positive and negative rights claims.⁴⁸ Positive claims require the government to “legislate or otherwise act to support or enable an expressive activity.”⁴⁹ Conversely, negative claims are “freedom from” government action that suppresses an expressive activity in which rights-holders could otherwise engage without government enablement.⁵⁰ This distinction is important, because the characterization of a claim as positive or negative substantially impacts an applicant’s likelihood of proving a section 2(b) breach.⁵¹ Positive claims are subject to the Baier framework, which provides an “elevated threshold” to limit situations where the government must act to support freedom of expression.⁵² Negative claims are evaluated under the expansive Irwin Toy framework.⁵³

In practice, characterizing a section 2(b) claim as positive or negative is often difficult and contentious. In her dissent in “City of Toronto”, Justice Abella disagreed with the majority’s characterization of the claim, and generally criticized the distinction between positive and negative rights as “promot[ing] confusion rather than rights protection.”⁵⁴ Nonetheless, the current section 2(b) analytical framework continues to require this distinction.

In Canada Without Poverty, Morgan J did not explicitly characterize CWP’s claim as positive or negative, despite the fact that both CWP and the Attorney General framed their written submissions in accordance with this approach.⁵⁵ Drawing on Chan’s analysis of CWP’s claim, ABC’s claim could be plausibly classified as either positive or negative:

• Subsection 149.1(6.2) excludes a class of taxpayers defined, in part, by their (in)ability to engage in partisan political expression or pursue political purposes from an advantageous statutory platform. This “category of persons restriction” frames ABC’s claim as positive.
• Subsection 149.1(6.2) restricts the political expression of a class of taxpayers (registered charities) within a statutory platform they are otherwise entitled to use. This “content restriction” frames ABC’s claim as negative.⁵⁶

Chan highlights several factors to support the position that CWP’s section 2(b) claim is properly characterized as positive – and these arguments are similarly applicable to ABC’s claim. First, the ITA’s registered charity regime restricts its statutory platform to a class of taxpayers (registered charities) based on criteria in subsection 149.1(6.2) that are used to determine who may benefit from the selective platform.⁵⁷ Second, ABC (like CWP) is not asserting a right to engage in political expression in itself, but rather seeks to engage as a “registered charity”. To pursue this claim, ABC requires government enablement: the Minister of National Revenue has “sole authority” to grant ABC registered charity status, which confers the corresponding tax advantages.⁵⁸ Third, characterizing ABC’s claim as positive is consistent with Federal Court jurisprudence, which has described registered charity status as “public funding through tax exemptions for the propagation of opinions.”⁵⁹ These considerations are consistent with City of Toronto, where the majority characterized a claim for access to a particular statutory platform as positive.⁶⁰ Therefore, ABC’s section 2(b) claim is likely a positive rights claim.

ii) Applying the Baier framework

As a positive rights claim, ABC’s claim is properly analyzed using the Baier framework. In City of Toronto, the SCC distilled the Baier framework into a single question: “is the claim grounded in the fundamental Charter freedom of expression, such that, by denying access to a statutory platform or by otherwise failing to act, the government has either substantially interfered with freedom of expression, or has the purpose of interfering with freedom of expression?”⁶¹ The statutory scheme must “effectively preclude” meaningful expression, representing “an exceedingly high bar … met only in extreme and rare cases.”⁶²

For ABC’s claim, the government could argue that subsection 149.1(6.2) does not violate section 2(b), as it does not restrain speech – it merely withholds tax subsidies for such speech, by barring access to the registered charity statutory regime.⁶³ This is supported by the SCC’s decision in Baier. The claimants in Baier alleged that a statute which barred school employees from running for a school trustee election infringed their section 2(b) rights, as it prevented them from expressing themselves on education issues. The SCC ruled against the claimants, finding that their claim was “grounded in access to the particular statutory regime,” and that their exclusion “deprived them only of one particular means of expression” on education matters.⁶⁴

In Canada Without Poverty, Morgan J drew an analogy between CWP and the agricultural workers in Dunmore v Ontario,⁶⁵ implying that CWP lacked an alternative space for political expression.⁶⁶ Chan notes that this inference seemed linked to the factual finding that CWP could not pursue its charitable purposes “while restricting its politically expressive activities to 10% of its resources as required by the CRA.”⁶⁷ As Chan observes, the only way to conclude that CWP lacked an alternative space for expression is by framing its section 2(b) right as “a right to express itself as a not-for-profit corporation with registered charitable tax status.”⁶⁸ This appears incompatible with the precedent set in Baier and the high bar that the SCC articulated for section 2(b) infringements in City of Toronto. It would be entirely plausible for a court to find that subsection 149.1(6.2) does not “effectively preclude” ABC’s section 2(b) rights, as ABC is free to express itself without restriction; it simply cannot do so as a registered charity. A difficulty with this position is that when a registered charity is issued a notice of intention to revoke, it must pay a revocation tax equal to the fair market value of all its property, less any debts and expenditures incurred while winding up operations.⁶⁹ This tax would make it very difficult or impossible for ABC to convert its existing resources to non-charitable uses, suggesting that ABC cannot simply revoke its registered charity status to enjoy free expression.

On the other hand, ABC could argue that the government is not relieved of its obligations to comply with the Charter by providing the option of relinquishing a statutory benefit: this reasoning would immunize governments from Charter scrutiny across various benefit programs and legislation.⁷⁰ In Osborne v Canada,⁷¹ the SCC held that legislation which prohibited public servants from engaging in work for or against a candidate or political party infringed section 2(b). The SCC in Osborne found that the suggestion that the scope of section 2(b) should be limited because of the particular status of the rights-holder (a public servant) was unsupported.⁷² Drawing on this reasoning, ABC could argue that the scope of its right to freedom of expression should not be limited based on its particular status as a registered charity. A difficulty with this argument is that, unlike in Osborne, people who work with charities can freely express their personal views on their own time, including by participating in partisan activities.⁷³

In the Canada Without Poverty section 2(b) analysis, Morgan J placed weight on the factual findings that CWP could not pursue its charitable purposes while complying with the ITA regime, and could not function, or would have difficulty functioning, without registered charity status.⁷⁴ While these findings are case-specific, these circumstances are not unique to CWP as a registered charity, and very well may also be the case for ABC. Depending on the circumstances, ABC may draw on Canada Without Poverty to argue that subsection 149.1(6.2)’s bans on partisan political expression and political purposes are at odds with ABC achieving its charitable purpose of relieving poverty, and ABC would have difficulty functioning without registered charity status – and thus subsection 149.1(6.2) infringes its section 2(b) rights. It is somewhat difficult to imagine a court finding poverty relief to require partisan political expression. However, this finding would be case-specific, and a court may find arguments persuasive regarding the connection between political purposes and poverty relief.

Further, the SCC in City of Toronto did not purport to make the Baier section 2(b) framework a more challenging hurdle for claimants.⁷⁵ Thus, in Canada Without Poverty, if CWP brought a positive section 2(b) claim, Morgan J implicitly found that the claim met the Baier framework by finding that the former subsection 149.1(6.2) breached section 2(b). Consequently, Morgan J arguably expanded the scope of “exceptional cases” whereby positive claims breach section 2(b). Drawing on this precedent, ABC could argue that partisan political activity is political speech, akin to non-partisan policy advocacy considered in Canada Without Poverty. Therefore, subsection 149.1(6.2) burdens ABC’s expressive activities under section 2(b), and would have to be justified under section 1.⁷⁶

Overall, it is not clear whether a court would find that subsection 149.1(6.2) of the ITA breaches ABC’s right to freedom of expression using the Baier framework. However, finding a section 2(b) breach is, at the very least, a plausible outcome of this analysis.

C. Section 1 analysis

Once a court determines that a claimant’s Charter right has been infringed, it must then decide whether the state can defend the limit under section 1 as “demonstrably justified in a free and democratic society.”⁷⁷ Section 1 analyses are guided by “the values and principles essential to a free and democratic society,” including “faith in social and political institutions which enhance the participation of individuals and groups in society.”⁷⁸ In Oakes, the SCC outlined a two-stage justification test under section 1: (1) the limiting measure must have a “pressing and substantial objective”; and (2) the means chosen must be proportional to the objective.⁷⁹ The proportionality test has three components: (A) the limit must be rationally connected to the objective; (B) the limit must impair the right no more than reasonably necessary to achieve the objective; and (C) the law’s deleterious and salutary effects must be proportional.⁸⁰ With respect to limits on section 2(b) rights, the SCC has held that freedom of expression is paramount in a democratic society, and should “only be restricted in the clearest of circumstances.”⁸¹

For ABC’s claim, the Oakes test necessitates engagement with fundamental questions regarding the objectives and proportionality of subsection 149.1(6.2). The following analysis will first discuss potential objectives for subsection 149.1(6.2)’s restrictions on partisan political activities and political purposes. Then, using the most compelling of these objectives (namely, to maintain the separation between charity and politics), this essay will consider the proportionality of subsection 149.1(6.2).

i) Does the limit have a pressing and substantial objective?

Under the first branch of the Oakes test, courts must determine whether an objective is “pressing and substantial” such that it is sufficiently important “to warrant overriding a constitutionally protected right or freedom.”⁸² In Canada Without Poverty, it was at this first stage of analysis that the justification for infringement failed. The Attorney General submitted that the objectives of former subsection 149.1(6.2) were to “recognize that it is appropriate for a registered charity to use its resources, within defined limits, for ancillary and incidental political activities in support of its charitable goals, and prohibit partisan political activities.”⁸³ Morgan J found that this objective was not pressing and substantial, as the government could not justify limiting charities’ section 2(b) rights “for the very purpose of ensuring [they] use no more than 10 percent of their resources on the exercise of free expression.”⁸⁴

However, there are several compelling objectives for the present subsection 149.1(6.2)’s remaining prohibitions on partisan political activities and political purposes, rooted in rationale for the political purposes doctrine. This essay will discuss three potential objectives for subsection 149.1(6.2): (a) to protect the distinct function of the charitable sector by maintaining the separation between charity and politics; (b) to uphold parliamentary sovereignty; and (a) to execute a tax policy decision that certain charitable purposes and activities deserve fiscal support. Based on the following analysis, I posit that a court would most likely find objective (a) (protecting the distinct function of the charitable sector) to be pressing and substantial.

a) Protect the distinct function of the charitable sector

Charities play a unique role as advocates in Canada’s political sovereignty.⁸⁵ In the Australian context, Jennifer Beard argues that maintaining the independence of charitable purposes distinct from party politics is a legitimate purpose, as it “preserves the coherence of the sector as a distinctive social force within our democracy, the charitable purposes of which are, and should be, different” from the government’s aims and responsibilities.⁸⁶ This purpose is similarly compelling in the Canadian context.

Further, holding charity and politics distinct ensures that political organizations cannot receive registered charity status. Political organizations are strictly regulated and do not receive the same tax benefits as charities. Removing or reducing the limits for registered charities participating in politics could result in broader public sector organizations, which depend on government funding, using tax-subsidized charitable contributions to run advertising campaigns to maintain or increase their funding.⁸⁷ Additionally, without regulations in place, there is a legitimate concern that political parties and candidates could use registered charities to skirt campaign finance laws.⁸⁸ This engages the “role and integrity” of charities in Canada’s electoral system and the financing of election campaigns, which is relevant to maintaining the “constitutionally prescribed system of representative government.”⁸⁹

As a counterargument, the separation between charity and politics may be more theoretical than practical. Charity and politics do not act in isolation: both share a “unified concern for the public benefit,” and it is through the prevailing social context (partly coloured by political considerations) that we define the “common good” and determine what is “charitable.”⁹⁰ Further, the argument that charitable tax subsidies could be used to unjustly skew the balance of political speech fails to recognize the already unequal distribution of political speech; charitable advocacy may actually lessen this inequality “by representing under-represented interests and improving the quality of decision-making through charities’ expertise and connection with the voiceless.”⁹¹ However, Nicola Silke notes that while this view accounts for the “inherent nature of charity and politics,” it ignores the fact that the registered charity regime “must retain its credibility and legitimacy in the eyes of the public.”⁹² All considered, I posit that maintaining the separation between charity and politics to protect the charitable sector’s distinct function is a compelling objective that a court would likely find to be pressing and substantial.

b) Uphold parliamentary sovereignty

An alternative objective for subsection 149.1(6.2) could be to uphold parliamentary sovereignty. This objective is most relevant to the prohibition on charities pursuing political purposes. At common law, a purpose must provide a public benefit to be charitable. This objective stipulates that evaluating whether a political purpose is charitable would require courts to impermissibly intrude into the realm of Parliament when considering the purpose’s public benefit, as doing so would require courts to acknowledge a public benefit in the specific law reform or party being advocated for by the charity.⁹³

There are several conceptual difficulties with this objective, especially if a political purpose is non-partisan. First, it is inconsistent with how courts assess the public benefit of religious charities. Instead of finding a public benefit in specific religious doctrines, courts broadly assume that religion generally provides a public benefit.⁹⁴ Courts could similarly abstract political purposes to a level of non-controversy by assuming that there is a public benefit in advocacy related to law reform generally, rather than considering specific reforms.⁹⁵

Second, the parliamentary sovereignty objective is inconsistent with judicial commentary on law reform. Broadly, courts frequently and properly suggest that Parliament could take action where the common law is confused or outdated, or where new situations have arisen that would benefit from legislative regulation.⁹⁶ The case Vancouver Society of Immigrant and Visible Minority Women v MNR provides an example of this in the charity law context: the SCC commented that Canadian charity laws were “in need of reform” and that it was “difficult to dispute that the law of charity has been plagued by a lack of coherent principles on which consistent judgment may be founded.”⁹⁷ Thus, it appears clearly within the purview of the courts to comment on the desirability of law reform without unduly entrenching into the legislature’s domain. Indeed, one scholar posited that “there are few people better qualified than judges” to assess the public benefit of a change in the law.⁹⁸

The third conceptual difficulty with the parliamentary sovereignty objective is that it ignores the effect of the Charter on the role of the courts in interpreting law. Today, courts play a constitutionally validated role in interpreting and enforcing constitutional rights and freedoms – a role that “overtly involve[s] courts in the normative evaluation of law.”⁹⁹ In Charter jurisprudence, courts rule on the public benefit of Charter-based law reform activities.¹⁰⁰ This suggests that it is irrational to justify a ban on charities pursuing political purposes as changes to the law may further constitutional values, a perspective consistent with Charter jurisprudence.¹⁰¹

c) Tax policy

A third objective for subsection 149.1(6.2) is that, in a context of limited fiscal resources, the government bar political activities from charitable tax status to reserve funds to fiscally support ‘traditional’ charitable activities, like “feeding the hungry or teaching the young.”¹⁰² However, Chan notes several criticisms of this objective. Firstly, organizations that seek law reform are not unanimously considered more valuable than those which seek to feed the hungry.¹⁰³ Further, budgetary constraints have generally been found insufficient to justify limits on Charter rights.¹⁰⁴ Given the fact that both municipalities and amateur athletic associations are considered “qualified donees” under the ITA, it is challenging to argue that the ITA stringently prioritizes philanthropic support.¹⁰⁵ Therefore, this objective is not particularly compelling, and would likely not be considered pressing and substantial.

ii) Is the limit proportional to its objective?

The second branch of the Oakes test involves determining whether an unconstitutional limit on a Charter right is proportional to its objective. For ABC’s claim, to find subsection 149.1(6.2) proportional, a court would have to be satisfied of three factors on a balance of probabilities: (a) that there is a rational connection between the section 2(b) infringement and the law’s objective; (b) that subsection 149.1(6.2) minimally impairs section 2(b) rights; and (c) that the impact of the section 2(b) infringement is proportional to the likely benefits of subsection 149.1(6.2).¹⁰⁶ The following analysis will discuss proportionality using the objective of protecting the distinct role of the charitable sector, identified above as the most persuasive.

a) Rational connection

The rational connection requirement is satisfied if a limit on a Charter right is “carefully designed to achieve the objective in question” and is not “arbitrary, unfair or based on irrational considerations.”¹⁰⁷ The SCC has described the rational connection test as “not particularly onerous”; it must be reasonable that the limit “may further the goal, not that it will do so.”¹⁰⁸

Based on this low bar, a court would likely find that the limit in subsection 149.1(6.2) is rationally connected to the law’s objective: a registered charity pursuing a political purpose would almost certainly blur the line between charities and political organizations. For the restriction on partisan political activities, however, there is some merit to the argument that the limit is arbitrary.

ABC may argue that under the present regulatory scheme, a charity could align all of its policy recommendations with those of a particular candidate; as long as it does not name the specific candidate, this would be considered a permissible PPDDA. However, if the registered charity named the candidate, this communication would become partisan, and thus unlawful under subsection 149.1(6.2). Therefore, while subsection 149.1(6.2) and its policy guidelines purport to distinguish between partisan and non-partisan activities in furtherance of a charity’s objective, this distinction may be arbitrary in practice, and thus not rationally connected to the objective of maintaining the separation between charity and politics. Despite this, a court would likely find that the present regulatory scheme may further Parliament’s to protect the charitable sector’s distinct function, and as a result satisfies the rational connection test.

b) Minimal impairment

The test for whether a law minimally impairs a Charter right is whether “there is an alternative, less drastic means” of realizing its objective.¹⁰⁹ A limit can fall within a “range of reasonable alternatives” to achieve its objective; a law is not overly broad merely because a court can “conceive of an alternative which might better tailor objective to infringement.”¹¹⁰ At this stage, courts will consider evidence adduced by the government as to why it did not choose less intrusive and equally effective measures to accomplish its objective.¹¹¹

The government may argue that the limits on partisan activities and political purposes in subsection 149.1(6.2) minimally impair ABC’s section 2(b) rights, as these restrictions apply only to registered charities – non-profit organizations are not subject to the same limitations. Therefore, subsection 149.1(6.2) tailors its impingement on freedom of expression to what is required by its objective, by confining its restrictions to organizations accorded registered charity status.¹¹²

At this stage, courts may also look to laws and practices in other jurisdictions.¹¹³ ABC would likely highlight more relaxed approaches taken in other countries to regulate charities’ political activities. For example, in the United States, charities can have political purposes; however, such entities are excluded from some fiscal benefits associated with charitable status if a “substantial part” of their activities are political.¹¹⁴ In Scotland, while an entity cannot be charitable if its purpose is to promote a political party, charities can participate in any general political engagement, including “supporting a particular candidate or party in an election or a referendum provided that they are transparent in declaring their motivation.”¹¹⁵

ABC could argue that to minimally impair its section 2(b) rights, the government ought to take a more lenient approach to regulating charities’ political activities, akin to that employed in the United States and Scotland. For instance, the CRA could create a new form of advocacy organization within the umbrella of ‘registered charity’ that may be eligible for fewer tax concessions and subject to more stringent reporting requirements.¹¹⁶ However, there are some significant drawbacks to this approach: it would further complicate an already complex regulatory scheme for registered charities; more stringent reporting requirements would require scarce charitable resources to be directed towards ensuring compliance; and, following the controversial United States Supreme Court decision Citizens United v Federal Election Commission,¹¹⁷ there would likely be skepticism towards the Canadian government adopting or shifting towards the American approach. On the balance, it seems likely that a court would find that subsection 149.1(6.2) minimally impairs registered charities’ section 2(b) rights, given the substantial disadvantages to alternative measures of achieving its objective.

c) Proportional balancing between the law’s salutary and deleterious effects

The third component of the Oakes proportionality test requires that the salutary effects of the impugned law outweigh its deleterious impact on the affected rights-holder, with reference to the identified legislative objective.¹¹⁸ This inquiry focuses on the law’s practical impact, and necessitates examining benefits that the measure will “yield in terms of the collective good sought to be achieved” and the importance of the limitation on the right to determine whether the restriction is justified.¹¹⁹

The deleterious effect of subsection 149.1(6.2) is that it restricts registered charities from fully participating in political discourse – an activity that charities are arguably well-equipped to do, and one that “lies at the heart of the guarantee of free expression.”¹²⁰ Based on their frontline experience, grassroots connections, and proximity to communities, charities are uniquely situated to contribute to public dialogue, raise awareness on matters of collective interest, and generally “facilitate participatory forms of justice.”¹²¹ Charities also offer “ready sources of normative perspectives on law and policy” as their organizing principle is idealism, distinct from the marketplace’s emphasis on economic self-interest.¹²² There is also evidence that charities are trusted groups to speak out on politics: a 2013 study found that 79% of Canadians have “some or a lot of trust in charities,” and 62% of Canadians generally value charities’ opinions on issues of public concern “because they represent a public interest perspective.”¹²³

The government could argue that, because of this notable public trust in charities, the salutary effect of subsection 149.1(6.2) – to protect the distinct function of charities as separate from politics – is especially important. The impugned law may “enhance more than harm the democratic process,” as it purports to preserve the coherence of registered charities as unique social forces within our democracy and maintain the constitutionally prescribed system of representative government.¹²⁴ In amending subsection 149.1(6.2) in 2018, the government could argue that Parliament was attempting to reduce the “advocacy chill” that the previous regulatory scheme had on the voluntary sector, while retaining some limits on charities’ political activities to maintain charities as distinct from political organizations. The deleterious effects of subsection 149.1(6.2) are mitigated by the fact that charities’ political voices are not entirely silenced by the registered charity regime: charities can contribute to political discourse through PPDDAs, following Canada Without Poverty.

As section 1 of the Charter mandates that limits on constitutional rights be demonstrably justified, the government would have to introduce evidence of the benefits that society stands to gain from subsection 149.1(6.2)’s restrictions on charities conducting partisan political activities and pursuing political purposes. While this evidence may dictate the outcome of a court’s proportional balancing analysis, I am inclined to say that the salutary effects of subsection 149.1(6.2) outweigh its deleterious impacts on charities’ freedom of expression.

CONCLUDING REMARKS

For its high degree of influence and impact in the Canadian charity law sphere, the Canada Without Poverty decision raises several significant questions that have yet to be addressed by the courts – namely, how can the government draw constitutionally-compliant boundaries between registered charities and other organizations, and what is Parliament’s objective for continuing to limit charities’ political advocacy?¹²⁵ Morgan J’s finding that the former ITA subsection 149.1(6.2) and associated policy guidelines violated charities’ right to freedom of expression under section 2(b) appears to leave the present subsection 149.1(6.2) vulnerable to a similar constitutional challenge.

The outcome of this challenge would likely depend on the evidence presented by the parties, and the court’s willingness to engage more deeply with constitutional law and charity law than Morgan J did in Canada Without Poverty. The freedom of expression analysis in this essay casts doubt on whether Morgan J would have found the former subsection 149.1(6.2) to violate CWP’s section 2(b) rights, had he applied the governing framework from Baier for analyzing positive rights claims. Despite this issue, it is at least plausible that a court would find that the current ITA provisions and policy guidelines governing charities’ political advocacy breach section 2(b). Thus, the question shifts from asking whether section 2(b) could be used to strike down subsection 149.1(6.2), to whether it should. I suggest that to preserve charities’ distinctive role in Canadian society, this should be answered in the negative.

WORKS CITED

Legislation and Policy Guidelines

Budget Implementation Act, S.C. 2018 (No 2), c 27.

Canada Revenue Agency, “Political activities” Policy Statement CPS-022 (2 September 2003).

Canada Revenue Agency, “Public policy dialogue and development activities by charities” Policy Guidance CG-027 (2019 January 2019).

Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11.

Income Tax Act, R.S.C., 1985, c 1 (5^th Supp).

Library of Parliament, “Bill C-86: A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures”  (14 December 2018), online (pdf).

Jurisprudence

Alberta v Hutterian Brethren of Wilson Colony, 2009 SCC 37.

B.C. Freedom of Information and Privacy Association v British Columbia (Attorney General), 2017 SCC 6.

Baier v Alberta, 2007 SCC 31.

Bowman v Secular Society Ltd, [1917] AC 406 (HL).

Canada (Attorney General) v JTI-Macdonald Corp., 2007 SCC 30.

Canada Without Poverty v AG Canada, 2018 ONSC 4147.

Carter v Canada (Attorney General), 2015 SCC 5.

Citizens United v Federal Election Commission, 558 US 310 (2010).

Commissioners for Special Purposes of Income Tax v Pemsel, [1891] AC 531 (HL).

Dunmore v Ontario, 2001 SCC 94.

Harper v Canada (Attorney General), 2004 SCC 33.

Irwin Toy Ltd v Quebec (Attorney General), [1989] 1 SCR 927.

Little Sisters Book and Art Emporium v Canada (Minister of Justice), 2000 SCC 69.

McGovern v Attorney General, [1982] Ch 321 (HC).

Oppenheim v Tobacco Securities Trust Co Ltd, [1951] AC 297 (HL).

Osborne v Canada, [1991] 2 SCR 69.

R v Oakes, [1986] 1 SCR 103.

RWDSU Local 558 v Pepsi-Cola Canada Beverages (West) Ltd, 2002 SCC.

RJR-MacDonald Inc. v Canada (Attorney General), [1995] 3 SCR 199.

Toronto (City) v Ontario (Attorney General), 2021 SCC 34.

Vancouver Society of Immigrant and Visible Minority Women v MNR, [1999] 1 SCR 10.

Secondary Sources

Beard, Jennifer, “Charity law and freedom of political communication: the Australian experience” in Matthew Harding, ed, “Research Handbook on Not-For-Profit Law” (Cheltenham, UK: Edward Elgar Publishing Limited, 2018) 252.

Chan, Kathryn, “Constitutionalizing the Registered Charity Regime: Reflections on “Canada Without Poverty (AG)” (2020) 6 Can J Com & Con L 151.

Chia, Joyce, Matthew Harding & Ann O’Connell, “Navigating the Politics of Charity: Reflections on Aid/Watch Inc v Federal Commissioner of Taxation” (2011) 35:2 Melbourne U L Rev 353.

Coyne, Andrew, “Problem with charities isn’t their politics, it’s their generous tax credit”, National Post (27 August 2014), online (webpage).

Glazebrook, Susan, “A Charity in all but Law: The Political Purpose Exception and the Charitable Sector” (2019) 42:2 Melbourne U L Rev 632.

Gloria DeSantis and Nick Mule, “Advocacy: A Contested yet Enduring Concept in the Canadian Landscape” in Nick Mule and Gloria DeSantis, eds, “Shifting Terrain: Nonprofit Policy Advocacy in Canada” (Montreal, McGill-Queen’s University Press, 2017) 3.

Hale, Geoffrey, “Policy Forum: Charity and Politics – A Dubious Mix?” (2017) 65:2 Can Tax J 379.

Moran, Mayo, “Rethinking Public Benefit: Charity in the Era of the Charter” in Jim Phillips et al., eds, “Between State and Market: Essays on Charities Law and Policy in Canada” (Montreal: McGill-Queen’s University Press, 2001) 251.

Parachin, Adam, “Charity versus Politics: Reforming the Judicial, Legislative and Administrative Treatment of the Charity-Politics Distinction” (Edmonton: The Pemsel Case Foundation, 2018), online (pdf).

Parachin, Adam, “Charity, Politics and Neutrality” (2018) 18 Charity L Prac Rev 23.

Parachin, Adam, “Distinguishing Charity and Politics: The Judicial Thinking Behind the Doctrine of Political Purposes” (2008) 45:4 Alta L Rev 871.

Parachin, Adam, “Shifting Legal Terrain: Legal and Regulatory Restrictions on Political Advocacy by Charities” in Nick Mule and Gloria DeSantis, eds, “Shifting Terrain: Nonprofit Policy Advocacy in Canada” (Montreal, McGill-Queen’s University Press, 2017) 33.

Silke, Nicola, “Please Sir, May I Have Some More – Allowing New Zealand Charities a Political Voice”, 8:2 Canterbury L Rev 345.

Singer, Samuel, “Charity Law Reform in Canada: Moving from Patchwork to Substantive Reform” (2020) 57:3 Alta L Rev 684.

Pleadings

Canada Without Poverty, “Factum of the Applicant, Canada Without Poverty” (2018), online (pdf).

Department of Justice, “Respondent’s Memorandum of Fact and Law” (2018), online (pdf).

Endnotes