On July 16th, 2018, the Ontario Superior Court of Justice struck down a prohibition in the Income Tax Act preventing registered charities from devoting more than 10% of their resources to “political activities”. This welcome decision paves the way for registered charities to sponsor advocacy that may previously have been limited as “political”, including “test case” litigation.

Test case litigation has always been a special case. Unofficially, CRA officials would indicate charitable support for litigation would not be considered political because, by definition, litigation includes courts applying the law (rather than creating it). Nevertheless, this position was never confirmed in official CRA publications.

Even before the Superior Court’s decision, some charities, primarily in the environmental sector, were treating test case litigation as having a charitable rather than political quality. Most other charities were unwilling to do so, despite the fact that test case litigation was never challenged by the CRA as a “political” pursuit. Most charities were unwilling to risk their charitable license and so declined to sponsor litigation which may otherwise have been the most effective way to advance their charitable purposes.

The result of this uncertainty has been that the legal entitlements of many persons were not enforced. Among other consequences, the Superior Court decision confirms that affording access to justice in support of charitable purposes will not place charities’ existences in jeopardy.

In Canada Without Poverty v AG Canada, 2018 ONSC 4147, Canada Without Poverty, a registered charity, challenged section 149.1(6.2) of the Income Tax Act that prevented charitable organizations from devoting more than 10% of their resources to non-partisan political activities (charities are prohibited entirely from participating in partisan political activities, such as supporting or opposing candidates or parties. Partisan activities by political parties and third parties seeking to support them are governed by separate election finance legislation).

According to the CRA, an activity is political if it explicitly:

1. Communicates a call to political action;
2. Communicates to the public that the law, policy, or decision of any government in Canada or in a foreign country should be retained, opposed, or changed; or
3. Indicates, whether in internal or external documents, that the intention of the activity is to incite or pressure government to retain, oppose, or change a law, policy, or decision.

Breach of section 149.1(6.2) could result in an organization losing its status as a registered charity.

The Court held that this 10% cap infringed Canada Without Poverty’s freedom of expression under the Charter. Virtually all of Canada Without Poverty’s activities were “political” – such as hosting policy summits, offering an online course on international human rights, and encouraging the public to participate in the democratic process. The CRA was essentially making it impossible for Canada Without Poverty to pursue its charitable purpose.

This limitation could not be justified under section 1 of the Charter, since the very objective of the section was to limit political expression.

As a result of the decision, charitable organizations are now able to pursue political activities (except partisan activity) without limitation in furtherance of their charitable purposes. This opens the door for charities to sponsor test case litigation as a form of charitable advocacy.

You can read the decision here (link).