Wonk Wednesday: The Charities Act, or Why There is no Charities Act (Part 2 of 2)

Did I say a day? I meant a week. Time is relative, I’m depressed, I prioritize policy rabbit holes. You know, all the usual metaphysical things. And the biggest metaphysical ponderance? Canadian charity law.

Here’s the previous Wonk Wednesday for the history of Charity in Canada and what is and isn’t charitable activity. If you don’t want to read the whole post again, the punchy summary of it is: colonial concepts of charity were implemented differently and unevenly across the areas that would become Canada. Post-Confederation, the first national law around charity was passed in 1917 to help support WW1 veterans and their families, but it was as a side effect of introducing a national income tax.

The Income Tax Act, or Why You Get a Receipt When You Donate

That’s the important distinction about charity: there are laws around it, but not one specifically about it. This can create some assumptions and can reinforce inaccurate ideas about what is and isn’t charity, and what charitable organizations are worth donating to or even existing. Colloquially, a charity is often used interchangeably with a non-profit. There are some similarities between the two, like (sometimes) neither of them being a corporation, and they are not set up to generate profit. But the legislation around the two are different: non-profits are almost always the purview of a province, while charities are federally registered. You can offset your federal tax assessment with donations over a certain amount with a registered charity, but you can’t with a non-profit.

So why are non-profits usually provincial entities, but charities aren’t? It’s mostly because of federalism and how the country is set up administratively. A lot of responsibilities are decided provincially, and there are very few things the nation is responsible for. The good news is a lot of provincial laws usually follow the same beats, so there isn’t usually a lot of difference from one part of the country to the other. The bad news is that doesn’t mean one province’s laws about registering and maintaining a non-profit are applicable to a neighbouring province. That has had ramifications for non-profits that have a regional focus that might extend into another province, as well as Indigenous-created non-profits where traditional territories have been separated by the implementation of provinces.

So what’s the takeaway? If non-profits and charities overlap, why the distinction? Non-profits and charities are a way for mutual aid networks to have the opportunity for longevity and continue the work they do without burning out the people providing the work and the resources. Registering as either allows that group to apply for funding with different donors. And because non-profits and charities are governed by a board of directors, they are required to have annual meetings and present their work, and members can request meeting minutes that aren’t private. This allows oversight and accountability, but it also introduces new objectives to meet, and it also changes the overall feeling of a smaller mutual aid network. In gaining these opportunities, organizations can lose founders or long time volunteers who don’t vibe with the institutionalization of what they were doing.

A pithy way to sum all this up: non-profits exist because a province allows them to.

A pithier way to sum it up: charities exist because the Canada Revenue Agency recognizes them, and they provide relief for a public need.

And the pithiest way: charities have federal oversight because their administration was tied to the introduction of income tax in Canada, and you can get tax return credits if you donate to a charity registered with our federal tax agency.

The Good of Legislating Charity

The major thing about charities being legislated is it provides oversight, both for charities and for donors. A charity that is registered will advertise its charitable number on its website and donation materials, and it will be on their donation tax receipt. Charities also have to file a return every year, indicating their revenue and expenses. Anyone can look up a charity to see how it spends its budget every year and whether its charitable status is active, suspended, or rescinded. This is so important in the age of accessible AI tools and disinformation. For the past six years, fraud has been increasing year over year, and while there are charities that have allegedly been misappropriating their funds, the majority of charity-related fraud is from scammers imitating established charities and soliciting donations. With a registry that has federal oversight, the burden of proof isn’t only on individuals to make sure the charity is actually charitable.

The Needs Improvement of Legislating Charity

It gets messy when there is no one law to point to for adherence. Provinces have legislation for registering a non-profit, in addition to a federal law for not-for-profit corporations. Despite charities being a federal oversight, provinces and some municipalities will have their own laws for lobbying. Depending on where they’re located, in house lobbyists may need to register and adhere to three sets of legislation.

Common law is based on precedent, and as mentioned last week, the definition of charity comes from a 19th century British case, and is still used as the measuring stick for whether an organization’s work is charitable or not. Canadian charity law is still based on Pemsel, a ruling and test that’s over 100 years old and from another country that doesn’t represent French Canadians, Indigenous Nations, and Canadians whose national roots have been impacted by British colonialism. It’s difficult to redesign a national law for a country that has been described as a cultural mosaic, but it might be worth exploring.

I feel like this can be contentious, but part of the question of legislating charity and what qualifies as a charity is the role of religious institutions and their charitable activities. Let me just say this: I’m not anti-religious. I recognize the importance houses of worship have as community spaces, and many good acts are done as religious observance. A lot of my passion for public policy and community building was built through watching my devoutly Catholic family practice their faith through service to their community.

With all that said, one of the acceptable charitable acts of a religious charity is spreading religion. This runs counter to the country being a secular state, meaning that despite the country’s colonial history being tied to Christian institutions, there is no state religion, the state is neutral in matters of faith, and the Canadian Charter of Rights and Freedoms protects the right to practice any or no religion.

Where it gets complicated is the case-by-case ruling for charitable incorporation. An established religion will have an easier time being approved than a new religious movement or the previously mentioned atheist church. Also, some religious institutions operate with hierarchical or exclusionary lenses that can conflict with Canadian human rights norms. A religious leader can advance ideas that infringe on human rights in addition to the support they provide to their community, and this doesn’t affect their charitable status.

Also, the Income Tax Act is a beast. It has over 250 Sections. If someone isn’t comfortable reading legislation already, they are going to feel really overwhelmed with a document that isn’t exclusively about the thing they’re looking up, and includes math formulas for determining thresholds.

Charities are also bound by how much lobbying they can do. This makes sense, as it ensures a charity is focused on its mission. But this also means that charitable organizations that aren’t commonly known as charity have a harder time making the good things they do in community known, or if they’re oversubscribed (an increasingly common trend with the rising cost of living, wages not keeping up, offloading of social services to different jurisdictions, and fewer grants being available from governments, businesses, and foundations), they won’t have the personnel or resources available, which just reinforces the system as it is.

What Now?

So where does that leave us with charity law, the limitations on how charities can advocate for greater support, and which charitable sectors have the loudest voices and greatest ability to influence policy and public funding?

It would make a great installment for next week’s Wonk Wednesday, but it won’t be next week’s. Much like the Income Tax Act, there’s a lot going on with charities, their political implications, the overlap with businesses and corporations, and the weaponization of charitable sectors. And there’s a lot happening with lobbying in Canada right now that I should really start yapping about.

So next week’s Wonk Wednesday: something else!