Canadian Charities and the Canada Revenue Agency


October 2018
One of the Liberal campaign promises in 2015 was to modernize the rules governing charities to allow them to make important contributions to public debate and policy.
This promise came a step closer to realization when the Mandate Letter for Minister Lebouthillier specified:
“Allow charities to do their work on behalf of Canadians free from political harassment, and modernize the rules governing the charitable and not-for-profit sectors, working with the Minister of Finance. This will include clarifying the rules governing “political activity,” with an understanding that charities make an important contribution to public debate and public policy. A new legislative framework to strengthen the sector will emerge from this process. This should also include work with the Minister of Families, Children and Social Development to develop a Social Finance and Social Enterprise strategy” (12 Nov 2015).
On January 20, 2016, the Minister of National Revenue announced the winding down of the special review that had been set up by the Canada Revenue Agency (CRA) under the Harper government to audit registered charities’ political activities.
These special political activity audits under the Harper government had overwhelmingly targeted progressive organizations, including environmental organizations, as well as international co-operation and human rights groups. The audits created a well-documented advocacy chill in the charitable sector, and the work involved in complying with the CRA absorbed precious resources from charities that could ill afford the distraction and significant time of a protracted audit. None of the audits conducted under the special or enhanced political activities reviews resulted in a loss of charitable status as a result of political activities.
However, the on-going audits of 24 charities on the basis of their political activities were suspended, but not abandoned. Moreover, while recognizing that the prohibition on partisan activities is entirely appropriate, the "political activities" category is out-dated, restricts freedom of expression, and places an undue regulatory burden on charities. The United Kingdom, Australia and New Zealand have undergone reforms to permit advocacy and lobbying without restriction, provided that those activities are consistent with the charitable objects of the organization and are nonpartisan. After more than four centuries, the limited number of legitimate charitable objects permitted by law are in need of an update.
On September 26, 2016, the Minister started a consultation process with the charitable sector and the public to assist in clarifying the rules for the participation of charities in political activities.
On March 31, 2017 the committee filed its report, which was widely lauded by the charitable sector. It offered “four recommendations, with the first two relating to interim administrative changes, and the second two focused on the longer-term legislative changes required”. The recommendations are:
1.Revise the CRA’s administrative position and policy … to enable charities to fully engage in public policy dialogue and development.
2. Implement changes to the CRA’s administration of the ITA [Income Tax Act] in the following areas: compliance and appeals, audits, and communication and collaboration to enhance clarity and consistency.
3. Amend the ITA by deleting any reference to "political activities" to explicitly allow charities to fully engage, without limitation, in non-partisan public policy dialogue and development, provided that it is subordinate to and furthers their charitable purposes.
4. Modernize the legislative framework governing the charitable sector (ITA) to ensure a focus on charitable purposes rather than activities, and adopt an inclusive list of acceptable charitable purposes to reflect current social and environmental issues and approaches.”
On May 4, 2017, the Minister welcomed the report and stated: "The Panel Report represents a significant milestone in the consultation process we began last year … The Government remains committed to clarifying the involvement of the charitable sector in public policy dialogue and development."
The CRA committed itself to providing a formal response to the Panel’s recommendations by June, 2017, but failed to render it.
On February 1, 2018, the Senate appointed a special committee on the charitable sector to look at laws and priorities.
On March 14, 2018, the same coalition of 24 charitable organizations that had initially asked for the review wrote to the government again, asking that the report be implemented.
On 31 May 2018, a group of several leading Canadian organizations working to preserve and enhance the role of Canadian charities in public policy discussions started a campaign to "protect Canadians’ free speech". They demanded that Prime Minister Trudeau follow through with his promises and create a new law to protect Canadians’ right to be heard through the charities they support.
On 16 July, 2018, Canada Without Poverty won a landmark case in the Ontario Superior Court of Justice, with Justice Morgan’s ruling  that the CRA’s rules are an unconstitutional limit on free speech. If the ruling had stood, it would have meant that charities could have engaged in non-partisan political actions without any limits, so long as they did not engage in partisan politics. Justice Morgan endorsed Canada Without Poverty’s claim that 100% if its charitable purpose had to do with public advocacy directed at changing governmental policies. However, this was not to be.
In August 2018, the federal government decided to appeal the judgement of Justice Morgan.
In September 2018, the government proposed amendments that are not consistent with the Recommendations of the Consultation Panel, and that are contrary to Justice Morgan’s statement that charitable activity should be interpreted to include non-partisan political activities “without quantum limitation, in furtherance of the organizations’ charitable purposes.” In a “Guidance” document, the Canada Revenue Agency offers its interpretation of the proposed amendments. Clearly, there are to be limits on a charity’s public advocacy activities. “If a charity’s public policy advocacy activities are more than incidental, the charity likely has a political purpose.”  The key word here is “incidental”.
If the government’s amendments had been implemented, the CRA would have been the judge of whether a charity’s public advocacy activity is more than incidental to its charitable purposes and in effect, we would have been in substantially the same situation as under the Harper government.
On October 25, after numerous organizations provided joint comments and recommendations on the new regulations, the Minister of Finance tabled proposed changes to the Income Tax Act, which incorporate the most significant demands of the organizations and also correspond with the recommendations made by the Consultation Panel on the Political Activities of Charities.

In a statement from October 26, CEO Bruce MacDonald of Imagine Canada says “These changes, once implemented, send a clear signal that charities have a legitimate role providing comment and feedback on government policies and ensuring that the voices of their communities and supporters are heard. At the same time, they ensure that charities are non-partisan and remain focused on fulfilling their charitable purposes as enforced by the Canada Revenue Agency.”

What Happened

In 2012, the Canada Revenue Canada (CRA) started a “blitz,” reviewing the registered status of charities that are critical of the federal government and promote policy ideas that differ from the government's agenda. This blitz of reviews has appeared to be focussed on environmental, human rights, progressive policy and international development organizations. The effect is an “advocacy chill” that has descended on charities that are critical of the federal government. It mutes their collective and individual voices, as well as the voices of those they represent, and diverts financial and human resources into anticipating, participating in, or complying with the auditing process and its results. Meanwhile, other charities that are in general agreement with the government's policy choices appear not to have been audited in a similar manner. Democracy is considerably damaged by the weakening of civil society.


While there is a history of various strategies used to reduce the impact of civil society organizations between 1985 and 2005 (Phillips, 2012), using the CRA to diminish the effectiveness of charities critical of the government is a new approach.

In March 2012, at a time of massive cutbacks to the CRA's overall budget, the Agency received $8 million for 2012-14 – later increased to $13.4 million stretching to 2017 – which in large part has been dedicated to investigating the activities and registered status of selected charities. The Canada Revenue Agency has built a team of 15 auditors specifically for this purpose. While efforts to crack down on Canada's charities continue apace, the CRA appears to be scaling down staff and resources aimed at tax evasion, including offshore tax evasion

Currently, some 52 audits are underway or concluded, with eight more expected to be launched by 2016.

The audits followed the introduction, in February 2012, of a new federal Counter-Terrorism Strategy, which identified “environmentalism” as a domestic terrorist concern in 2012. The Conservative government has also engaged in the massive surveillance of activist groups, investing more than $20 million dollars since 2012 in the monitoring of political opponents.

How CRA audits work

Reasons charities may be audited include ensuring that they are in line with their legal requirements under the Income Tax Act; the CRA deeming them non-compliant; or following up on complaints.

Audits may examine:

  • whether charities spend more than the allowed 10% (or up to 20%, depending on the size of the organization) of their resources on political activities;
  • whether their activities align with their charitable purposes as previously approved by the government;
  • whether the organization's charitable purposes themselves are acceptable, even though they have previously been approved by the CRA;
  • and whether appropriate records are kept in one of the two official languages.

The Canadian Revenue Agency states that an activity is political if it:

  • explicitly communicates a call to political action (that is, encourages the public to contact an elected representative or public official to urge him or her to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country);
  • explicitly communicates to the public that the law, policy, or decision of any level of government in Canada or a foreign country should be retained, opposed, or changed;
  • explicitly indicates in any of its materials (internal or external) that the intention of any of its activities is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country; or
  • made a gift to another qualified donee to support the political activities of the recipient.

Representations to members of parliament are not characterized as political activities un the CRA rules, but they are nonetheless required to meet stringent criteria.

A politicized process

While Minister of Revenue Kerry-Lynne Findlay maintains that “CRA audits occur at arm's length from the government and are conducted free of any political interference,” the CRA admits that it acts on media attention about charities, as well as on complaints received.

Since the start of 2012, Ethical Oil, a not for profit organization with links to the Conservative Party of Canada, has filed formal complaints against at least six charities. While some charities' audits began before these complaints were filed, there is evidence that complaints can have an impact on the direction and tone of ongoing audits, as reported by Environmental Defence to the Huffington Post in December 2014.

The groups which Ethical Oil filed complaints about include:

  • Environmental Defence (audit began in 2011; complaint filed by Ethical Oil in March 2012)
  • The David Suzuki Foundation (audit began in May 2013; complaint filed by Ethical Oil in April 2012)
  • Pembina Foundation (audit began in Dec. 2013; complaint filed by Ethical Oil in April 2013)
  • Sierra Club Canada (complaint filed by Ethical Oil in Dec. 2012; under audit as of May 2015)
  • Tides Canada Initiatives Society (audit began in 2011; complaint filed by Ethical Oil in Aug. 2012)
  • Tides Canada Foundation (audit began in 2011; complaint filed by Ethical Oil in Aug. 2012)

All of these organizations have been critical of the development of the Alberta tar sands as well as the federal government’s approach to oil extraction and pipeline development. By contrast, Ethical Oil's mission is to promote efforts to develop Canada's tar sands.

Ethical Oil's connections to the Conservative Party of Canada have been well-documented. As research from the website Deep Climate has shown, the organization was founded by Alykhan Velshi, who in 2011 left a job as communications director for then-federal Immigration Minister Jason Kenney. He worked with Ezra Levant, a Fraser Institute graduate, to set up the Ethical Oil Institute. Velshi then went back to work in the Prime Minister’s office. Velshi is only one of a number of people who held Conservative staff positions, then left government to work for Ethical Oil, only to later return to political jobs.

While some audits of environmental charities began in 2011, the number increased the following year, when then-Natural Resources Minister Joe Oliver stated in January 2012 that “environmental and radical groups” funded by “foreign special interest groups” were working to undermine Canada's economy. The next month it was revealed that the Conservative government's new anti-terrorism strategy regarded “eco-extremists” as a major threat.

While the federal government's public criticism was at first reserved for environmental organizations, revelations of other audits show that the CRA's investigation into the political activities of charities has a much broader reach, including human rights, international development, social welfare and research/education charities.

Other organizations under audit include:

Consequences of the audits for charities1

The spate of audits of charities deemed to be critical of the federal government has had severe consequences.

Overall, an “advocacy chill” has descended on charities. Charities have reported taking greater caution in their communications, and voluntarily reducing their public profiles for fear of being targeted for an audit. This is in contrast to their usual mission of vocally engaging in public discussions and debate in order to maximize the exposure of their public policy ideas and critiques.

The audits have not only reduced charities' ability and willingness to speak out, but have also had an impact on their ability to carry out their central missions. Being audited means being significantly distracted from their core work, with staff tied up in attempts to satisfy bureaucratic requirements.

"It's nerve-wracking," Leilani Farha, Executive Director of Canada Without Poverty (CWP), told the Canadian Press in 2014. CWP is a small charity based in Ottawa, under audit since 2011, that had to turn over internal emails and other documents to auditors examining the extent of their political activities.

"We've been under audit for more than two years, and it just goes on and on, with no communication,” added Farha. “It's a huge drain on the resources of our organization."

“The Harper government attack on non-profits is unprecedented. I essentially see it as a bullying tactic,” said Harvey McKinnon, a Vancouver-based fundraiser, in an interview with the Canadian Press.

The audits also use precious financial resources for legal advice, according to researcher Gareth Kirkby. Environmental Defence has spent an estimated $100,000 on related legal bills as of July 2014, Executive Director Tim Gray told the Canadian Press.

The impacts of the audits aren't solely seen on those charities actively under review either. Kirkby has also found that others in the charitable sector have both reduced their outspoken-ness and dedicated internal resources normally used for their charitable work to prepare for eventual audits, in the wake of the growing number of reviews.

'Reminder letters' are issued to some groups to warn that CRA analysts have been watching their political activities, and may launch full audits.

As of October 16, 2014, 23 of these letters had been issued, though the CRA won't say exactly which groups are on the list, citing the confidentiality provisions of the Income Tax Act.

And in April 2015, the CBC reported that :

As of March 31, the Canada Revenue Agency had completed 21 political-activity audits, with 28 still under way and 11 still to begin. So far, five charities have received notices of the agency's intention to revoke their charitable status.

Push back

In April 2014, Greenpeace Canada filed a complaint with Elections Canada asking them to look into possible collusion in the ties between Ethical Oil and the government. (Kirkby, 2014: 39)

In the same month, the Canadian Council of Churches wrote directly to the Prime Minister about the "chilling effect of threats to revoke the charitable status of organizations that draw attention to policies that harm our world."

Lawyers' Rights Watch Canada made a submission to the UN Human Rights Council in May 2014 about the "shrinking space for dissent in Canada" through the “selective targeting of organizations by Canadian revenue authorities to strip certain organizations of their charitable status.”

In reaction to the auditing of the Canadian Centre for Policy Analysis (CCPA), a left-leaning think tank, 400 academics sent an open letter in September 2014 to the Minister of National Revenue, Kerry-Lynne D. Findlay and the Director General of the Charities Directorate, Canada Revenue Agency, Cathy Hawara. The letter states:

… we feel that CRA fails to understand the nature of what academic research is all about. Research begins from a series of questions and observations, and, from there, it proceeds, following a set of guidelines, to infer possible answers.  In this sense, it contests. All research in fact is critical, by its very definition: it tests hypotheses, seeks answers, and must be allowed to find these answers wherever it can.

But critical policy analysis does not equate with political activism, nor is it “biased” or “one-sided”, as CRA has claimed. Researchers explore specific questions of interest, and then present the results of their research. Reaching a conclusion is not the same as bias.

After noting that right-leaning organizations were not audited, they state, “We are therefore left with the conclusion that the decision to audit the CCPA is politically motivated to intimidate and silence its criticism of your government’s policies.”

This conclusion is supported by a study by the Broadbent Institute. Looking at published documents, it reviewed 10 right-leaning charities: The Atlantic Institute for Market Studies, Canadian Constitution Foundation, C.D. Howe Institute, Energy Probe Research Foundation, Fraser Institute, Focus on the Family, Frontier Centre for Public Policy, Institute for Canadian Values, Macdonald-Laurier Institute and Montreal Economic Institute. It presents examples of apparent political activities for each of the organizations, yet notes that none of them filed any political activity to CRA during 2011 and 2013. It concludes: “This report has provided evidence suggesting biased scrutiny by the CRA of charities that are critical of the government.”

A group of 18 organizations, mostly charitable orgnaizations themselves, wrote an open letter to all political parties, including Minister of National Revenue Kerry-Lynne Findlay. In it, they asked the minister, the Conservative government and the opposition parties to: 

"[Support a] new legal and policy direction that enhances and protects the ability of registered charities to participate in public policy debates. We also request that the process to define this new approach be developed in an open and transparent consultation process involving a broad range of charities and the public." 

Relevant dates

  • 2011: the Ethical Oil Institute is founded by Alykhan Velshi and Ezra Levant.
  • January 2012: Then-federal Minister of Natural Resources Joe Oliver denounces “environmental and radical groups” funded by “foreign special interest groups” were working to undermine Canada's economy.
  • February 2012: The Conservative government's newly released anti-terrorism strategy regards “eco-extremists” as a major threat.
  • March 2012: The federal budget allocates $8 million to investigate the charitable status of select groups. This is later topped up to $13.4 million.
  • August 2012: Ethical Oil files a complaint against 6 environmental agencies, charging that they engage in political action.
  • April 2014: Greenpeace files a complaint with Elections Canada alleging Ethical Oil serves as an unregistered "front group" for Conservative policies, including shared talking points and a revolving door of staff.
  • September 2014: Over 400 academics send an open letter to the Minister of National Revenue, and the Director General of the Charities Division, Canada Revenue Agency, charging that the audit of the CCPA is politically motivated to intimidate and silence its criticism of your government’s policies.
  • October 16, 2014: As of this date, some 52 organizations have been chosen for audits under the new program, with at least another 8 on the way.
  • October 2014: The Broadbent Institute publishes a study of 10 right-leaning think tanks demonstrating that they engage in political activities according to the CRA criteria – none of them has been audited so far.
  • February 10, 2015: A group of 18 organizations write an open-letter to the federal government and the opposition parties, asking for a commitment to laws and policy that guarantee that charities can participate fully in public policy debates.


1While this case study examines the impact of political activities audits, concerns around the current rules of what is considered acceptable activities and mandates for charities goes further. See, for example, the case of the United Nations Platform for Action Committee (UNPAC), which was told by a CRA agent that that it needed to remove all references to equality and inequality in its objects, in favor of saying that it seeks to promote “women-centred community economic development.” Other cases of charities having their status challenged covered by the Voices-Voix documentation project include IRFAN-Canada, Canadian Mennonite and Physicians for Global Survival.


Role or Position

Charities are an important part of civil society. They often have “in the field” expertise on social issues and give voice to concerns and policy ideas that often would not otherwise be considered. Diminishing their role in public discourse and dissent diminishes democracy.

Implications and Consequences

Democracy and free speech: Charities provide a public service by bringing problems and potential solutions into public discussion, building social consensus, and pressuring government and citizens to act. Democracy is enhanced by their actions. Obliging charities to spend more time and resources doing administrative tasks dictated by audits or the threat of audits means that democracy suffers. The advocacy chill means that charities are less outspoken and censor themselves, resulting in less frankness in public commentary. The diminution of frank comment and of dissent is a diminution of democracy.

Transparency: There is no transparency as to how CRA selects the charities to be audited or to receive a reminder letter. The interpretation of what constitutes a “political activity” is unclear and confusing. Such lack of clarity increases the chilling effect of this audit activity, leaving charities perpetually off-balance about what is, and is not, acceptable, both before and during audits. The lack of transparency and clarity also deprives citizens, generally, of means to hold government to account for what it is doing.


Published: Dec. 11, 2014
Updated: May 1, 2015; February 2, 2016; July 25, 2018; October 23, 2018

Image: The Canadian Press