Monday, August 11, 2014

Restrictions on Political Activity as Government Turf Protection -- not because Charity is non-partisan!

Over on TaxProf you can get a daily rundown -- "Day X of the IRS Scandal" -- of the faux scandal regarding Lois Lerner and conservative social welfare organizations.  The President's opponents assert that the government is using the restrictions on political activities to weaken his  political opponents.  Meanwhile, in Canada, the charitable sector is up in  arms because the conservative Harper government has ordered the Revenue Agency to audit charitable organizations' political activity.  Its funny how different contexts demonstrate the same ultimate truth.   In this country, talking heads and bloggers are working feverishly to uncover an alleged secret government conspiracy to crack down on conservative social welfare organizations critical of government.  In Canada, commentators allege that the government became indignant because some environmental charities opposed certain energy initiatives and, as a result, the government very explicitly and unabashedly ordered the tax agency to determine whether those charities were engaging in illegal political actifity.  Charities are sometimes conceptualized as a "separate sovereign" often acting in competition with other sectors (business and government).  Under this conception, government uses its tax laws to ensure its dominate role in the lives of citizens by strategically taxing that other sovereign when necessary to maintain government's superior role.  Business may use its influence over government to get the government to enact laws -- the  unrelated business income tax, for example, -- to help  in business' competition with the charity.  Thus, when  private foundations were thought to control too much money and power, the government imposed a whole range of private foundation taxes.  Likewise, restrictions on political activity are not imposed, necessarily, to protect charitable beneficiaries or in pursuit of some other notion of "good works."  Rather restrictions on political activity are imposed to decrease the "Independent Sector's" willingness and ability to speak out against the government.  If we admit this to be the real reason for restrictions on political activity, we might make progress with regard to whether the restrictions or bans should even exist.  We ought to ask ourselves whether political intervention and activity bans are worth the costs and trouble of enforcment.  Regardless, the American and Canadian experiences both help prove the underlying reason for political acitivity bans as well as the deleterious effects of  indulging the bans.  According to The Toronto Star:

The Conservative government has stepped up its scrutiny of the political activities of charities, adding money for more audits, and casting its net well beyond the environmental groups that have opposed its energy policies. Canada Revenue Agency, ordered in 2012 to audit political activities as a special project, now has also targeted charities focused on foreign aid, human rights, and even poverty. The tax agency has also been given a bigger budget — $5 million more through to 2017 — and is making the special project a permanent part of its work. With 52 political-activity audits currently underway, some stretching out two years and longer, charities say they’ve been left in limbo, nervous about speaking out on any issue lest they provoke a negative ruling from the taxman. And their legal bills are rising rapidly — in some cases adding $100,000 to already strained budgets — as they try to navigate often-complex demands from CRA auditors. “It’s nerve-racking,” said Leilani Farha, executive director of Canada Without Poverty, a small charity based in Ottawa that had to turn over internal emails and other documents to auditors looking for political activities. “We’ve been under audit for more than two years, and it just goes on and on, with no communication . . . It’s a huge drain on the resources of our organization.”  The blitz began with the 2012 federal budget, shortly after several cabinet ministers — Joe Oliver, now finance minister, among them — labelled environmental groups as radicals and money launderers. The groups, able to attract donations by virtue of their charitable status, have sharply opposed the Harper government’s oilsands and pipelines policies. The government tightened rules and initially earmarked some $8 million over two years for CRA to create a special team of auditors to closely scrutinize the political activities of charities.  A landmark policy statement from 2003 allows charities to spend up to 10 per cent of their resources on political activities, such as advocating changes in government policies. Partisan activity — endorsing a candidate or party — has always been forbidden and remains so.

The Independent Sector is not necessarily passive in this competition.  Charities seek help  from non-incumbents, for example in  the competition with government.  In Canada, a group of  larger international  charities are pushing back, complaining that the  government is  using strong arm tactics and  that those tactics have created an environment of fear and uncertainty. 

Some international aid charities are joining forces to challenge the Canada Revenue Agency’s increased scrutiny of the sector, saying onerous new demands are draining them of resources that are badly needed overseas.  A dozen such groups conferred last week about a joint strategy to present to agency officials next month, a reversal from the last two years, when many charities refrained from speaking out for fear of aggravating the taxman. The new initiative is being quarterbacked by the Canadian Council for International Co-operation, representing some 70 groups who funnel charity dollars abroad to alleviate poverty and defend human rights. The move is a belated reaction to a wave of political-activity audits ordered by the Harper government in 2012, but which only began to hit the international aid sector in the second year after several environmental groups were swept up in the first round.

As the New Zealand Supreme Court implied last week, politics and charity are not mutually exclusive.  Indeed, politics and  charity are just the opposite.  Governments only pretend the two are mutually exclusive to protect themselves from challenge. 


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