On Friday, May 24, 2024 the Standing Senate Committee on Fisheries and Oceans (the "Committee") released a report (the "Report") titled Sealing the Future: A Call to Action. In October 2022, the Committee began a study on Canada's seal populations and their impact on Canada's fisheries, ecosystems, seal harvests, the seal products industry, and their cultural and economic significance to remote, coastal, and Indigenous communities. The Report summarizes the findings of that study, and makes a number of recommendations, with one in particular, Recommendation 4, that relates to the charity and not-for-profit sector.
Specifically, Recommendation 4 states that:
The committee recommends that the Government of Canada urgently review and amend the Income Tax Act and all other related acts, as needed, to ensure that registered Canadian charities and non-profit organizations that produce or promote misinformation and/or disinformation about the seal harvest or seal products industry have their tax-exempt status revoked.
In addition, the committee recommends that the Government of Canada amend the Income Tax Act to require registered Canadian charities and non-profit organizations to fill out information returns about donors, similar to those that are prescribed for registered journalism organizations in section 149.1(14.1) of the Act, which includes a public information return for the year in the prescribed form that lists each donor whose total gifts to the organization in the year exceed $5,000.
The main thrust of Recommendation 4 is stated as being to counter alleged "misinformation and/or disinformation" surrounding the sealing harvest or seal products industry and trade. In this regard, the Report states that certain animal welfare organizations have been the source of misinformation and/or disinformation regarding aspects of the Canadian sealing industry, including the scope, regulation, and practices associated with the trade. The Report goes on to state that this has the effect of harming Indigenous communities who have traditionally practiced sealing in a humane and environmentally conscious manner for generations, and that action is required in the name of truth and reconciliation.
Notwithstanding what one's view might be about the sealing industry in Canada, recommending that the Income Tax Act be amended so that registered charities and non-profit organizations that are alleged to have generated misinformation and/or disinformation about sealing should have their tax exempt status revoked (which in the case of registered charities would presumably involve loss of charitable status, although this is not explicitly stated in the Report) would be a very dangerous path for the government to follow. This would open the door to permitting revocation of charitable status (for registered charities) and tax-exempt status (for non-profit organizations) to become a politicized tool that could be used against those charities and non-profit organizations that were alleged to be carrying out programs or activities contrary to the policies of the government in power at any given time.
The harmful impacts from the politicalizing of charitable status were experienced by the charitable sector during the extensive audits of environmental charities approximately ten years ago under Prime Minister Harper. We have seen it most recently with Prime Minister Trudeau's Mandate Letter issued in December 2021 directing that amendments be made to the Income Tax Act to "make anti-abortion organizations that provide dishonest counselling to pregnant women about their rights and options ineligible for charitable status...", as reported on in the January 2022 Charity and NFP Update. Fortunately, the Minister of Finance has not acted on the Prime Minister's Mandate Letter to date and it is hoped that the Minister's will refrain from doing so in the future.
If the federal government were to act on Recommendation 4, it would establish a very unsettling precedent, as a similar approach could subsequently be adopted by future governments concerning other segments of the charitable and non-profit sector, which, in the opinion of the government of the day should no longer be eligible for charitable or tax-exempt status.
It is therefore hoped that the important concerns raised in the Report about sealing in Canada can be addressed without the government having to resort to the Report's ill-advised Recommendation 4 involving the threat of revocation of charitable and tax-exempt status. The troubling approach suggested in Recommendation 4 should be of concern to all registered charities and non-profit organizations in Canada.
Read the May 2024 Charity & NFP Law Update
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