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Simon DoyleFred Lu

Canadian charities say they're hoping tax agency audits launched under Stephen Harper's Conservative government will be scaled back or even halted under the Justin Trudeau Liberals.

The Harper government provided additional resources to the Canada Revenue Agency to conduct audits of charities' political activities, which the organizations said were politically motivated tactics intended to slow down policy work on the environment and poverty.

"We're expecting a real sea change," said Tim Gray, executive director of Environmental Defence, whose group spent over $100,000 last year under an audit of its advocacy activities that's been happening for three years. "I'm expecting some pretty rapid action on behalf of the government … They [CRA] have almost total discretion as to what to do with an audit at any time."

The Conservative government's 2012 budget provided $8-million in funding to conduct audits into the political activities of charities. The budget later grew to $13-million through 2017, with a confidential list of 60 charities identified for audits.

Environmental groups David Suzuki Foundation, Équiterre, Pembina Foundation, Sierra Club Canada, Environmental Defence, social and environmental group Tides Canada and freedom of expression organization PEN Canada have been among the charities affected by the program. Several of those audits are ongoing.

The CRA has flatly rejected any suggestion that the audits had political motivations.

According to CRA rules, charities cannot engage in any partisan activity such as endorsing a candidate or a political party, though they may spend up to 10 per cent of their resources on non-partisan "political activity," such as advocating a public policy position.

Alex Neve, secretary general of Amnesty International Canada, whose group went through an audit for the first time, said he would like to see a government review to ensure no charities were targeted for political reasons. The Liberals have proposed a review of the charity policy, and until that is completed any audits under way should be suspended, Mr. Neve said.

"They have said there will be major changes, that there's going to be a new approach," Mr. Neve said of the Liberals.

He referred to a controversial position taken by the CRA in 2014, when it told charity Oxfam Canada that the group could try to alleviate poverty, but not try to prevent it, as that would not be an acceptable charitable purpose.

"The notion that organizations should be allowed to provide relief to the poor but not allowed to campaign for an end to poverty is just not tenable in the 21st century," Mr. Neve said.

Mr. Gray called the audits "politically motivated attacks," and also said the government should conduct an internal investigation to determine whether any ongoing audits should continue.

The Justin Trudeau campaign platform said a Liberal government would "modernize the rules governing the charitable and not-for-profit sectors" and clarify "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."

At the same time, the Liberals said they would boost the CRA's budget by $80-million over four years to help the agency crack down on tax evasion.

Experts point out that audits of charities are not unusual. Some pro-life groups lost their charitable status under the Jean Chrétien Liberal government, though so did a Greenpeace charitable foundation.

While the Harper government devised an "ill-conceived fixation" on charities' political activities, Mr. Trudeau doesn't need to step in because the CRA will back off on its own as the audit program winds down, said Mark Blumberg, a charities lawyer with Blumberg Segal LLP in Toronto.

About half the audits are done and the 60 charities that will undergo the process have already been identified, he said. While hundreds of charities aren't complying with the rules on political activities, only about five are expected to lose their charitable status, Mr. Blumberg said.

That includes Dying With Dignity Canada, a group that advocates the right to physician-assisted death for terminally ill patients, which lost its charitable status this year.

"This is not something they like to be involved with," Mr. Blumberg said of the CRA and the political activity audits. "They will try to go for much more important things like combatting terrorism or inappropriate receipting."

Philippe Brideau, a spokesman for the CRA, said via e-mail that the rules on political activities are longstanding and have always been part of the agency's compliance program.

"Where non-compliance is identified as a result of an audit, the CRA will continue to use its education-first approach to help charities better understand all of the requirements for registration. Only a very small proportion of the CRA's audits result in serious consequences like sanctions or revocation," Mr. Brideau said.

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