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Protesters fill a giant piece of pipeline with placards after a demonstration outside the Vancouver Art Gallery on Aug. 31, 2010.Jonathan Hayward

Ross McMillan has a pretty good idea that Finance Minister Jim Flaherty aimed one part of this week's federal budget squarely at his organization and its partners.

Mr. McMillan is chief executive of Tides Canada, a Vancouver-based charity that has been criticized by Natural Resources Minister Joe Oliver for funding groups opposed to the proposed Northern Gateway pipeline that would connect British Columbia to the Alberta oil sands. Mr. Oliver has called Tides groups radicals and accused them of hijacking the regulatory hearings for the project.

The impact on Tides Canada, and other groups that oppose the pipeline, is in new measures that target how charities engage in political activity. By law, all charities are allowed to devote 10 per cent of their total resources, including money and volunteers, to political advocacy so long as the activity is part of the charity's overall purpose and isn't partisan. For example, a charity can denounce or support a government policy, but it can't endorse or oppose a particular political candidate or party.

The budget doesn't change the 10-per-cent rule, but it does go after politically active charities in other ways. For example, the budget increased sanctions on charities that don't comply with the advocacy regulations and it announced an $8-million special audit by Canada Revenue Agency to see if charities are adhering to the 10-per-cent limit. The budget also announced restrictions on how charitable foundations fund political activities by other organizations and it introduced new reporting rules for charities that use foreign donations to fund these activities.

"We really see this as part of an ongoing effort by the government to divert the country away from real issues," said Mr. McMillan, who added that the new rules won't have much of an impact on his organization but could increase administrative costs for many other charities. "This will create more fear in the sector."

Marcel Lauzière, president of Imagine Canada, an umbrella organization for charities, said the budget measures are vague and he is waiting for more details. In the meantime, "there is no doubt organizations will be worried," he said. "It may well create a chill" on political activity, he said.

He added that the new reporting rules for foreign donations could be burdensome to many charities. While only a handful of charities rely on foreign donations – roughly 2,000 out of 86,000 registered charities in Canada – those gifts are important to many groups such as universities, religious organizations and international development groups. Those charities will now have to carefully track, and report, how their foreign gifts are used.

Others wonder why the government is hitting all charities with new rules when only a fraction engage in political activity. By some estimates, just 500 charities do any kind of political advocacy, and they typically spend far less than the 10-per-cent threshold. Mr. McMillan said Tides spends less than 5 per cent on political activities and the foreign donations it receives have gone almost entirely toward environmental projects such as the Great Bear Rainforest in B.C.

The federal government is "looking for a problem that I don't think is there," added Malcolm Burrows, who heads philanthropic services at the Bank of Nova Scotia. Nonetheless, the proposals "could have a very big impact on the sector."

Mark Blumberg, a Toronto lawyer who works with charities, said the overall impact might not be that onerous and most charities can just keep doing what they've been doing. "There are no additional restrictions on charities and their ability to carry out political activity," he said adding that the measures relate more to reporting issues.

Rick Smith, executive director of the Environmental Defence, disagreed and called the budget measures an attack on environmental groups. "I think it's just unprecedented," he said. "I've never seen anything like it."

Editor's Note: The print and original web version of this story incorrectly identified Ross McMillan's title as well as the reason for Natural Resource Minister Joe Oliver's criticisms of Tides Canada.

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