The bounds of religious charitable speech
Should a charity lose its tax exempt status if it engages in political activity?
There has been a lot of recent interest in the Australian Charities and Not-for-profits Commission’s ability to revoke a charity’s tax exempt status if it engages in political advocacy. For religious charities, the power of the State to levy an impost on criticism takes a particular poignancy. The very idea of individual freedom and its protection in modern liberal democracies owes its origin to the vocal defence of religion against encroachments by the State.
A law that can be first wielded against the environmental movement and then provoke an investigation into Catholic Education Melbourne has almost unlimited entertainment potential. A law that can unite both Tony Abbott and Bill Shorten in outrage holds decidedly unique prospect for reform.
Further, the issue of charitable advocacy was made an election issue last month, with the Labor Party committing to amend the Charities Act to formally recognise the public benefits of advocacy by charities. That specific reform will not now take place, however if reform is to be contemplated on this issue, there is much to be learnt from international experience. In my view the debate could benefit from a small dose of reason, perspective and clarity.
First, reason. The reason why the law is in place is to stop the politicisation, and thus the delegitimisation, of charities. To allow groups with mere political motive to take charitable form would undermine confidence in the independence of the sector as a whole – our deconstructionist proclivities may have borne some fruit after all.
by tying exemption to a strict “no political comment condition” the State risks the allegation that not only does it not want the comment of charities as to what comprises the common good, it will wield the threat of financial impost against any such offering.
Second, perspective. If one accepts the correlation between charity and pure motive, then a boundary line between charity and partisan politics must be maintained. However, the threat of the loss of tax exemption can have a distinctly sobering effect on free speech. As charities exist to promote public benefit, precisely where the line is drawn can then have significant impacts on civil society freedom.
Adopting an international perspective, a review of the law of Anglophone democracies reveals just how contentious this boundary line can be. During the height of World War One in Bowman v Secular Society, Lord Parker handed down the seminal English dictum that a charitable “trust for the attainment of political objects has always been held invalid… because the court has no means of judging whether a proposed change in the law will or will not be for the public benefit”.
Although imbibing the English common law, our revolutionary dissenting friends across the Atlantic have taken a vastly differing position, choosing to disqualify mere activity. In the US section 501(c)(3) of the Internal Revenue Code provides that charities must “not participate in, or intervene in… any political campaign on behalf of… any candidate”. In the lead judgement Branch Ministries v Rossotti a church lost its tax exemption for placing two newspaper advertisements critiquing Bill Clinton’s policy on, amongst other things, homosexuality, abortion and contraceptives use.
US law thus imposes a strict activity test, which renders even individual acts of critique liable to disqualification. Not having the numbers in the Congress to amend the law, last year President Trump signed an executive order prohibiting Treasury from taking “adverse action” against charities. How curious that the nation born of the revolution against non-representative state autocracy, what Tocqueville called the “most democratic country on earth”, should limit its civil society through such a blunt mechanism.
The contagion of contention has also spread to Canada, where last year the Ontario Superior Court ruled that a tax agency imposed advocacy cap of 10 per cent of resources unconstitutionally burdened free speech. In doing so, the court upheld a prohibition on partisan activities.
So the perspective gained through an international lens can help us attain to the third value I think is needed in the debate – greater clarity. Although yet incomplete, in Australia a measure of clarity has been provided by the High Court.
Perhaps exercising their own revolutionary spirit, in the 2010 Aid/Watch decision the court wielded the constitutionally protected “implied freedom of political communication” to overturn Lord Parker’s dictum.
The result is that in Australia charities can have a purpose of critiquing government policy, provided such is done in furtherance of a public-benefiting charitable purpose.
The Charities Act delineates the following disqualifying boundary line: a “purpose of promoting or opposing a political party or candidate”.
Although a consistent narrative in activity may point to an independent political purpose that is not subservient to a charitable purpose in all respects, we can take comfort that one-off or incidental activities (like those in Branch Ministries) are unlikely to amount to a ‘purpose’.
As international experience shows, there is a treacherous boundary line to navigate here between inviting charities’ contribution on policy and protecting their legitimacy as independent, non-partisan players in a democratic polity. Tax exemption sends the message to charities that your contribution to our common weal is sought, so much so that we are willing to subsidise it.
Conversely by tying exemption to a strict “no political comment condition” the State risks the allegation that not only does it not want the comment of charities as to what comprises the common good, it will wield the threat of financial impost against any such offering.
US Chief Justice Marshall’s claim in the 1819 decision McCulloch v. Maryland that “the power to tax is the power to destroy” comes to mind, to the extent he might be channelling that quintessential American (and distinctly Bostonian) loathing of tea.
The role of charities in pursuing their vision of the common good is fundamental to the great contest of ideas that characterises a flourishing democracy – this requires competing visions, and at times, challenges to the State, especially in the name of charitable good.
Mark Fowler is an Adjunct Associate Professor at the University of Notre Dame School of Law Sydney and a practising lawyer. This is an extract of a speech given last month in conjunction with a lecture given by Australian Charities and Not-for-profits Commissioner Gary Johns at the University of New England.