Canadian charities, U.S. money, and Keystone XL

“There is political manipulation. There is influence peddling. There are millions of dollars crossing borders masquerading as charitable foundations into bank accounts of sometimes phantom charities that do nothing more than act as a fiscal clearing house. They dole out money to other charities without disclosing what the money is for.”

Unless one notes the concern with dollars crossing borders, this sounds like another lament about the Citizens United U.S. Supreme Court decision and the influence of billionaire businessmen on U.S. politics.

However, this declaration wasn’t about billionaire influence on U.S. politics: it was about U.S. billionaire influence on Canadian politics.

This declaration was made in the Canadian Senate by Ontario senator Nicole Eaton. She was announcing a Senate inquiry “about how billionaire foreign foundations have quietly moved into Canada and, under the guise of charitable deeds, are trying to define our domestic policies.” Before you think this is just talk from a Canadian lefty, I note that Senator Eaton is a no liberal: she serves in the Senate as part of Canada’s governing Conservative Party and she married into one of Canada’s wealthiest families.

What is Senator Eaton so upset about?

She is upset about the alleged funneling of U.S. funds to Canadian environmental groups that oppose the development of Canada’s oil sands. In the United States, environmental groups were powerful enough to pressure President Obama into denying -- at least for now -- a permit to build the Keystone XL pipeline that would have represented a $7 billion dollar investment in America’s energy infrastructure and secured America’s access to a reliable source of petroleum from a friendly neighbor.

Senator Eaton expresses the worry that Canadian environmental groups will be similarly successful in opposing development Canada’s energy resources. Like their American counterparts, Canadian environmental groups oppose the further development of the oil sands, the construction of Northern Gateway pipeline to Canada’s west coast, and the construction of an alternative pipeline to the United States that could carry at least some of the petroleum that would have been carried by the Keystone XL pipeline.

Canadian charities are allowed to spend up to 10 percent of their annual funds on political activities. There’s suspicion that some environmental charities have been exceeding that 10 percent allowance and that U.S. funds are helping, for example, to support efforts to slow the regulatory hearings for the Northern Gateway pipeline.

Acting on the concerns being investigated in the Canadian Senate, last week Canada’s finance minister Jim Flaherty announced in his 2012 budget statement to the House of Commons that the Canada Revenue Agency (Canada’s equivalent of the IRS) will receive an additional $8 million Canadian dollars over the next two years to monitor charities. The budget documents noted:

Given their unique perspectives and expertise, it is broadly recognized that charities make a valuable contribution to the development of public policy in Canada. Accordingly, under the Income Tax Act charities may devote a limited amount [10%] of their resources to non-partisan political activities that are related to their charitable purposes. Recently, concerns have been raised that some charities may not be respecting the rules regarding political activities. There have also been calls for greater public transparency related to the political activities of charities, including the extent to which they may be funded by foreign sources.

Canadians are always very touchy about the influence of their giant neighbor to the south -- although citizens in any country are legitimately concerned about hidden foreign influence on its politics (recall the kerfuffle about Chinese gifts to the Democratic National Committee in the 1996 election). Senator Eaton’s inquiry and the investigations of the Canada Revenue Agency will determine whether concern is warranted in this case.

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