Thursday, September 08, 2005

The pinch in The Walrus wallet

Today's Mastheadonline records rumblings among freelancers about slow/late payments from The Walrus. To his credit, Ken Alexander, the Publisher, give a guarantee that everyone will get paid, eventually. But Mastheadonline notes that, as it always has, the long-term health of The Walrus hinges upon getting charitable status from Canada Revenue Agency.

The charitable status is necessary so that much-needed money can flow from one charity (the Chawkers Foundation) to another (the Walrus Foundation). Meanwhile, Alexander has been paying for the magazine out of his personal, considerable but not inexhaustible, resources. Masthead says this totals $2.5 million so far.

What the item did NOT say was that The Walrus was already turned down once by the CRA and parted ways with the law firm that was considered to have failed in its mission.

As many other Canadian magazines before it have discovered, if you think applying for charitable status is hard, try appealing a ruling that went against you. Even magazines which have charitable foundations supporting their work (for instance, Red Maple and This Magazine) find themselves under seige from time to time, challenged to defend retaining their number.

There are no rules or specific legislation governing who gets charitable status, who keeps it and who loses it -- it is all based on common law and precedent and, some would say, bureaucratic whim of the charities directorate of CRA. The fact is that over the years, the government has allowed such status to be given out willy nilly to a total of more than 70,000 such charitable numbers*, and has been trying to claw them back ever since. In the case of magazines, they qualify only if the majority of their work is "educational" in nature and simply publishing a magazine does not do the trick. One must hold conferences, publish (non-political) books, run internships, do training and lectures and so on and (wink, wink) publishing a magazine can only be one of the things you do. Most magazines apply, of course, to channel money directly to the support of their publication. That, says the CRA, is not allowed, even if the magazine is a not-for-profit corporation, or a struggling literary.

The charity bureaucrats are looking, always, for ways to take back numbers and not give out new ones (after all, every charitable number in theory means foregone taxes). And the word on the street is that it is 10 times harder to win an appeal than to get a number in the first place. Hence the frantic activity of Alexander in appealing all the way to the minister responsible for Canada Revenue Agency, John McCallum. If McCallum demurs, who knows what will happen next.

*The ludicrosity of the situation is that virtually every little Canadian Legion branch has its own charitable number and is considered a separate charity. That's who gets your poppy money. And virtually every church in the country has such status because one of the "qualifications" is the "promotion of religion". But if you wanted to start a charity that promoted atheism? You'd be out of luck.


Anonymous Anonymous said...

I applaud the work of Schiff and Alexander in trying to get the Walrus recognized as a registered charity. I am sure they are hoping to level the playing field for all of us, right, with their own appeal? The reality is though with CRA constantly looking for charities to de-list, and magazines being a perfect target, they will likely only draw more attention to the few that have the status.

Anyway to be clear about one thing before your readers go madly off drawing incorrect conclusions about where the donated money goes and duped my experience at least, donors are perfectly aware of what their dollars support. They know it goes to operating costs, to editorial salaries, to measly writers says so in the appeal letter. The Red Maple Foundation, for one, is not sitting on a whack of benefactor dollars. Would that it were so, that they could align themselves with a wealthy family foundation and ensure the growth of their publishing project, and not just maintain the status quo.

Anyway, I good luck to the Walrus. But in the meantime, next time someone goes to set up a publishing effort using this model, listen to the consultants who tell you it's a bad idea for a plan A.

12:07 pm  
Anonymous Anonymous said...

If having charitable status was such a crucial part of The Walrus's business plan, am I the only one who finds it odd that Alexander went and launched the magazine -- and sunk millions of dollars into it -- before said status was secured?

4:14 pm  
Blogger Judith said...

If can't change the way the CRA does things, I don't see how the Walrus can, unless connections gets you further than good legal reasoning. Oh wait, right. Nevermind.

3:54 pm  

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