Philanthropic Foundations Canada has been trying to keep its members informed about changes in the federal budget that touch on charities, but fears a chill descending on the sector.
The Conservatives have accused some environmental foundations of laundering money for American bodies in the United States that are critical of Canadian resource projects.
The government wants to apply greater scrutiny and limits on how much charities can spend on non-partisan political activities, such as advocating for certain policies or laws.
At the same time, a Senate finance committee is set to study the politically loaded issue of foreign cash flowing to organizations with charitable status.
Prime Minister Stephen Harper defended the moves Wednesday.
"What is incumbent upon all charities is that they respect the laws regarding political activities. Those laws are clear," Harper said in the House of Commons.
"We will make them even clearer. The Canada Revenue Agency has an excellent record of the non-partisan enforcement of these rules."
The umbrella group for foundations says there's concern the measures and the rhetoric will create a chill around public policy and advocacy work. The group represents organizations with names of Canadian corporate titans and philanthropists: the Asper Foundation, the J. Armand Bombardier Foundation, and the Margaret and Wallace McCain Foundation.
"The concern is ... that foundations will say to themselves, it's just not worth getting involved in funding charities that seem to be involved in doing any kind of advocacy or public policy work that involves making public statements, when in fact all of that is perfectly legitimate and is not being criticized by the government nor being changed," said Hilary Pearson, president of Philanthropic Foundations Canada.
One of group's members is Tides Canada, singled out by the Conservatives because of cash it receives from its American sister organization and distributes to other charities. The Tories say foreign money is being used to thwart Canadian interests, namely petroleum pipeline projects.
"The opposition members can whinge all they want but the fact of the matter is some charitable organizations have allegedly used funds from outside this country inappropriately in regard to their charitable status," Environment Minister Peter Kent told the Commons earlier this week.
"They can call it money laundering, they can call it a financial shell game or they could call it three card monte."
Pearson says the organization would like to see the rhetoric cool down. She says the existing rules delineating what is acceptable in terms of political, non-partisan activity are already clear.
"There's obviously a level of discomfort with the language that's being used," said Pearson, who is scheduled to meet with the Canada Revenue Agency officials next week.
"American foundations just like Canadian foundations don't like to be labelled as somehow trying to illegitimately influence government, and certainly not laundering money. I think that would offend quite a lot of them."
Stephen Huddart, president of the J.W. McConnell Family Foundation — Canada's second-oldest family foundation — says charitable organizations have a long history of taking positions on matters of public interest.
The 75-year-old Montreal-based foundation funds a variety of endeavours that range from environmental stewardship to skills training for new immigrants, with a focus on bringing together private, public and community groups to find solutions to social challenges.
"I think what we have to be concerned about is the fear that people have to speak up or take a position on an issue of public importance," said Huddart.
"The regulations are clearly laid out so people feel that they're able to do so, and in many cases have a responsibility to do so, to speak up on behalf of underprivileged or dispossessed or vulnerable populations.
"There's a need for informed debate, a diversity of views, on these kinds of issues, and this sector is good at doing that."
Currently, a registered charity is allowed to engage in non-partisan political activity only if it represents no more than 10 per cent of its resources. The proposed changes would specify that if a charity or foundation gives money to another charitable group so they can carry on such activity, both the donor and the recipient would have to count the money toward their 10 per cent limit.
The government also wants to collect more information from charities about their political activities, and can suspend their charitable status if they don't get the information or if they find the activity had exceeded the limits.