(Updated with additional information December 15, 2015)
Like other organizations, registered charities need to be concerned with the legal and administrative application of the Income Tax Act. To maintain its charitable status under the Act, a charity must devote substantially all of its resources to charitable purposes and activities. An organization established for a political purpose cannot be a registered charity.
In 2013–2014, the CRA increased its charity monitoring and enforcement efforts to ensure that registered charities comply with the limits on political activities. The agency conducted 845 audits and issued 36 notices to revoke charitable status. In 2014–15, the CRA conducted fewer audits (781), but issued more notices to revoke (45).
‘Political purpose’: when is it okay and when is it not?
While this is quite clear when it comes to making contributions to a particular political party, the definition of “political purpose” is not always so clear and includes seeking to oppose or change the law, policy or decision of any level of government in Canada or a foreign country. One can easily understand why many charitable organizations shrink from vigorous advocacy activities, even when they believe their cause to be in the public interest: registered charity status is a key asset to be protected.
Nonetheless, the Income Tax Act does recognize that some advocacy activities are fundamental to the success of many registered charities, and the Canada Revenue Agency (CRA) has attempted to assist such organizations in defining the kinds of activities that are considered legitimate for a registered charity to undertake.
Examples and limitations
A child welfare organization may safely publicly oppose a new bill that ignores or harms the rights of children, so long as it does not endorse a particular party in expressing its opposition. It may also call upon the public to ask difficult questions of their members of parliament on the subject. However, the same organization may not publicly oppose or endorse a new bill on, say, agricultural subsidies, since that is not related to the organization’s charitable purpose.
For clarity, the CRA has set the proportion of resources that may be devoted to political activities at 10 percent, unless the organization’s annual income is below $200,000, in which case, a slightly higher proportion is allowed. For further guidance, see the CRA policy statement CPS-022, “Political Activities”.
What are ‘partisan activities’?
The CRA provides additional guidance on prohibited activities:
A charity may not take part in an illegal activity or a partisan political activity. A partisan political activity is one that involves direct or indirect support of, or opposition to, any political party or candidate for public office.
When a political party or candidate for public office supports a policy that is also supported by a charity, the charity is not prevented from promoting this policy. However, a charity in this situation must not directly or indirectly support the political party or candidate for public office. This means that a charity may make the public aware of its position on an issue provided:
- It does not explicitly connect its views to any political party or candidate for public office
- The issue is connected to its purposes
- Its views are based on a well reasoned position
- Public awareness campaigns do not become the charity’s primary activity
In addition, a charity in this situation is subject to the restrictions this guidance places on non-partisan political activity, public awareness campaigns and communications with an elected representative or public official.
Finally, a charity may provide information to its supporters or the public on how all the members of parliament or the legislature of a province, territory or municipal council voted on an issue connected with the charity’s purpose. However, a charity must not single out the voting pattern on an issue of any one elected representative or political party.
In short, political activities are okay, partisan activities are not
The CRA also notes that political activities themselves are permitted, but they must be non-partisan and connected to the charity’s purposes:
A charity may take part in political activities if they are non-partisan and connected and subordinate to the charity’s purposes. We presume an activity to be political if a charity:
- Explicitly communicates a call to political action (that is, encourages the public to contact an elected representative or public official and urges them to retain, oppose or change the law, policy or decision of any level of government in Canada or a foreign country);
- Explicitly communicates to the public that the law, policy or decision of any level of government in Canada or a foreign country should be retained (if the retention of the law, policy or decision is being reconsidered by a government), opposed or changed; or
- Explicitly indicates in its materials (whether internal or external) that the intention of the activity is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose or change the law, policy or decision of any level of government in Canada or a foreign country.
As a result of the measures introduced in the 2012 federal budget, which came into force on June 29, 2012, a political activity also includes the making of gifts to qualified donees intended for political activities. (Emphasis added.)
Political activities self-assessment tool
Charities may engage in public awareness campaigns about their existence and their work, or an issue directly related to their charitable purpose. The CRA has published a “Political activities self-assessment tool” to help organizations evaluate whether their political activity is likely to raise concerns at the agency.
Changes to charity rules and reporting
In its 2012 budget, the federal government proposed some fairly significant changes to the CRA’s rules and reporting requirements for charities with respect to political activities. Those measures are now in force, and include:
- Charities must report substantially more information about their political activities, including the amounts of grants they receive from foreign sources
- Restricting the extent to which charities may fund the political activities of other qualified donees
- New penalties for charities that exceed the limits on political activities, or that fail to provide complete and accurate information in relation to any aspect of their annual return
- $8 million over two years for enhanced education and enforcement
The CRA has updated its Registered Charity Information Return, now Form T3010 E, and added a schedule where organizations must describe in some detail their political activities, specifically:
- The nature of the organization’s political activities, including gifts to qualified donees for the purpose of political activities
- How those activities relate to the organization’s purpose
- What resources the organization used to perform the activities (e.g., staff, volunteers, money, property)
- Funding for political activities received from foreign sources, including the country
The CRA has released a detailed guide to help charities manage the new reporting obligations and updated Form T3010. You can find “Completing the Registered Charity Information Return” at the CRA website. The agency notes, helpfully, that:
The charity should only report on gifts to other qualified donees that were intended for political activities. The charity is not responsible for tracking and reporting on how the funds were actually spent. Further, regardless of whether the funds were ultimately used for political activities, if a purpose of the gift was to fund political activity, it should be reported.
Best of luck!
Do you need help complying with the CRA’s political activity guidelines? Try Not-for-Profit PolicyPro free for 30 days!
If it’s still not clear what activities might be political or partisan and how you should report them, Chapter 3 of Not-for-Profit PolicyPro, co-published by First Reference and CPA Canada, includes extensive material to help you evaluate whether the activities carried out by your registered charity comply with CRA rules governing political activities. See in particular sections 3.01 – Advocacy Primer and 3.04 – Lobbying.
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Jeffrey is a popular presenter, and was an adjunct professor at York University for 15 years. He is a frequent course director and course author for many organizations, including provincial bodies of Chartered Professional Accountants across Canada.
He has written over 20 books including: Canadian Treasury Management, Canadian Risk Management, and Financial Instruments: A Guide for Financial Managers (all published by Thomson-Reuters/Carswell), as well as Finance and Accounting PolicyPro and Information Technology PolicyPro (guides to governance, procedures, and internal control), and Cash Management Toolkit for Small and Medium Businesses (all published by Chartered Professional Accountants of Canada [CPA Canada]).
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