Are Canadian-registered charities allowed to participate in political activities? The short answer is yes, but there are serious limitations and overstepping the boundaries can have serious consequences. Find out what the rules are.
What Is a Political Activity?
The distinction between charitable and political activities is not defined in the Income Tax Act. Over time, the Canada Revenue Agency (CRA) has identified activities whose purpose qualify as charitable, such as the relief of poverty, the advancement of education, the advancement of religion, and certain others. By definition, a charitable activity is an activity that furthers a charitable purpose and everything else is not.
As a rule, to maintain its registration, a charity must devote substantially all of its resources to charitable activities. Therefore, charities can engage in other types of activities, including political activities, but to a very limited extent. The CRA has indicated that political activities will not be considered as charitable activities, despite how beneficial the results of the activity might be, or how sincere the intentions or beliefs of the charity.
The CRA has publicly indicated four criteria that qualify an activity as political. They are:
- the activity explicitly communicates a call to political action such as representations made to an elected representative or public official
- the activity explicitly communicates to the public about the merits of a law, policy, or decision of any level of government anywhere
- the activity explicitly indicates in its materials that the intention of the activity is to influence an elected representative or public official to retain, oppose, or change a law, policy, or decision of any level of government anywhere
- the making of a gift to another qualified donee to support political activities
In all cases, a charity cannot engage in partisan politics. Therefore, a charity cannot support a particular candidate or party.
Record Keeping and Reporting Requirements.
Annually, charities must file Form T3010, Registered Charity Information Return detailing their activities of all types. This annual return is used by the CRA in order to ensure that a charity devotes substantially all of its resources to charitable activities.
Section C5 of the annual return specifically asks if the charity carried on any political activities during the fiscal period, including making gifts to qualified donees that were intended for political activities and the total amount spent by the charity on these political activities. For charities that answer yes, there is an additional schedule (Schedule 7) to complete detailing the political activities.
The consequences of engaging in political activities beyond what is permitted are serious for the charity. If you exceed the limits or engage in partisan political activities, your registration may be suspended for one year. During this time, you will not be allowed to issue tax receipts or receive gifts from other charities. The CRA adds that “charities who engage in serious non-compliance with the rules governing political activities continue to face possible revocation of their registered status.”