Political activism by Canadian charities has been a hot-button issue since at least 2012, when the Canadian government launched five dozen audits of active charities. More than $13 billion was allocated to improve transparency and educate charities about restrictions on political action. The audits and funding were billed as a late development of an Accord Between the Government of Canada and the Voluntary Sector.
More recently, the government has invited comment from private citizens about the rules governing charities and political advocacy. This is important from an accounting standpoint, because charities in Canada don’t pay income taxes and may even issue tax receipts to donors that act as non-refundable tax credits or deductions.
As of 2016, the Income Tax Act places stern restrictions on the political activities of charities in Canada. Charities that fail to understand and abide by such restrictions may risk losing their charitable status or, if the violations are serious enough, face other punitive consequences.
The Canadian government does not recommend that charities stay out of politics completely. The Canadian Revenue Agency states, “Charities are well-placed to study, assess and comment on government policies,” and it suggests that political activity by charities benefits Canadians.
In Policy Statement CPS-022, the CRA defines political activity and sets strict conditions under which charities are permitted to pursue political ends.
CPS-022 also divides political actions into three categories:
Prohibited activities are partisan or violate other laws.
Allowable activities are those that cannot directly be described as charitable.
Charitable activities are conducted in direct pursuit of charity.
What Qualifies As Political Activity?
The CRA considers an activity to be political if the charity:
Makes an explicit plea for political action, such as urging voters or public figures to retain, oppose or amend Canadian or foreign laws, policies, or political practices.
Explicitly offers an opinion on law, policy or political practices (such as whether it should be retained, opposed or changed).
Indicates in its materials internally or externally that the organization intends to affect political change in Canada or a foreign country.
Explicitly partisan political activities, including advocating for a specific candidate or political party, are illegal when conducted by a charity. Charities may legally lobby for specific laws (even those that imply a partisan slant), as long as such lobbying efforts are contained to no more than 10 percent of the charity’s budget.
Legal political activities must be “connected and subordinate” to the expressed purpose of the charity. For example, a charitable food program for impoverished families will not likely be allowed to lobby for changes in Canadian steel import policy.
Will the Laws Change, and How?
It is possible that the CRA will change some rules regarding political activity by charities. On Sept. 27, 2016, the CRA held an online national consultation when it invited charities and other members of the public to comment. It is difficult to predict how those rules may change, but those associated with charities must be on the watch for changes in tax or accounting rules.