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. Allocations totaling $13 billion were then put into place to improve transparency and educate charities about restrictions on political action. The audits and funding were billed as a late development of the 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. From an accounting standpoint, this invitation has importance 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.
Current Laws on Political Activities by Charities
In 2016, the Income Tax Act placed 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. If the violations are serious enough, they may also face punitive consequences.
The Canadian government doesn’t recommend charities stay out of politics completely. The Canadian Revenue Agency (CRA) 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 it permits charities to pursue political ends.
CPS-022 also divides political actions into three categories:
- Prohibited activities that are partisan or violate other laws.
- Allowable activities that can’t directly be described as charitable.
- Charitable activities 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, including whether these things 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 it contains such lobbying efforts to no more than 10 percent of the charity’s budget.
Legal political activities must also be “connected and subordinate” to the expressed purpose of the charity. For example, a charitable food program for impoverished families can’t lobby for changes in Canadian steel import policy.
Anticipated and Possible Changes to Charity Law
It’s possible the CRA could 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’s difficult to predict how those rules may change, making it important for those associated with charities to be on the watch for changes in tax or accounting rules. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.