Since 2012 there has been greater scrutiny of Canadian charities and their political activities. The Canadian government has allocated over $13 million to improve transparency, educate charities and to conduct approximately 60 audits on political activities. Some would argue that such increased scrutiny has resulted in a “chill”, although fundamentally the rules have not changed and Canadian charities are conducting significant political activities. 

With the upcoming Federal election slated for October 2015, it is expected that there will be additional scrutiny of Canadian charities and their political activities. The rules around charities and political activities would not be that significant if not for the fact that for many charities it is important for that charity to conduct political activities in order to advance its mission. 

Unfortunately, many charities are conducting political activities but the charities and their boards think that they are not.  Many organizations are not disclosing their political activities on their T3010 annual return. For example, if you publicly support any of the following changes then you are probably conducting a political activity:  the Imagine Canada stretch tax credit, a higher minimum wage, and more governmental funding for a particular area. With the advent of social media, the likelihood that a charity will conduct a political activity is far greater.

In this two-part article we cover the basic rules and considerations for Canadian registered charities when conducting political activities.   

The Income Tax Act (Canada) (the “Act") restricts Canadian registered charities in the type and quantity of political activity.  The Charities Directorate of the Canada Revenue Agency in its guidance entitled Political Activities (CPS – 022) has set out CRA’s position on political activities by registered charities. Essentially under the Act, a registered charity can be involved in non-partisan political activities as long as it devotes substantially all (generally 90% or more) of its resources to charitable activities. Any political activity has to help accomplish the charity’s purposes and remain incidental (generally 10% or less) in scope. In CPS-022 what the public would describe as ‘political activities’ could be classified as prohibited activities, allowable political activities or in fact charitable activities.

Summary of CPS-022 (Political Activities)

Here is part one of a summary of the most important points from CPS-022 (Political Activities):

1) Canadian charities have experience, expertise and ideas that they should communicate to government so that government can develop better public policy and deliver better programs. Some types of political activity are very beneficial and charities are encouraged within certain limits to be involved with certain political activities.

2) A registered charity CANNOT be involved in PARTISAN political activities.  Charities should always keep this in mind.  It is especially important to remember this during an election because there is a greater likelihood that a volunteer officer or paid staff person or a board member while representing the charity may deliberately or accidentally breach this prohibition. A political activity is considered partisan if it involves direct or indirect support of, or opposition to, a political party or candidate for public office. 

3) According to CRA, an activity is presumed “political” if a charity:

Explicitly communicates a call to political action (i.e., 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 of the 2012 Federal budget, a “political activity” “includes the making of a gift to a qualified donee if it can reasonably be considered that a purpose of the gift is to support the political activities of the qualified donee.”

4) The political activities that the charity carries out must be “connected and subordinate” to the charity’s purposes.  Therefore, be aware of what your objects or purposes are before engaging in “allowable political activities” and if your objects are no longer relevant or not broad enough consider changing your objects. 

5) The content of the political activities is important. “In order to serve the public, the information charities give on public policy issues should be presented in an informative, accurate, and well-reasoned way to enable society to decide for itself what position to take.” Furthermore, “well-reasoned” does not mean vetted by the “elites” but rather not false, inaccurate, or misleading.

We will continue to discuss the issue of charities and political activities in next week’s issue of eNEWS. We hope that you will look out for the article because it is really important to understand the requirements in CPS-022 for the following reasons:

1)    failure to do so can result in a charity losing its charitable status;

2)    failure to respect the rules in this area can result in significant reputational harm to the charity and its directors/staff; and

3)    for many charities, their mission will be advanced by the use of political activities but if they don’t understand the rules they may avoid political activities or spend less resources on political activities than they are legally allowed. 

Whether or not there is a “chill” on political activities in Canada, it is important that any registered charity conducting political activities does it with care and thought as to the rules.

Mark Blumberg is a partner at Blumberg Segal LLP in Toronto, Ontario.  He can be contacted at mark@blumbergs.ca or at 416-361-1982. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit  www.canadiancharitylaw.ca or www.globalphilanthropy.ca

This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.