Key message, Charities must be non-partisan and limits on a charity's non-partisan political activities - Segment 1
Welcome to segment 1 called "Key message, Charities must be non-partisan and Limits on a charity's non-partisan political activities", part of the "Political activities (Policy statement CPS-022)" webinar.
This webcast is a recording of a webinar that occurred on June 25, 2013. This session is no longer live. If you have any questions, please call our client service at 1-800-267-2384 and an agent will be happy to help you. Thank you very much and I hope you enjoy this webcast.
My name is Diana Laing and I'm from the Charities Directorate at the Canada Revenue Agency.
To begin, I'd like to provide some context for the regulation of charities in Canada.
Charities are registered and regulated under the Income Tax Act, at the federal level, by the Canada Revenue Agency.
The Charities Directorate is the part of the Canada Revenue Agency that is responsible for administering the provisions of the Income Tax Act that relate to charities.
The Income Tax Act allows for the registration of charities, which provides certain privileges: exemption from income tax, and the ability to issue income tax receipts to donors.
However, along with these advantages come a number of restrictions on what, and how a charity can devote its resources, including restrictions on the use of a charity's resources on political activities.
A failure to observe these limits can have serious consequences for a charity, up to and including loss of its charitable status.
These restrictions are explained in detail in the CRA's policy on political activities by registered charities, Policy Statement CPS-022, Political Activities.
This presentation is divided into seven relatively brief sections, each of which deals with a topic related to political activities and charitable registration.
There is more detail on each of these topics in our policy on political activities, CPS-022, but these sections cover the core requirements for charities that carry out political activities.
The first four sections are really the heart of the political activities policy, dealing with the legal limits on political activities, and their definition.
If a charity is familiar with the information in these first four sections, there is a good chance it will be able to comply with the Income Tax Act when it carries out political activities.
The fifth section deals with a charity's tracking of the use of its resources for political activities, so that it can assure itself, as well as show to the CRA, that its political activities comply with the requirements of the Income Tax Act.
The sixth section addresses representations to government, which is a more specialized issue, but also is the only exception to the definition of a political activity, so we will discuss it in some detail.
The final section very briefly discusses personal political activities carried out by representatives of a charity.
Before we begin discussing any topics in detail, I'd like to first make sure from the very beginning that the key message of this webinar is clear: in short, a charity can carry out a small amount of political activities, as long it always stays within the limits set by the Income Tax Act.
Those limits are, as a very brief summary, that a charity's political activities must be completely non-partisan, undertaken only to help support or further a charity's charitable purposes, and always remain a minor focus of the charity.
There is, of course, much more detail to add to each of these points, which we will explore in the rest of this webinar.
One of the most critical requirements for a charity's political activities is that they must always remain completely non-partisan, or politically neutral.
This is because the Income Tax Act requires that a charity never use any of its resources to support or oppose any political party or candidate for public office, whether directly or indirectly.
It does not matter whether it is a Canadian political party or candidate, or a political party or candidate of another country.
An activity that opposes or supports a political party or candidate is usually called a partisan political activity.
The definition of a partisan political activity is very broad, including both direct and indirect methods of support, which means it can encompass almost any type of activity.
Direct support could include, for example, providing a charity's resources for the use of a political party or candidate—one straightforward example is a charity giving money to a political party or candidate, or allowing a party or candidate to use the charity's office space for free.
Indirect support could include, for example, a charity that puts a link on its website to a candidate's website; while the charity might not be saying "vote for this candidate," the link could be considered an attempt to get more visitors to the candidate's website, and therefore help that candidate in the campaign for public office.
More examples of activities that the CRA would consider to be partisan political activities could include, but are not limited to, the following:
Endorsing a candidate: It is prohibited for a charity to suggest that it supports or approves of any candidate for public office, whether at the federal, provincial, or municipal level.
Suggesting people should vote for a candidate or party: It does not matter whether this is done directly or indirectly; an example of an indirect suggestion could include a charity that, during an election period, distributes to voters a pamphlet that highlights a certain political party's successes and achievements over the past few years, implying they are a successful or effective party that people should vote for.
Publishing comments that support or criticize a political party or candidate would be partisan, as well as providing links that direct a reader to a third party's supportive or critical comments.
Paying for one of its employees, volunteers, directors, or other representatives to attend a fundraising event for a political party; this includes reimbursing a representative for attending a fundraiser.
Although charities must always be non-partisan, a charity can still make its views known about a certain issue or matter of public policy, even if that policy is supported or opposed by a political party or candidate.
In such a case, the charity has to be careful to confine its support or criticism just to the policy itself, and never support or oppose the candidate or political party.
For example, a charity is registered to promote public safety. It supports a policy based on reliable research that seeks to reduce the provincial speed limits by 10km/hour to reduce the risk of serious accidents. Political party XYZ supports another policy that seeks to raise the provincial speed limits by 10km/hour to ease traffic congestion.
The charity could, as a political activity, support its policy that seeks to lower speed limits, explain why it would help residents of the province, predict positive outcomes, and otherwise support the policy. The charity could also oppose Political Party XYZ's policy that seeks to raise the speed limit, arguing that such a policy would be dangerous, explaining the risks, predicting costs and drawbacks, and otherwise opposing the policy. As long as the charity restricted its comments to the policy itself, and did not explicitly connect its views to Political party XYZ, it would likely be carrying out a non-partisan political activity.
The charity would be carrying out a partisan political activity if it carried out activities such as:
- making statements such as "Political party XYZ is putting lives at risk with its short-sighted policy";
- publishing or reprinting partisan statements from third parties, such as "Respected traffic analyst Jane Smith said ‘Political party XYZ is playing Russian Roulette with drivers' safety";
- or hosting or allowing partisan statements on its website such as "The party that supports this policy is the worst party in this province's history."
Another topic that can raise the question of whether a charity is carrying out a partisan political activity is distributing the voting record of elected representatives on an issue that is related to a charity`s charitable purposes.
This can be done as an acceptable, non-partisan activity. However, the charity must be careful to provide information on the voting record of all the elected representatives of the federal government, or provincial or territorial, or municipal governments.
If a charity were to single out the voting record of any elected representatives or political parties, whether to support or oppose that representative or party, it would be carrying out a partisan political activity.
For example, a charity is registered to assist people with substance abuse issues. An election is being held in the province, and one of the issues being debated as part of the election is funding for substance abuse programs in the province.
The charity researches and then releases the voting record only of the member of the legislative assembly (MLA) of the riding the charity is located in, showing the MLA has consistently voted against increased funding whenever the issue has arisen in the past. In this case, the charity is carrying out a partisan political activity by singling out this voting record of the MLA.
If the charity released the voting record of all the members of the legislative assembly on the issue, to inform the public of how all MLAs and political parties have voted in the past, this would probably not be a partisan activity. The charity could not, of course, suggest how people should vote based on those voting records.
The provisions of the Income Tax Act provide charities with a number of tax privileges, such as exemption from income tax and the ability to issue official donation receipts.
However, the Income Tax Act also restricts how a charity can use its resources.
Those restrictions include limits on the use of a charity's resources for political activities—this means that a charity is not free to pursue any political activity it wants, or to use as much of its resources for political activities as it wants.
A charity that carries out political activities that exceed the limits of the Income Tax Act could lose its charitable registration.
A natural question regarding the restrictions on a charity's political activities might first be: "How much political activity can a charity carry out?"
The Income Tax Act requires a charity to devote substantially all of its resources to charitable activities if it wants to carry out political activities, and the CRA typically interprets substantially all to mean 90%.
The term resources is not defined in the Income Tax Act, but we consider it to include the total of a charity's assets, which includes its financial assets, as well as everything the charity can use to further its purposes, such as its staff, volunteers, directors, premises, and equipment.
This means that a charity can use 10% or less of the total amount of all its various types of resources for political activities. Section 9 of the CRA's policy on political activities, CPS-022, also describes some exceptions to this rule that may allow some charities to devote more than 10% of their resources to political activities, in certain specific circumstances.
A charity`s political activities must also be connected.
Connected, sometimes also called ancillary, means a political activity relates to and supports a charitable purpose, and is a reasonable way to achieve that purpose.
For example, a charity might be registered to relieve poverty by operating a food bank.
In addition to its usual activities of collecting supplies and distributing food to those in need, the charity might also call publicly for an increase in the provincial minimum wage. This would likely be considered connected to its charitable purposes.
But that same charity could not devote its resources to calling for a new defence policy for Canada, since this does not relate to its charitable purpose of relieving poverty.
A charity's political activities must also be subordinate or minor in scope compared to its charitable activities.
This is a separate requirement from the substantially all requirement described on slide 10, which generally requires a charity to devote at least 90% of its resources to its charitable activities if it carries out political activities.
The subordinate requirement might be seen as more of a qualitative test rather than a quantitative test—it isn't necessarily about how much resources a charity is using for its political activities, but the relative importance of those political activities, their prominence, or the emphasis the charity places on them, compared to its charitable activities.
For example, a charity is registered to advance education by providing scholarships. It also carries out the political activity of organizing public pressure on the provincial government to make university tuition free for students from low-income families.
To carry out this political activity, the charity might use a number of methods that consume only a relatively low amount of resources, such as by posting notices on its website, distributing social-media messages, or having volunteers distribute leaflets and petitions.
Depending on the exact facts of the case, the charity could well devote very few resources to this political activity, and therefore meet the substantially all requirement. But, if the charity still puts too much emphasis on these political activities, compared to distributing scholarships, it would fail to meet the subordinate test.
For example, if the charity's involvement in political activities caused it to delay processing applications for scholarships, or distributing those scholarships, or if the charity gave out fewer scholarships than it planned, these might be signs or indicators that its political activities have assumed too much importance for the organization, and are no longer subordinate to its charitable purposes.
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