CRA's Rules for Advocacy by Charities

policy news

Apr 17

Across Canada, charities have a wealth of in-depth knowledge about their community and the populations they serve. Organizations working on the ground can identify new or emerging issues and opportunities, and be a source of insight and expertise. Sharing this knowledge with all levels of government can lead to the development of and implementation of effective policies that build a healthy and vibrant community.

Under rules set out by the Canada Revenue Agency (CRA), charities must devote substantially all of their resources to their charitable purposes and activities. They can only use 10% of their resources for allowable political activities (non-partisan) that further their charitable purpose. These restrictions, known as the “10% rule,” are set in CRA’s Policy Statement on Political Activities (CPS-022), an interpretation of the Income Tax Act.

Often charities are hesitant to engage with government, particularly during an election campaign for a number of reasons including confusion about what is allowed under these rules. Although the rules limit a charity’s ability to engage in certain types of political activities, there are a number of advocacy activities that are allowed.

Details about CRA Advocacy Rules for Charities

Under the rules, a charity can engage in political activities so long as they advance, not supersede, its charitable purpose. In other words, though an organization cannot be established for a political purpose, such as running candidates in a general election, a charity can take part in some political activities as a way of furthering its charitable purpose. A charity must also ensure that the information that it presents in support of public policy issues be informative, accurate and well reasoned.

In what ways can a charity advocate? Current policy divides a charity’s activities into three categories:

Charitable activities- allowed
Political activities- allowed up to 10-20%
Prohibited activities- never allowed
Charitable Activities - Unlimited

In carrying out their mandate, charities often need to communicate with the public or with public officials. Acceptable communication as part of the charitable purpose includes:

Public awareness campaigns to help the public to make informed decisions related to the work of the charity. The information must be connected and subordinate to the charity’s purpose and cannot be primarily emotive.

Communication, whether invited or not, that occurs with an elected representative or public official. Such activity should be subordinate to the charity’s purpose, and all representations should relate to issues that are connected to a charity’s purpose, be well-reasoned and not contain any information the charity knows or ought to know is false, inaccurate or misleading.

Sharing the entire text of a representation to an elected official or public official provided there is no explicit call to action within it.

Political Activities - 10-20%* of Activities

These activities must be non-partisan and connected and subordinate to the charities’ purpose. Only 10% (see note) of a charity’s activities can fall into this category. Allowable political activities include:

Explicitly communicating a call to political action (i.e., encouraging the public to contact an elected representative or public official and urging them to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country)
Explicitly communicating 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
Explicitly indicating 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.

*The CRA recognizes that the 10% limit on political activities may handicap smaller charities (those with annual incomes up to $200,000). It has therefore allowed for a sliding scale that permits smaller charities to allocate more than 10% of their resources on political activities, based on the following guidelines.

The amount of resources a charity can allocate on political activities in a year is determined by its annual income for the previous year. Organizations with annual incomes:

below $50,000 can devote up to 20% of their resources to political activities in the current year.
between $50,000 and $100,000 can devote up to 15% of their resources to political activities.
between $100,000 and $200,000 can devote up to 12% of their resources to political activities.

Prohibited Activities - Don’t Even Think About It!
A charity may not take part in an illegal activity or in a partisan political activity which involves direct or indirect support of or opposition to, any political party or candidate for public office.

When a political party or candidate for public office supports a policy that is also supported by a charity, the charity is not prevented from promoting this policy. However, a charity in this situation must not directly or indirectly support the political party or candidate for public office.

Finally, a charity may provide information to its supporters or the public on how all the Members of Parliament or the legislature of a province, territory or municipal council voted on an issue connected with the charity's purpose. However, a charity must not single out the voting pattern on an issue of any one elected representative or political party.

Budget 2012: Political Activities

Budget 2012 proposes some minor changes for registered charities engaging in political activities.

1. The definition of political activity has been amended “to include gifts to qualified donees if it can reasonably be considered that a purpose of the gift is to support the political activities of the qualified donee.”

2. Reporting requirements have been increased for Canadian charities that receive foreign grants earmarked for political activities, as well as for foundations and charities that provide funding to other organizations. In the future, funders will need to calculate and include the political activities of the organizations they fund when filing their own reports.

3. Sanctions for charities which exceed the limitations on political activity outlined in the Income Tax Act have been increased. The Canada Revenue Agency (CRA) now has the authority to suspend the tax receipting privileges of charities for up to one year for exceeding the permitted levels of political activity or providing inaccurate or incomplete information in their annual returns.

It is not clear when the changes introduced in Budget 2012 will go into effect. While the details have yet to be finalized, they do provide an indication of the direction the federal government is heading in, with increased emphasis on accountability and transparency in reporting.