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This policy statement replaces Information Circular 87-1, Registered Charities — Ancillary and Incidental Political Activities, and provides information for registered charities on political activities and allowable limits under the Income Tax Act (the Act). It also provides a framework that explains how we distinguish between political and charitable activities. In addition, it seeks to clarify the extent to which charities can usefully contribute to the development of public policy under the existing law.

The guidance in this policy statement is based on subsections 149.1(6.1) and 149.1(6.2) of the Act and on general principles of charity law and court decisions that define what is charitable and what is political. This information applies to all registered charities.

2. Some context

Two years ago the Government of Canada and the voluntary sector launched a joint endeavour, called the Voluntary Sector Initiative, to better serve Canadians by enhancing the relationship between both parties and strengthening the capacity of the voluntary sector. The Reference Group of Ministers on the Voluntary Sector provided oversight on behalf of the Government of Canada. A Voluntary Sector Steering Group performed a parallel function on behalf of the voluntary sector.

A key element of the initiative was the development of an Accord Between the Government of Canada and the Voluntary Sector (the Accord) that was signed in December 2001. The Accord sets out the common values, principles, and commitments that will shape the future practices of both the sector and the Federal Government. In accordance with the Accord's provisions, a Code of Good Practice on Policy Dialogue was developed to implement the Accord commitments. This code is a tool for deepening the dialogue between the sector and the government in the public policy process. It states:

The Government of Canada recognizes the need to engage the voluntary sector in open, informed and sustained dialogue in order that the sector may contribute its experience, expertise, knowledge and ideas in developing better public policies and in the design and delivery of programs.[Footnote 1]

The Accord recognizes that Canadian society has been enriched by the invaluable contribution charities have made in developing social capital and social cohesion. By working with communities at the grassroots level, charities are trusted by and understand the needs of the people they serve. This is important work that engages individuals and communities in shaping and creating a more inclusive society.

Through their dedicated delivery of essential programs, many charities have acquired a wealth of knowledge about how government policies affect people's lives. Charities are well placed to study, assess, and comment on those government policies. Canadians benefit from the efforts of charities and the practical, innovative ways they use to resolve complex issues related to delivering social services. Beyond service delivery, their expertise is also a vital source of information for governments to help guide policy decisions. It is therefore essential that charities continue to offer their direct knowledge of social issues to public policy debates.

Much attention has been paid recently to the question of registered charities and their involvement in political activity. Many in the voluntary sector felt that the old interpretation of the Act was overly restrictive and did not allow a registered charity to inform the public about issues of concern or to participate adequately in the process of developing public policy. Consequently, we reviewed recent case law related to political activity and the Act and discussed it internally, and with people from the voluntary sector. As a result of this review we have come to the following conclusions.

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.

In addition, when charities choose to contribute to public policy debates, they are required by law to do so in a way that considers certain constraints. A charity cannot be established with the aim of furthering or opposing the interests of a political party, elected representative, or candidate for public office. Also, a charity cannot be formed to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country. However, charities may choose to advance their charitable purposes by taking part in political activities if they are connected and subordinate to those purposes.

We have narrowed what we consider political activities to no longer include many attempts to inform public opinion on an issue. This change in policy should enable charities to more effectively carry out their public awareness programs.

3. Charities in Canada

In Canada, charities can become registered by meeting certain requirements of the Act and common law. Once registered, a charity pays no income tax and is able to issue tax receipts to donors that are then used for non-refundable tax credits or deductions.

Under the Act, a registered charity must devote all of its resources to charitable purposes and activities. Notwithstanding this general rule the Act allows a small amount of resources to be used for political activity. This policy statement focuses on resources used for political activity and the limits imposed by the law. It also uses plain language to discuss legal concepts relating to charities. Therefore, you should use the information in this policy statement as a general guide only. In cases of appeal, a decision about an organization's activities will ultimately depend on how a court interprets the facts of a specific situation.

4. The difference between political purposes and charitable purposes

All registered charities are required by law to have exclusively charitable purposes. As the Act does not define what is charitable, we look to the common law for both a definition of charity in its legal sense as well as the principles to guide us in applying that definition.[Footnote 2] The formal objectives or goals of a charity must be set out in its governing documents.

Under the Act and common law, an organization established for a political purpose cannot be a charity. The courts have determined political purposes to be those that seek to:

further the interests of a particular political party; or support a political party or candidate for public office; or

retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country.

The main reason why the courts rule out political purposes for charities is a result of the requirement that a purpose is only charitable if it generates a public benefit. A political purpose, such as seeking a ban on deer hunting, requires a charity to enter into a debate about whether such a ban is good, rather than providing or working towards an accepted public benefit.

It also means that in order to assess the public benefit of a political purpose, a court would have to take sides in a political debate. In Canada, political issues are for Parliament to decide, and the courts are reluctant to encroach on this sovereign authority (other than when a constitutional issue arises).[Footnote 3]

It is important to remember that although the stated purposes of an organization are the obvious source of reference of whether or not an organization is constituted exclusively for charitable purposes, it is not the sole indicator. The Canada Revenue Agency also takes into account the activities that the organization is currently engaged in as a potential indicator of whether it has since adopted other purposes.[Footnote 4]

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5. Unstated purposes and devoting more than the allowable maximum of a charity's total resources to political activities

When a charity focuses substantially on one particular charitable activity so that it is no longer subordinate to one of its stated purposes, we may question the legitimacy of the activity at law. This is because when an activity is no longer subordinate to a charity's purposes, it may indicate that the charity is engaging in an activity outside its stated objects, or pursuing an unstated:

collateral political purpose; or

non-charitable purpose; or

charitable purpose.[Footnote 5]

In such circumstances, rather than just considering the explicit purpose of the activity in question, we will consider all the facts and determine whether it is reasonable to conclude that the charity is focusing substantially on a particular activity for an unstated political purpose.[Footnote 6]

In addition, when a charity's purposes are clearly charitable, but it devotes more than the allowable maximum of its resources to political activities, we may consider that the charity is operating to achieve a political objective that is not stated in its governing documents, and it will consequently risk revocation.

Finally, it is important to bear in mind that some purposes can only be achieved through political intervention and legislative change. For example, a purpose such as improving the environment by reducing the sulphur content of gasoline would very likely require changes in government regulations. Generally, any purpose that suggests convincing or needing people to act in a certain way and which is contingent upon a change to law or government policy (for example, "the abolition of" or "the total suppression of animal experimentation") is a political purpose.

6. What kinds of activities can a charity participate in?

Although an organization established for a political purpose cannot be registered as a charity, a registered charity may take part in some political activities as a way of furthering its charitable purpose(s). However, charities do not have complete freedom to support any cause they like. Special legal rules apply to charities because of their charitable and tax statuses.

A charity wishing to carry out activities that go beyond the limits permitted by the Act may establish a separate and distinct organization that will not be a registered charity and therefore not able to issue charitable receipts. No limitations are placed on the political activities of such a body; it has complete freedom within the law to support any cause it chooses. But the charity cannot fund that separate organization or make resources available to it for any otherwise impermissible political activity.

For the purposes of this policy, a charity's activities can be divided into three separate types:

prohibited activities

political activities

charitable activities

6.1 What are prohibited activities?

A charity may not take part in an illegal activity or a partisan political activity. A partisan political activity is one that 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. This means that a charity may make the public aware of its position on an issue provided:

it does not explicitly connect its views to any political party or candidate for public office;

the issue is connected to its purposes;

its views are based on a well-reasoned position;

public awareness campaigns do not become the charity's primary activity.

In addition, a charity in this situation is also subject to the restrictions this guidance places on non-partisan political activity, public awareness campaigns and communications with an elected representative or public official.

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.

6.2 What are political activities?

A charity may take part in political activities if they are non-partisan and connected and subordinate to the charity's purposes.

We presume an activity to be political if a charity:

explicitly communicates a call to political action (that is, 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.