by Arthur Drache, C.M. Q.C.
The vast majority of charities in Canada do not carry on advocacy or political activities. But that having been said, there is little doubt that there are some which would get involved if they had the resources to spare.
Of course, the first thing that any charity would have to do is to determine whether any proposed activity is acceptable under the Income Tax Act rule and the CRA’s Charity Directorate interprets them. A full and more than adequate exposition of the CRA’s rules is set out in CPS 022.
It is commonly stated that a charity can devote up to 10% of its resources(whatever that term might mean) to acceptable political activity. But the CRA administratively has loosened this rule.
“However, we recognize that this may have a negative impact on smaller charities. In an effort to alleviate this hardship, we will exercise our discretion and not revoke the registration of smaller charities for the excessive use of their resources on political activities as long as they meet the following administrative guidelines:
Registered charities with less than $50,000 annual income in the previous year can devote up to 20% of their resources to political activities in the current year.
Registered charities whose annual income in the previous year was between $50,000 and $100,000 can devote up to 15% of their resources to political activities in the current year.
Registered charities whose annual income in the previous year was between $100,000 and $200,000 can devote up to 12% of their resources to political activities in the current year.”
But the real problem is that if the purpose of lobbying is on a matter of national (as opposed to local) impact, only giant organizations are able to mount campaigns which have any chance to be effective when part of the campaign is to persuade the public to support the initiative.
One approach would be for a group of charities which have similar interests to coordinate a national campaign through the pooling of their funds and using experts to actually mount the initiative. This could be done by transferring funds to another umbrella charity, hiring a professional organization and paying it, the fees counting as political expenditures or the creating of a single use (likely non-profit) corporation controlled by the contributing charities to carry on the activity.
CPS 022 specifically states that a charity can hire others to conduct on its behalf any political activities that it is allowed to undertake itself. This includes hiring professional lobbying firms.
Our preferred option is the use of a single purpose non-profit. Here’s how it works and why.
Let’s say thirty charities find that as a result of the abolition of the mandatory long-form census find themselves to have difficulties in their forward planning for lack of data. Having made contact and finding that there is agreement that a campaign should be launched to persuade the public and politicians that the full census should be reinstated by the time the next census rolls around.
They create a non-profit corporation to undertake the lobbying effort and each of the charities is prepared to allocate $10,000 to the project well within each charity’s capacity and allowable expenditure limit on such activities.
Instead of paying the non-profit a fee, each charity enters into an agency agreement (in some cases, the more complex arrangement of a joint venture may be required) which requires the non-profit to conduct the campaign within acceptable parameters. Presumably, with $300,000 available a national campaign run professionally can be mounted, something which none of the individual charities could consider with their limited budgets.
Another attraction is that the group of charities can be recruited with a pointed and specific objective and not have its message diffused by going through larger umbrella organizations where there may be mixed objectives.
At the end of each year, each individual charity reports its $10,000 expenditure as its own direct political activity, which the agency agreement substantiates.
The non-profit need not report anything publicly but of course as an agent its activities are limited to those which are acceptable under C 022. But if there re other sources of funding even that changes.
Suppose that in addition to the thirty charities, ten non-charities which have similar goals, the reinstatement of the full census, contribute funds to the non-profit. The non-profit will have no constraints at all in using these “non-charitable” funds subject to the general laws. Of course it will be of utmost importance that the non-profit be able to show that the “charity” money was spent within the CPS 022 guidelines and that any spending outside the guidelines came from non-charitable money.
The upshot of this arrangement is that smaller charities with common objectives are able to collaborate and get a much bigger “bang for their buck” with the collaborative effort than if they mounted their own campaigns with much more limited resources. Not only is there more money available but the spending becomes more efficient and undertakings which are beyond the ability of a single organization (national advertising for example) becomes a distinct possibility.
We should say for the record that this construct is not merely theoretical. We are aware of such arrangements which have been used for many years in the past without challenge (and why should the CRA challenge such arrangements?).
 CPS 022 paragraph 9.
 Less attractive since changes to the Income Tax A t would then double count the expenditure, once for th the donating charities and again for the recipient charity.
 Paragraph 10.
 If they are taxable, it is likely that they can deduct the payments as a business expense.