Backgrounders

Political Contributions by Individuals –
New Rules on January 1, 2004

New rules for individuals making political contributions came into effect on January 1, 2004. The rules are part of important changes to the Canada Elections Act made by Parliament in June 2003.

This backgrounder summarizes the main changes affecting individuals in the amended Canada Elections Act, and is not intended to be a comprehensive outline of the Act's new provisions. Six other backgrounders summarize changes affecting corporations and trade unions, registered political parties, electoral district associations, candidates, nomination contestants and leadership contestants.

The most significant changes affecting individuals concern contributions and income tax credits.

Limits on contributions

Any individual who is a Canadian citizen or permanent resident of Canada may make these contributions:

• up to $5,000* in total in a calendar year to a particular registered political party and its registered electoral district associations, nomination contestants and candidates
   
• up to $5,100* in total to the leadership contestants of a registered political party in a particular leadership contest
   
• up to $5,100* in total to a candidate for a particular election who is not the candidate of a registered political party

A registered party or electoral district association (often called a riding association or constituency association) is one that is registered with the Chief Electoral Officer of Canada. Among other privileges and obligations, registration allows the party or association to issue income tax receipts for contributions, and obliges it to make regular public reports on its finances.

An individual who is a nomination contestant, candidate or leadership contestant may also make the following additional contributions out of his or her own funds to his or her own campaign:

• by a nomination contestant or candidate of a registered party, up to $5,000* in total for both the nomination and election campaigns
   
• by a leadership contestant of a registered party in a particular leadership contest, up to $5,000*, or
   
• by a candidate for a particular election who is not the candidate of a registered party, up to $5,000*

Contributions made to a leadership contestant within 18 months after a leadership contest are considered to be contributions for that contest.

Contribution limits are adjusted annually for inflation*.

Unlimited contributions

There are no limits to these contributions by an individual:

• an unconditional, non-discretionary contribution ("testamentary disposition") made in the individual's will
   
• contributions to a political party that is not registered or to its electoral district associations (these contributions are not eligible for income tax credits)

Indirect contributions

Making an indirect contribution is an offence. That is, an individual must not make a political contribution that comes from the money, property or services of another person or entity (including companies, unions and associations), if that other person or entity gave it to the individual to make a political contribution. The prohibition applies to indirect contributions to a registered party, a registered association, a candidate, a nomination contestant and a leadership contestant.

Nevertheless under certain circumstances, an unincorporated organization or association is allowed to make contributions to a registered electoral district association, a nomination contestant or a candidate that come from money provided for that purpose by an individual who is a Canadian citizen or permanent resident of Canada. The total contributions must not exceed:

• $1,000* in total in any calendar year to a registered electoral district association, a nomination contestant or a candidate of a registered party
   
• $1,000* in total to a candidate for a particular election who is not the candidate of a registered party

With each contribution the association must also provide a statement containing the following information:

• the name and address of the individual who is responsible for the association
   
• the amount of the contribution
   
• the name and address of each individual whose money forms part of the contribution, the amount of money provided by that individual included in the contribution, and the date on which it was provided

Membership fees

An individual's membership fee in a registered party is not a contribution, so long as the fee is not more than $25 per year for up to five years, the fee is paid out of the individual's own funds and the individual is eligible to make contributions.

Income tax credits

When Parliament changed the Canada Elections Act, it also changed the Income Tax Act to allow higher income tax credits for political contributions by an individual:

• for contributions up to $400, a credit of 75 percent (for example, a $300 credit for a contribution of $400)
   
• for contributions from $401 to $750, a credit of $300 plus 50 percent of the amount over $400 (for example, a $475 credit for a contribution of $750)
   
• for contributions over $750, the lesser of $650 or $475 plus 33⅓ percent of the amount over $750 (for example, a $650 credit for a contribution of $1,275)

Unlike most deductions, the credits are deducted directly from the income tax to be paid. The credits apply to monetary contributions – supported by authorized receipts – to a registered party, a provincial division of a registered party, a registered electoral district association or a candidate. Tax credits are not available for contributions to nomination and leadership contestants.

Any person authorized to accept political contributions must issue a receipt for each contribution over $25.

Offences and punishment

The Act itemizes a number of offences that an individual must not commit, such as circumventing or attempting to circumvent or collude in circumventing the rules for ineligible contributors, for concealing a contributor's identity and for contribution limits.

Depending on the seriousness of the offence and the type of court proceeding, maximum penalties include a fine of $1,000 to $25,000, or imprisonment for a term of up to five years, or both. The court may also impose additional penalties, such as performing community service and compensating for damages.

* Click here to access the limit in effect.

For more information, please contact:

Elections Canada
257 Slater Street
Ottawa, Ontario
K1A 0M6

Telephone

1 800 463-6868
toll-free in Canada and the United States

001 800 514-6868
toll-free in Mexico

(613) 993-2975
from anywhere in the world

For people who are deaf or hard of hearing:
TTY 1 800 361-8935
toll-free in Canada and the United States

Fax

(613) 954-8584
1 888 524-1444
toll-free in Canada and the United States

This publication is available in alternative formats.

June 2004