Election Advertising Handbook for Third Parties, Financial Agents and Auditors (EC 20227) – April 2017
2. Election Advertising and Financial Administration
This chapter covers the following topics:
- 2.1 Third party election advertising
- 2.2 Election advertising expenses
- 2.3 Sources of funds used for election advertising
This chapter introduces how the Canada Elections Act regulates third party election advertising and explains how the political financing rules apply to a registered third party's financial administration during an election period.
2.1 Third party election advertising
What is election advertising?
Election advertising is the transmission to the public by any means during an election period of an advertising message that promotes or opposes a registered party or the election of a candidate, including one that takes a position on an issue with which a registered party or candidate is associated.
The following is not election advertising:
- the transmission to the public of an editorial, a debate, a speech, an interview, a column, a letter, a commentary or news
- the distribution of a book, or the promotion of the sale of a book, for no less than its commercial value, if the book was planned to be made available to the public regardless of whether there was to be an election
- the transmission of a document directly by a person or a group to their members, employees or shareholders, as the case may be
- the transmission by an individual, on a non-commercial basis on the Internet, of that individual's personal political view
- the making of telephone calls to electors
- in some cases, the transmission of election messages over the Internet (see details below)
- door-to-door canvassing, unless canvassers distribute election advertising such as pamphlets
Authorization and identification
The Canada Elections Act requires that a third party identify itself in any election advertising and indicate that it has authorized the advertising. This authorization has to be in or on the message. Failure to do so is an offence.
The following wording is suggested: "Authorized by <name of the third party>."
For advertising on the Internet, where the authorization statement cannot be included on the advertising message because of its size, this is acceptable if the statement is made immediately apparent to the viewer by following the link in the advertising message.
The third party hires a media firm to place banners on websites and social media platforms during the election period, directing users to a video posted on YouTube. The banners are small clickable objects that have no space for the authorization statement. The statement is therefore displayed at the start of the video.
The Canada Elections Act prohibits the transmission of election advertising to the public in an electoral district on election day before the close of all polling stations in the electoral district.
The blackout does not apply to the transmission of a message on the Internet that was placed before the blackout period began and was not changed during that period. The blackout also does not apply to the distribution of pamphlets or the posting of messages on signs, posters or banners during that period.
Advertisements distributed through traditional means such as signs, billboards, flyers, pamphlets, radio, television, newspapers or magazines during an election period are election advertising and have to be authorized by the third party. This authorization has to be in or on the message.
The commercial value, including the design, production and installation costs, of any pre-existing billboard that remains in place during the election period is an election advertising expense. The expenses related to billboards include the sign and the supporting structure. Elections Canada will accept the commercial value of an equivalent sign that would be temporarily installed just for the election period. Similarly, with respect to the supporting structure, Elections Canada will accept the commercial value of an equivalent structure that would typically be used for an election period rather than the commercial value of a structure designed to be more permanent in nature. Note that the commercial value of the structure is the lower of its purchase price or rental cost.
The third party purchases an advertisement that is broadcast during the election period on a national radio station, promoting a registered party. The advertisement has to include an authorization statement from the third party.
Advertising over the Internet
Election messages communicated over the Internet are election advertising only if:
- they meet the general criteria for election advertising (see “What is election advertising?” above), and
- they have, or would normally have, a placement cost
Any other messages communicated over the Internet are not election advertising.
Placement cost is the cost charged to purchase advertising space (for example, the cost of placing an advertisement on a social media site or the cost of placing an advertisement banner on a website).
Note: The cost to host and update the third party's own website is not a placement cost.
The following election messages communicated over the Internet are not election advertising:
- messages sent or posted for free on social media platforms such as Twitter and Facebook
- messages sent by email or through other messaging services (including texts sent through a cellular or mobile network)
- content posted on the third party's website
Note: Paid content on social media sites (for example, a paid tweet, Facebook post or Snapchat story) is election advertising. It is subject to the authorization requirements and blackout provisions, and the related expenses are election advertising expenses.
- The third party pays to place banners opposing a registered party on websites and social media platforms during the election period, directing users to a video that was posted on the third party's own website. Because the banners have a placement cost and oppose a registered party, they are election advertising. Because there is no placement cost to post the video, the video is not election advertising.
- The third party pays to place non-partisan banners on websites and social media platforms during the election period, directing users to a video that opposes a registered party and was posted for free on YouTube. Because the paid banners are non-partisan, they are not election advertising. This is true even though they lead to content that opposes a registered party. Because there is no placement cost to post the video, the video is not election advertising either.
- A group page has been created by the third party on a free social networking site. The third party manages the page and posts articles related to the general election, supporting a registered party. This is not election advertising.
- During the election, the third party sets up a website to promote a registered party. Even though there are costs to produce and host the website, the website and its content are not election advertising.
For a detailed discussion of this topic, please refer to Elections Canada's interpretation note 2015-04, Election advertising on the Internet, on the Elections Canada website.
Fundraising activities and election advertising
Fundraising activities of a third party—for example, mass mailings—often include an election advertising message. In cases where a fundraising activity with an advertising message is conducted during an election period, the entire expense related to producing and distributing the material is an election advertising expense.
During the election period, the registered third party mails letters to voters, asking for contributions to support the third party in promoting a specific election issue. The letter also promotes a registered party's position and encourages the recipients to vote in support of the issue.
Because this fundraising activity contains an election advertising message, the third party has to authorize the message and the authorization has to be included in the letters.
Election advertising does not include telephone calls.
Note, however, that a third party must follow certain rules for voter contact calling services. The rules are administered by the Canadian Radio-television and Telecommunications Commission (CRTC), and enforced by the CRTC and the Commissioner of Canada Elections.
The third party hires a calling service provider to conduct telephone calls during the election period, informing voters about a specific election issue. The telephone calls are not election advertising; therefore, the expenses of conducting the calls are not election advertising expenses.
Note: The third party and the calling service provider must register with the CRTC.
Note: For the rules on voter contact calling services, please refer to the CRTC's Voter Contact Registry web page. A link to the page is posted on the Elections Canada website.
For a detailed discussion of this topic, please refer to Elections Canada's interpretation notes 2015-04, Election advertising on the Internet, and 2015-11, Application of election advertising rules to telephone calls, on the Elections Canada website.
2.2 Election advertising expenses
The third party has to maintain proper books and records in regard to election advertising expenses to ensure accurate reporting and compliance with the Canada Elections Act.
The third party's auditor, if one is required, must have access to the third party's books and records at any reasonable time and may require the third party to provide any additional information or explanation needed to prepare the auditor's report.
For details on reporting requirements, see the Third Party Reporting Obligations table in section 3.1.
What is an expense?
- amounts paid
- liabilities incurred
- the commercial value of donated property and services
- the difference between an amount paid or liability incurred and the commercial value of the property or services (when they are provided at less than their commercial value)
The third party has to report the amount that it was charged for an election advertising expense. Generally this amount is the commercial value of the property or service received.
The expense for any election advertising transmitted during an election is an election advertising expense, regardless of when the expense was actually incurred.
Commercial value, in relation to property or a service, is the lowest amount charged at the time that it was provided for the same kind and quantity of property or service, or for the same use of property or money, by:
- the person who provided the property or service (if the person who provided it is in that business), or
- another person who provides that property or service on a commercial basis in the area (if the person who provided the property or service is not in that business)
If the registered third party purchases property or a service for less than commercial value from an eligible contributor, and the property or service is used for election advertising purposes, the difference between the purchase price and the commercial value of the property or service is a non-monetary contribution from the contributor. The full commercial value of the donated property or service is an election advertising expense.
The third party engages a corporation (that carries on business in Canada) to design advertising material for the upcoming election. By giving a 30% discount, the corporation has made a non-monetary contribution (30% of the commercial value of the service) to the third party. The full commercial value of the service (the amount the corporation would normally charge for the service) is an election advertising expense subject to the limit.
Note: If the commercial value of a non-monetary contribution provided for election advertising purposes is $200 or less, and it is from an individual (who is a Canadian citizen or permanent resident) not in that business, the contribution is deemed to be nil and no expense has to be reported. However, all non-monetary contributions provided for election advertising purposes by other classes of contributors must be reported, regardless of the commercial value.
Determining production and distribution costs
The production and distribution costs for election advertising are election advertising expenses subject to the limit and have to be reported.
What is the production cost?
Production cost refers to the cost incurred when creating a good or providing a service. It includes a variety of expenses such as, but not limited to, labour, materials and general overhead. (General overhead refers to ongoing business expenses such as rent, utilities or office supplies.)
The production cost for election advertising also includes activities such as graphic design, writing, printing, envelope labelling, and so on.
The table below shows how to determine production costs in different scenarios.
|The third party||Production cost|
|Hires an external resource to create election advertising||The production cost is the cost incurred for the work.|
|Uses its own paid staff and resources to produce election advertising||The production cost is the direct labour cost for the period the third party's employees engage in creating the election advertising, the cost of materials used, and a reasonable allocation of the general overhead.
Note: Elections Canada accepts any reasonable basis for allocation of overhead–for example, an allocation based on labour hours.
|Creates election advertising using research it conducted or stating a policy position||The expenses for the research, such as surveys about the advertisement's subject matter or studies on reaching its target audience, are not included in the production cost. The expenses to develop the policy position, such as policy analysts' salaries, are also not included in the production cost.|
|Is an individual||No value is attributed to the non-commercial use of the individual's pre-existing personal property (other than money) for the production of election advertising.|
What is the distribution cost?
The distribution cost is simply the cost of getting the election advertising to recipients–for example, the cost of postage or the cost of advertising space in the media.
Production and distribution costs related to canvassing
Door-to-door canvassing on its own is not election advertising.
However, if canvassers distribute election advertising such as pamphlets, the cost to produce the advertising material and any compensation paid to canvassers are election advertising expenses. If canvassers are not paid, their work is volunteer labour if it is done outside of their working hours, and only the cost to produce the advertising material is an election advertising expense.
- The third party hires a media firm to design election advertising and purchases advertising space in a national newspaper before the election is called. The advertisement is distributed during the election period. The amount paid for the advertisement, including the design and distribution, is an election advertising expense subject to the limit.
- The third party uses its own resources and equipment to design and print flyers during the election period. The expenses related to producing and distributing the flyers are election advertising expenses. To determine the election advertising expense amount, the financial agent calculates:
- the salaries of the staff involved (for the duration they worked on the flyers)
- the cost of materials
- a reasonable allocation of the general overhead based on labour hours
- the cost of distribution
- The third party designs an election advertising poster to appear on public transit. The poster incorporates the results of a survey the third party had commissioned at the start of the election on a particular issue. The costs to produce and distribute the poster are election advertising expenses, but the costs for the research underlying the content are not.
Who can incur expenses?
Because third party election advertising expenses are subject to a limit, every election advertising expense incurred on behalf of a third party or accepted in the form of a non-monetary contribution must be authorized by the financial agent. A financial agent may authorize other persons to incur expenses, but that authorization does not limit the responsibility of the financial agent.
A third party can be any group of persons acting together for the purpose of conducting election advertising. No third party may circumvent, or attempt to circumvent, the election advertising expenses limit by splitting itself into two or more third parties or by acting in collusion with another third party so that their combined election advertising expenses exceed the limit.
No third party and no registered party may collude with each other for the purpose of circumventing the maximum amount that a registered party is allowed for election expenses.
No third party and no candidate, candidate's official agent or person authorized by the official agent to incur expenses may collude with each other for the purpose of circumventing the maximum amount that a candidate is allowed for election expenses.
Note: A third party may be making a non-monetary contribution when it coordinates its spending activities with a registered party or a candidate. For example, election advertising conducted by a third party on behalf of a registered party or a candidate is a non-monetary contribution. The contribution is ineligible if the third party is not a Canadian citizen or permanent resident, or if the commercial value of the non-monetary contribution places the individual over their contribution limit.
When expenses are not cancellable
If an advertising message is in transit on the day a by-election or a general election is called and the third party does not have the ability to stop the delivery, it will not be considered an election advertising expense even though the actual delivery will take place during the election period. However, any election advertising distributed in the 36 days preceding a fixed date election will be an election advertising expense.
Limit on election advertising expenses
The Canada Elections Act imposes a limit on the election advertising expenses that a third party can incur for a general election or by-election. The base limit for a general election with a 37-day election period is $150,000. Of that amount, no more than a base limit of $3,000 can be incurred to promote or oppose the election of one or more candidates in a particular electoral district. The base amount is multiplied by the inflation adjustment factor in effect on the date an election or by-election is called.
The inflation adjustment factor is published before April 1 every year by Elections Canada.
All election advertising expenses, including production, distribution and placement costs, are subject to the election advertising expenses limit. The limit applies to the total of all election advertising expenses, whether paid, unpaid or accepted as non-monetary contributions.
Note: An election advertising expense incurred to promote a leader of a registered party is subject to the limit in the electoral district only to the extent that it is incurred to promote or oppose the leader's election in a given electoral district.
The inflation adjustment factor in effect from April 1, 2017 to March 31, 2018, is 1.408. This means that the inflation-adjusted general limit for a 37-day election period is $211,200 and the local limit is $4,224.
Limit increase for longer election period
If an election period is longer than 37 days, the election advertising expenses limit at the national and electoral district level increases as follows:
- the initial limit is divided by 37
- the result is then multiplied by the number of days by which the longer election period exceeds 37 days
A general election is called in June 2017 with a 55-day election period. The election advertising expenses limits for third parties are calculated as follows:
- Inflation-adjusted limit for a 37-day election period: $211,200
- Adjustment for longer election period: $211,200 x 1/37 x (55 – 37) = $102,745.95
- General limit: $211,200 + $102,745.95 = $313,945.95
- Inflation-adjusted limit in a particular electoral district: $3,000 x 1.408 = $4,224
- Adjustment for longer election period: $4,224 x 1/37 x (55 – 37) = $2,054.92
- Local limit: $4,224 + $2,054.92 = $6,278.92
Limit for by-elections
During a by-election, even though advertising may be distributed to a broader area than the electoral district where a by-election is underway, 100% of the production cost, plus the actual cost to transmit in the region that includes the electoral district, are election advertising expenses.
A third party purchases an advertisement in a local newspaper distributed in a region that includes an electoral district where a by-election is underway. The advertisement promotes a party that has endorsed a confirmed candidate in the by-election. Despite the fact that the newspaper has a distribution area that goes beyond the electoral district, 100% of the production cost, plus the distribution cost for the area that includes the electoral district, are election advertising expenses of the third party, subject to the limit for the by-election.
If multiple by-elections are underway at the same time, and the same election advertising is transmitted in more than one electoral district, a third party may allocate the election advertising expense among the affected electoral districts.
- There are by-elections underway in three electoral districts. A third party purchases election advertising that is transmitted in the broadcast area where the by-elections are underway. The third party splits the production and transmission expenses evenly among the three electoral districts.
- There are by-elections underway in three electoral districts. The electoral districts belong to different broadcast areas. A third party purchases election advertising that is transmitted a different number of times in each of these broadcast areas. The third party splits the production cost evenly among the three electoral districts and reports the actual transmission cost for each electoral district.
2.3 Sources of funds used for election advertising
A third party may fund its election advertising expenses from one of three sources: contributions given to the third party for election advertising purposes, its own funds, or loans obtained for election advertising purposes.
What is a contribution?
A contribution is donated money (monetary contribution) or donated property or services (non-monetary contribution). In the case of registered third parties, the Canada Elections Act only regulates contributions provided for election advertising purposes.
Note: Contributions made for election advertising purposes in the period beginning six months before the election was called and ending on election day have to be reported in the Third Party Election Advertising Report. There is no limit on contributions to third parties.
A monetary contribution is an amount of money provided for election advertising purposes that is not repayable.
Monetary contributions include cash, cheques or money orders, credit card or debit card payments, and contributions made using online payment services.
The amount of a non-monetary contribution is the commercial value of a service (other than volunteer labour) or of property, or of the use of property or money, to the extent that it is provided for election advertising purposes without charge or at less than commercial value.
Non-monetary contributions are recorded at commercial value. Commercial value, in relation to property or a service, is the lowest amount charged at the time that it was provided for the same kind and quantity of property or service, or for the same use of property or money, by:
- the person who provided the property or service (if the person who provided it is in that business), or
- another person who provides that property or service on a commercial basis in the area (if the person who provided the property or service is not in that business)
A self-employed graphic designer (who is a Canadian citizen) offers to design an advertising pamphlet for the third party free of charge. The commercial value of this service has to be recorded as a non-monetary contribution from the graphic designer. In this case, the commercial value is the lowest amount the graphic designer normally charges for the service.
Note: If the commercial value of a non-monetary contribution is $200 or less, and it is from an individual not in that business, the contribution amount is deemed to be nil.
What is not a contribution?
Volunteer labour is any service provided free of charge by a person outside of that individual's working hours. Volunteer labour is not a contribution.
Note: A service provided by a self-employed person who normally charges a fee for that service is a non-monetary contribution and is not volunteer labour. The person providing the service has to be eligible under the contribution rules.
Who can contribute to a third party?
Individuals who are Canadian citizens or permanent residents, and businesses or other organizations that operate in Canada, can make contributions to a third party for election advertising purposes.
For reporting purposes, the Canada Elections Act identifies the following classes of contributors:
- commercial organizations
- trade unions
- corporations without share capital other than trade unions
- unincorporated organizations or associations other than trade unions
- A homeowner (who is a Canadian citizen) supplies construction material with a commercial value of $175 that is used to construct a billboard. Because the homeowner is not in the business of supplying construction materials and the commercial value of the materials is less than $200, the contribution is deemed to be nil and it is not reported.
- A corporation (that carries on business in Canada) provides free production services for radio advertisements to the third party during the election. The commercial value of the production is a non-monetary contribution from the corporation and an election advertising expense.
- An individual who is regularly employed in the third party's office designs an election advertising poster outside of their working hours. This is volunteer labour and therefore is not a contribution
- A self-employed graphic designer offers to design an election advertising logo for the third party free of charge. Because the person is self-employed and normally charges for that service, the logo design is not volunteer labour. The commercial value of the service (the lowest amount the graphic designer normally charges for that service) is a non-monetary contribution.
Certain contributions prohibited for election advertising purposes
The third party is prohibited from using a contribution for election advertising if it does not know the name and address of the contributor, or if it is unable to determine to which contributor class the contributor belongs.
In addition, the third party cannot use a contribution for election advertising if the contribution is from:
- a person who is not a Canadian citizen or permanent resident
- a corporation or association that does not carry on business in Canada
- a trade union that does not hold bargaining rights for employees in Canada
- a foreign political party
- a foreign government or an agent of one
Contributions made to the third party for election advertising purposes in the period beginning six months before the election was called and ending on election day must be reported as follows in the Third Party Election Advertising Report:
- For contributions from the same contributor totalling $200 or more, the contributor's name, address and class, as well as the amount and date of the contribution have to be reported.
- If a contributor is a numbered company, the name of the chief executive officer or president has to be reported in addition to the above.
In the case where a third party (for example, a not-for-profit organization) receives multiple contributions for different purposes, it only needs to report the contributions made for election advertising purposes in the relevant period.
However, if the third party receives some contributions for election advertising purposes but is unable to identify which ones were made for those purposes, it must list the name and address of every contributor who made contributions totalling $200 or more for any purpose during that period.
Use of own funds
The third party might use its own funds to pay for election advertising expenses. Any amount paid out of the third party's own funds for election advertising expenses must be reported in the election advertising report.
If a loan is obtained to finance election advertising expenses, the third party must report it in the election advertising report.