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Election advertising handbook for Third Parties, Financial Agents and Auditors (EC 20227) – July 2015

Financial Administration

This chapter covers the following topics:

Introduction

This chapter helps to explain how the Canada Elections Act applies to a third party's financial administration during an election period with respect to election advertising.

3.1 Sources of funds used for election advertising

A third party may fund its election advertising expenses from one of three sources: its own funds, contributions given to the third party for election advertising purposes, and loans obtained for election advertising purposes.

Definitions

What is a contribution?

A contribution is donated money (monetary contribution) or donated property or services (non-monetary contribution).

Monetary contribution

A monetary contribution is an amount of money provided 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.

Non-monetary contribution

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 without charge or at less than commercial value.

What is commercial value?

Non-monetary contributions are recorded at commercial value. The commercial value 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:

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.

Volunteer labour

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.

Contribution rules

Who can contribute to a third party?

Individuals who are Canadian citizens or permanent residents of Canada, and businesses or other organizations that operate in Canada, can make contributions to a third party for election advertising purposes.

Certain contributions prohibited for election advertising purposes

The third party is prohibited from using a contribution made for election advertising purposes 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.

The third party cannot use a contribution made for election advertising purposes if the contribution is from:

Loans

If a loan is used to finance election advertising expenses, the third party must report it in the election advertising report.

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 also be reported.

Examples
  1. 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.
  2. 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.
Contributor identification

Depending on the amount of the contribution, the contributor's information has to be reported in the third party election advertising report as follows:

For reporting purposes, the Canada Elections Act identifies the following classes of contributors:

3.2 Election advertising expenses

The Canada Elections Act regulates expenses incurred by third parties for election advertising purposes.

What is an expense?

Expenses include:

The third party has to report the amount charged to the third party for an election advertising expense. Generally this amount is the commercial value of the property or service received.

Commercial value 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:

Commercial value is generally the amount charged in a store for an item or a service.

If the third party purchases property or a service for less than commercial value, the third party has to report the difference as a non-monetary contribution.

Note: If the commercial value of a non-monetary contribution is $200 or less, and it is from an individual (who is a Canadian citizen or permanent resident) not in that business, the contribution amount is deemed to be nil.

Election advertising

Definition

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. However, it does not include:

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 the <name of the third party>."

Blackout period

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.

Election advertising categories

Traditional advertising

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 design, production and installation, of any pre-existing billboard that remains in place during the election period is an election advertising expense. 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.

Example

The third party purchases an advertisement that is broadcast during the election period on a national radio station, promoting a registered party. The expenses for the advertisement, including its design, recording and transmission, are subject to the limit on election advertising and have to be reported in the third party election advertising report. 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 have, or would normally have, a placement cost (and meet all the other requirements for election advertising).

Placement cost is the cost charged to purchase advertising space (for example the cost of placing an advertisement in a newspaper or on a social media site, or the cost of running an advertisement on television or radio).

The third party has to authorize any election advertising transmitted to the public, and that authorization must be mentioned in or on the advertisement. 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 following are not election advertising:

Examples
  1. 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. There is a placement cost for the banners; therefore, they are election advertising and have to be authorized by the third party. The authorization statement is displayed on the banners. Because there is no placement cost to post the video, the video is not election advertising.
  2. A group page has been created by volunteers on a free social networking site. The volunteers manage the page and post articles related to the general election, supporting a registered party. This is not election advertising.
  3. During the election, the third party sets up a website to promote a registered party. Even though there are costs to produce and host websites, these are not election advertising expenses.
Fundraising activities and advertisement

The fundraising activities of a third party may take many forms, such as mass mailings. These fundraising activities often also include an election advertising message promoting or opposing a registered political party or a candidate, or take a position on an issue with which a registered party or candidate is associated. In cases where the activity is conducted during an election period, the entire expense related to the production and distribution of the communications material is an election advertising expense.

3.3 Administering election advertising expenses

The third party's financial agent is responsible for administering and reporting the third party's election advertising expenses.

For details on reporting the third party's election advertising expenses, see Chapter 4, Reporting Requirements.

What is an election advertising expense?

An election advertising expense is an expense incurred in relation to:

All election advertising expenses, including the production, distribution or placement costs, are election advertising expenses subject to the election advertising expenses limit.

The expense for any election advertising transmitted during an election is an election advertising expense, regardless of when the expense was actually incurred.

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 amounts are multiplied by the inflation adjustment factor. The inflation adjustment factor is published before April 1 every year by Elections Canada.

The limit applies to the total of all election advertising expenses, whether paid, unpaid or accepted as non-monetary contributions.

The third party election advertising expenses limit for a 37-day general election period called between April 1, 2015 and March 31, 2016 is:

The third party election advertising expenses limit for the above period for a by-election is:

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 his or her election in a given electoral district.

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:

Limit for by-elections

For an advertising expense to be an election advertising expense, the advertising in relation to which it is incurred must:

As stated earlier, all election advertising expenses, including the production, distribution or placement costs, are election advertising expenses subject to the election advertising expenses limit.

Even though the advertising may be distributed to a broader area than the electoral district, 100% of the production cost, plus the actual cost to transmit in the region that includes the electoral district (which may be a broader area than the electoral district), are election advertising expenses.

Example

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.

Examples
  1. 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.
  2. 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.
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 perform these tasks, but that authorization does not limit the responsibility of the financial agent.

Collusion prohibited

No third party and no registered party shall 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, official agent of the candidate or person authorized by the official agent to incur expenses shall collude with each other for the purpose of circumventing the maximum amount that a candidate is allowed for election expenses.

No combination to exceed the limit

No third party shall 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.

Non-monetary contributions also reported as expenses

When a non-monetary contribution is made and is used for election advertising purposes, the financial agent must report the commercial value of the property or service as a contribution as well as an election advertising expense.

When property or a service is provided for election advertising purposes at less than commercial value, the commercial value of the property or service must be reported as an election advertising expense. A non-monetary contribution will also have to be recorded for the difference.

Note: If the commercial value of a non-monetary contribution 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. Consequently, no expense has to be reported. However, all non-monetary contributions provided by other classes of contributors must be reported, regardless of the commercial value.

Use of capital assets

Third parties may purchase capital assets or make use of existing capital assets for election advertising purposes during an election.

Third parties must assess the value of the use of a capital asset used for election advertising purposes. The value to be reported as an election advertising expense is the amount that would be charged for renting a similar asset from a commercial provider in the same area for the period of the election.

If the purchase price was less than the rental amount, the purchase price has to be recorded as an election advertising expense.

If the asset is provided for election advertising purposes at less than commercial value, the difference between the amount charged and the commercial value will constitute a contribution for election advertising purposes.

Multi-purpose expenses

When a third party combines election advertising expenses with other expenses of the third party, the total expenses constitute an election advertising expense.

Example

If a photocopier is used to copy promotional materials during the election period and is also used for general copying purposes, the commercial value of the photocopier is an election advertising expense. The amount to be reported is the lower of the rental cost for the period used, and the purchase price.

Maintaining books and records

The third party has to maintain proper books and records to ensure accurate reporting and compliance with the Canada Elections Act.

The third party's auditor, if required, shall have access to the third party's books and records at any reasonable time and may require the provision of any additional information or explanation to enable the auditor to prepare the auditor's report.