Political Financing Handbook for Nomination Contestants and Financial Agents (EC 20182) – December 2014
This document is the DRAFT version of Elections Canada's guideline: OGI 2014-04
Chapter 2 – Nomination Campaign Inflows
This chapter covers the following topics:
- 2.1 Contributions
- 2.2 Loans
- 2.3 Administering contributions and loans
- 2.4 Transfers received
- 2.5 Other cash inflows
Before the campaign begins to receive inflows, the financial agent and the nomination contestant should understand the types of inflows that can be received. The Canada Elections Act imposes limits on individual contributions, loans and loan guarantees. The contribution limits apply to: total contributions, the unpaid balance of loans made during the year and the amount of any loan guarantees made during the year that an individual is still liable for. The sum of these three amounts cannot at any time exceed the contribution limit.
This chapter explains the rules and procedures for accepting and administering contributions, loans, transfers and other monetary inflows that the campaign may receive.
Note: The following table displays the limits for all political entities.
|Political entity||2015 annual limit||Limit per election called between Jan 1, 2015, and Dec 31, 2015|
|To each registered party||$1,500*||n/a|
|In total to all the registered associations, nomination contestants and candidates of each registered party||$1,500*||n/a|
|In total to all the leadership contestants in a particular contest||$1,500*||n/a|
|To each independent candidate||n/a||$1,500*|
The contribution limits apply to: total contributions, the unpaid balance of loans made during the contribution period and the amount of any loan guarantees made during the contribution period that an individual is still liable for.
The sum of these three amounts cannot at any time exceed the contribution limit.
* The limits will increase by $25 on January 1st in each subsequent year.
There are some exceptions to the limits on contributions:
- A nomination contestant is permitted to give an additional $1,000 in total per event in contributions, loans or loan guarantees to his or her own campaign.
- A candidate is permitted to give a total of $5,000 in contributions, loans and loan guarantees to his or her campaign.
- A candidate is also permitted to give an additional $1,500 in total per year in contributions, loans or loan guarantees to other candidates, registered associations and nomination contestants of each party. (This includes contributions to the registered association in the candidate's electoral district and contributions to the candidate's own nomination campaign.)
- A leadership contestant is permitted to give a total of $25,000 in contributions, loans and loan guarantees to his or her campaign.
- A leadership contestant is also permitted to give an additional $1,500 in total per year in contributions, loans or loan guarantees to other leadership contestants.
- Fees collected for membership in a registered party of no more than $25 per year for a period of no more than five years are not contributions. For example, a party could charge $125 for a five year membership without a contribution being made.
Max decides to contribute $1,500 to the registered party he supports. In addition, he makes an $800 contribution to the party's registered association in his riding; and when a nomination contest is called in the same year, he lends $700 to one of the contestants. With that, Max reaches the annual limit for contributions to the registered party as well as the annual limit for contributions, loans and loan guarantees to any combination of candidates, registered associations and nomination contestants of the registered party.
Note: This example uses the limits in effect for 2015.
This section provides details and practical examples about contributions: Who can contribute what and how much? Is volunteer labour a contribution? What are the rules about anonymous contributions and ticketed fundraising events?
In addition, this section provides basic information about how to administer contributions.
What is a contribution?
A contribution is donated money (monetary contribution) or donated property or services (non-monetary contribution).
Who can contribute?
Only individuals who are Canadian citizens or permanent residents can make a contribution to a registered party, a registered association, a candidate, a leadership contestant or a nomination contestant.
Any money that is used in relation to the contest out of the contestant's own funds is a contribution.
Note: Corporations, trade unions, associations and groups cannot make contributions.
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.
The amount of a non-monetary contribution is the commercial value of a service (other than volunteer labour) or of property, or the use of property or money, to the extent that they are provided without charge or at less than commercial value. This includes forgone interest on loans.
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:
- the person who provided it (if the person who provided the property or service 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)
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.
- An individual who is not in the business of renting office supplies lends a photocopier to the campaign office for the duration of the nomination contest. The financial agent has to determine the commercial value of this non-monetary contribution by checking with local suppliers to see how much they would charge for renting similar equipment for the same period. If that amount is greater than $200, a non-monetary contribution must be reported.
- A self-employed individual in the business of providing information technology services offers to set up the computers in the campaign office and does not charge for the service. This is a non- monetary contribution from that person. The commercial value is equal to the lowest amount charged by that individual for the same kind of service.
Volunteer labour is any service provided free of charge by a person outside of their 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.
- A person who is employed at an accounting firm offers to work in the evenings in the campaign office to answer the phone and help with general office duties. This is volunteer labour and therefore it is not a contribution.
- A self-employed graphic designer offers to design a pamphlet for the nomination contestant free of charge. Because the person is self-employed and normally charges for that service, the pamphlet design is not volunteer labour. The commercial value of the service has to be recorded as a non-monetary contribution. In this case, the commercial value is the lowest amount the graphic designer normally charges for that service.
Loans are used as a source of financing.
It is important that the nomination contestant and the financial agent manage the campaign finances properly and ensure that all loans are repaid.
This section discusses how loans are received, reported and repaid.
Getting a loan
A nomination contestant's campaign may receive loans from either a financial institution or an individual who is a Canadian citizen or permanent resident. A written loan agreement must accompany all loans.
Loans from financial institutions
There is no limit to the amount a campaign can borrow from a financial institution. Note however that if the financial institution requires a loan guarantee, only individuals who are Canadian citizens or permanent residents can guarantee the loan. The amount an individual guarantees is subject to the individual's contribution limit.
The campaign is planning to borrow $15,000 and the bank requires a guarantor for the loan. Because individual guarantees are subject to the contribution limit, the campaign needs at least 10 individuals to guarantee the requested amount. Each guarantor is limited to guaranteeing $1,500 of the total loan amount.
Loans from individuals
If an individual obtains a personal loan from a financial institution and lends those funds to a nomination campaign, the lender is the individual and not the financial institution. The loan amount would be subject to the individual's contribution limit.
An individual can lend money to a campaign as long as the total of the individual's contributions, the unpaid balance of the loan and the amount of any outstanding loan guarantees does not at any time exceed the contribution limit in the calendar year that the loan was made.
Paul made a $500 contribution to Christine's campaign. In addition, he takes out a $1,000 personal loan from his bank and lends it to the campaign. With that, Paul has reached the annual limit for contributions to any combination of candidates, registered associations and nomination contestants of the registered party.
Note: This example uses the limits in effect for 2015.
The financial agent must report the interest rate of each loan in the loans section of the Nomination Contestant's Campaign Return.
Interest incurred on loans between the start and end date of the nomination contest is a nomination campaign expense, whether it is paid or accrued.
If the interest rate on a loan from an individual is lower than the market interest rate, the financial agent will need to record the forgone interest as a non-monetary contribution from the individual.
Note: If the loan is from an individual who is not in the business of lending money and the forgone interest on the loan is $200 or less, the non-monetary contribution is deemed to be nil.
A demand loan is a loan with no specific payment deadline. It is due whenever the lender demands to be repaid. To report a demand loan, a loan agreement has to be submitted with the contestant's return. It is recommended that the agreement include a maximum term for the repayment.
Note: If the demand loan is from an individual, it is subject to the contribution limit.
Overdraft and line of credit
If overdraft protection or a line of credit is used, it has to be recorded as a loan at the maximum amount used. Note however that if the financial institution requires a guarantee, only individuals who are Canadian citizens or permanent residents can guarantee the overdraft or line of credit. The amount an individual guarantees is subject to the individual's contribution limit.
The financial agent has to include the following information when reporting an overdraft or a line of credit:
- the maximum amount used
- the name and address of the financial institution
- the interest rate charged
- the dates and amounts of any repayments of principal and payment of interest
- the full name and address of any guarantors and the amounts they have guaranteed
- the unpaid balance at the end of each calendar year and as of the date of the return
The campaign bank account has overdraft protection of $1,000. The account goes into overdraft by $200 and the financial agent pays back $100 within the same day. Later on that day, the financial agent withdraws another $400 from the same account, bringing the highest amount overdrawn during the campaign to $500.
The overdraft amount to be reported is $500. The financial agent has to report this amount in the Details of operating loans section of the contestant's return.
2.3 Administering contributions and loans
Depending on the amount and type of the contribution, the contributor's personal information has to be recorded as follows:
- The financial agent can accept anonymous CASH contributions of $20 or less.
- For contributions over $20, the contributor's name has to be recorded and a receipt must be issued.
- For contributions over $200, the contributor's name and address have to be recorded and a receipt must be issued.
Note: When recording a contributor's personal information, the full first and last name (initials are not acceptable) and the home address have to be recorded.
The financial agent responsible for ensuring that contributions are in accordance with the rules set out in the Canada Elections Act. The following contributions are ineligible:
- cash contributions over $20
- contributions from corporations, trade unions, associations and groups
- contributions that exceed the limit
- indirect contributions (no individual can make a contribution on behalf of another person or entity)
- contributions from an individual who is not a Canadian citizen or a permanent resident
- contributions made as a result of a term of an agreement for the provision for payment of goods or services, directly or indirectly, to a registered party or a candidate
Returning ineligible contributions
The financial agent must not knowingly accept an ineligible contribution.
If the campaign receives an ineligible contribution, the financial agent has to return the unused contribution to the contributor within 30 days of becoming aware that it is ineligible. If that is not possible, the financial agent has to send a cheque for the amount of the ineligible contribution to Elections Canada, payable to the Receiver General for Canada. In the case of an ineligible non-monetary contribution that has been used, the financial agent has to send an amount equal to the commercial value of property or service to Elections Canada, payable to the Receiver General for Canada.
The financial agent receives a cheque for $600 from a contributor. The financial agent, however, is aware that the same person has already contributed $1,000 to the registered association in that year. He sends a cheque of $100 to the contributor.
Note: This example uses the limits in effect for 2015.
If the financial agent receives a contribution that is:
- over $20 and the name of the contributor is not known, or
- over $200 and the name and address of the contributor is not known
the financial agent has to send a cheque for the amount without delay to Elections Canada, payable to the Receiver General for Canada.
If a fundraising activity is held for the primary purpose of soliciting monetary contributions through the sale of tickets, the amount of a ticket purchaser's monetary contribution is the difference between the price of the ticket and the fair market value of the benefit that the ticket entitles the purchaser to receive. The benefit received includes the fair market value of using a rented venue, the cost of dinner and entertainment, etc.
Note: The fair market value of the production and distribution of materials promoting the event is not included in the benefit received because persons who attend the event would not benefit from such activities. Instead these would be considered nomination campaign expenses.
A ticketed fundraiser was expected to attract 50 attendees. On the assumption that this number would attend, the following expenses were incurred in an open and competitive market:
- room rental – $500
- meal – $2,500
- decoration – $300
- entertainment – $500
- server staff and gratuities – $200
- mail-out promoting the event – $500
- total – $4,500
The fair market value of the benefit for each ticket purchaser is $80, calculated by dividing $4,000 by 50 (the $500 expense related to the mail-out is excluded, because it is not part of the benefit received by the attendee). The fair market value remains the same regardless of the number of individuals who actually attend the event.
Forty tickets were sold at $200 each for the event. The amount of each monetary contribution is therefore $120, calculated by subtracting $80 (the fair market value) from the ticket price ($200).
Note: The contribution rules apply to contributions made through ticketed fundraising.
Sponsorship or advertising
A transaction involving the receipt of money by a political entity in exchange for advertising or promotional opportunities directed at members or supporters of the political entity is not recognized as a commercial transaction. Any money received as part of such arrangement is to be treated as a contribution that is subject to the contribution limit and eligibility rules.
Only the financial agent can accept contributions to the nomination contestant's campaign.
Recording anonymous contributions
If anonymous contributions of $20 or less are collected during an event related to the campaign or contest, the financial agent has to record:
- a description of the function at which the contributions were collected
- the date of the function
- the approximate number of people at the function
- the total amount of anonymous contributions accepted
Anonymous contributions of $20 or less may also be received outside the context of a particular function. In that case the financial agent has to keep track of the total amount plus the number of contributors.
Campaign volunteers organize a wine and cheese event one evening in the campaign office, and invite local residents. Approximately 40 people show up. During the evening, a volunteer passes a basket around to collect cash contributions from the attendees. She informs the guests about the contribution rules: a maximum of $20 can be accepted from any one individual as an anonymous cash contribution. At the end of the evening there is $326 in the basket.
After the event, the financial agent has to record the following: the date and a description of the event, the approximate number of people who attended (40), and the amount collected in anonymous contributions ($326). The financial agent has to deposit the amount into the campaign bank account.
Issuing contribution receipts
The financial agent has to issue receipts for each contribution over $20.
Note: Contributions made to the nomination contestant's campaign are not eligible for tax receipts.
What to keep in mind when administering contributions
Here are some important points to keep in mind when recording contributions or issuing receipts:
- A contribution received in the form of a cheque from a joint bank account is generally reported under the name of the individual that signed the cheque. However, if the cheque is accompanied by written instructions signed by both account holders indicating how the contribution is to be allocated to the contributors, the contributions are to be reported in accordance with that agreement.
- If a contribution is received through an online payment service, a processing fee might apply. The full contribution amount has to be recorded as a contribution and the processing fee has to be recorded as a nomination campaign expense. For example, if the campaign receives a $500 contribution through an online payment service and the net deposit to the campaign bank account is $490, the financial agent has to record and issue a receipt for a contribution of $500 and also record an expense of $10.
- If the campaign receives a cheque from a partnership, the partnership has to provide the following information in writing: names and home addresses of individual contributors, the voluntary nature of each contribution, who it is intended for, and the amount of each contribution. The instructions must be signed and dated by each contributor. Each contributing partner's share of a partnership draw should also be reduced by the amount of that partner's contribution.
- A contribution from an unincorporated sole proprietor has to be recorded in the individual's name (not the business name), using the contributor's home address.
The financial agent has to include the following information when reporting a loan:
- the full name and address of each lender
- the full name and address of any guarantors and the amount guaranteed
- the interest rate charged
- the amount of the loan
- the dates and amounts of repayments of principal and payments of interest
- the unpaid principal at the end of each calendar year and as of the date of the return
- a copy of the loan agreement must accompany the return
Repaying a loan
Loan repayments may be made any time up to 36 months after the selection date (or after election day if the selection day was during or within 30 days of the election period). Authorization is not required from Elections Canada before making these payments.
If a loan is paid in full after the contestant's return is filed, but before 36 months from the selection day, (or from election day if the selection day was during or within 30 days of the election period), the campaign must file an updated return within 30 days of the payment. The updated return must also indicate the source of funds used to pay the loan.
Loan repayments made more than 36 months after the selection date (or from election day if the selection day was during or within 30 days of the election period) require authorization from Elections Canada or a judge. The requests to pay should be accompanied by evidence in the form of a campaign bank account statement, showing that the campaign has sufficient funds to make the requested payment. The authorization to pay a loan may be subject to additional terms and conditions considered appropriate by Elections Canada.
2.4 Transfers received
A transfer is a provision of funds, property or services between specified political entities of the same political affiliation. A transfer is not considered to be a contribution, and contribution rules therefore do not apply.
Transfers are permitted only between related political entities (registered party, electoral district association, candidate, leadership or nomination contestant) of the same political affiliation.
However, not all types of entities are authorized to provide all types of transfers. For a quick reference guide to eligible and ineligible transfers, see the Transfers – types and rules table in the Tables and Reminders section.
A monetary transfer is a transfer of funds. A non-monetary transfer is a transfer of property or services.
Transfers to the nomination contestant
The following transfers may be accepted by the nomination contestant's campaign:
- property or services from the registered party or any registered association of the registered party, as long as it is offered equally to all contestants
- property, services or funds from a candidate to himself or herself in his or her capacity as a nomination contestant in respect of the same election
Administering incoming transfers
The financial agent has to include the following information when reporting a transfer in the Nomination Contestant's Campaign Return:
- the full name of the affiliated political entity
- the date the transfer was received
- the amount received (monetary transfer)
- the commercial value of the property or services received (non-monetary transfer)
2.5 Other cash inflows
All monies flowing through the campaign bank account have to be reported. In addition to contributions, loans and transfers (described in the previous sections), a campaign may receive the following cash inflows: the non-contribution portion of fundraising revenue, bank interest, refunds from suppliers, the returned portion of any cash advances, the proceeds from the sale of assets, and all other sources of cash inflows.
|Non-contribution portion of fundraising revenue||The inflows recorded for fundraising activities are:
|| John Smith holds a ticketed fundraiser in support of his campaign. The ticket price for the fundraiser is $200, and the fair market value of the benefits received is $75. The contribution made by each individual ticket purchaser is $125.
The amount to be recorded as other inflow is the fair market value of the benefits received – that is, $75.
|Bank interest earned||Interest earned on the campaign bank account must be recorded as other inflow, along with the date received.||At the end of the month, the bank deposits $1.50 of interest into the campaign bank account. The financial agent has to record this amount as other inflow.|
|Refunds from suppliers||If a refund is received from suppliers, the financial agent has to record the refunded amount as other inflow.||The financial agent purchases 20 reams of paper for use in the campaign office, at a total cost of $60. Near the end of the campaign, the financial agent returns 5 unused reams of paper and receives a $15 refund from the supplier. The financial agent has to record this amount as other inflow.
The $15 is also offset from the original expense in the expenses section and classified as an amount not included in nomination campaign expenses.
|Returned cash advances||If the campaign advanced funds for travel or other expenses, the unused returned portions have to be recorded as other inflow.||The financial agent gives $200 to an authorized person for travel expenses. At the end of the campaign, there is $50 left over and the financial agent deposits this amount into the campaign bank account. The financial agent records the $50 as other inflow.|
|Sale of assets||
If the campaign sells any of its assets, the amount received has to be recorded as other inflow.The sale proceeds do not reduce the commercial value of the asset, which is reported at the lower of the purchase price or the cost to rent a similar asset.
|At the beginning of the campaign, the financial agent purchases two brand new computers at a cost of $2,000. After the selection date, the financial agent sells the two computers for the amount of $1,500. This amount is recorded as other inflow.|
Administering other cash inflows
For the inflows described in the preceding table, the financial agent has to record:
- the amount
- the date the cash inflow was received
- the provider of the cash inflow, if applicable
- a description of the cash inflow