Political Financing Handbook for Candidates and Official Agents (EC 20155) – July 2015 – Archived Content

Chapter 2 – 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
• 2.6 Gifts and other advantages

Introduction

Before the campaign begins to receive inflows, the official agent and the candidate should understand the types of inflows that can be received. This chapter defines the rules and procedures for receiving campaign inflows.

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.

Individual Contribution, Loan and Loan Guarantee Limits

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 leadership contestants in a particular contest	$1,500*	n/a
To each independent candidate	n/a	$1,500*

There are some exceptions to the limits on contributions:

• A nomination contestant is permitted to give an additional $1,000 in total per contest in contributions, loans and 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 and 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 and 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. However, this exception applies only if the payment is made by the individual who wishes to become a member of the registered party.

2.1   Contributions

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, ticketed fundraising events, auctions and draws?

In addition, this section provides basic information about how to administer contributions.

Definitions

What is a contribution?

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

Note: An employer can give an employee a paid leave of absence during an election period to allow him or her to be a nomination contestant or a candidate. The paid leave is not considered a 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.

Note: The term 'individual' used in this section refers to a Canadian citizen or permanent resident.

Any money that is used for the campaign out of the candidate’s own funds is a contribution. If the candidate obtains a loan from a financial institution for the purpose of making a contribution to his or her own campaign, the loan must be guaranteed by the personal property of the candidate.

Note: Corporations, trade unions, associations and groups cannot make contributions.

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 the use of property or money, to the extent that it is 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.

Volunteer labour

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.

2.2   Loans

Loans are used as a source of financing.

Both the candidate and the official agent have to manage campaign finances properly and ensure that all loans are repaid.

This section discusses how loans are received, reported and repaid.

Getting a loan

A candidate's campaign may receive loans from either a financial institution or an individual who is a Canadian citizen or permanent resident. Candidates may also receive loans from their registered party or a registered association of their registered party. 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 the registered party, a registered association of the party, or 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.

Loans from the registered party or the registered association

There is no limit to the amount a campaign can borrow from the registered party or from a registered association of the party. The registered party or a registered association of the party can also guarantee loans obtained from financial institutions. There is no limit to the amount the registered party or a registered association of the party can guarantee.

Loans from individuals

If an individual obtains a personal loan from a financial institution and lends those funds to a 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.

Loan interest

The official agent must report the interest rate of each loan in the loans section of the Candidate's Electoral Campaign Return.

Interest incurred on loans is an electoral 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 official 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.

Demand loan

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 candidate'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 the registered party, a registered association of the party, or 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 official 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 payments 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

2.3   Administering contributions and loans

Contribution rules

Contributor identification

Depending on the amount and type of the contribution, the contributor's personal information has to be recorded as follows:

• The official agent can accept anonymous contributions of $20 or less.
• For contributions over $20, the contributor's name has to be recorded, and a receipt must be issued.

Note: In order to issue a tax receipt, the official agent has to record the address as well.

• 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.

Ineligible contributions

The official agent is 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 official agent must not knowingly accept an ineligible contribution.

If the campaign receives an ineligible contribution, the official 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 official 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 official agent has to send an amount equal to the commercial value of the property or service to Elections Canada, payable to the Receiver General for Canada.

Anonymous contributions

If the official 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

then the official agent has to send a cheque for the amount without delay to Elections Canada, payable to the Receiver General for Canada.

Ticketed fundraising

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, if the event was during the election period, these would be considered election expenses.

Auctions and draws

Note: Please check the provincial or territorial regulations before organizing draws or other lotteries. In jurisdictions where draws are permitted, a licence from the province or territory may be required.

Below is a list of important reminders about auctions and draws:

• Any donated property or service sold at an auction is subject to the rules about contributor eligibility and contribution limits.
• If the donated property or service has a commercial value of $200 or less and it is donated by an individual not in that business, the non-monetary contribution from the donor is deemed to be nil.
• The monetary contribution made by a person at an auction is the amount paid minus the commercial value of the item purchased.
• If the property or service sold at an auction is not available on a commercial basis, the full purchase price is a contribution.
• Anyone buying a ticket for a draw is making a contribution equal to the price they pay for the ticket.

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 an arrangement is to be treated as a contribution that is subject to the contribution limit and eligibility rules.

Administering contributions

Accepting contributions

Only the official agent can accept contributions to the candidate's campaign.

Recording anonymous contributions

If anonymous contributions of $20 or less are collected during an event related to the campaign, the official 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 official agent has to keep track of the total amount plus the number of contributors.

Issuing contribution receipts

Only the candidate's official agent can provide official receipts for contributions, including receipts issued for income tax purposes.

Receipts have to be issued for each contribution over $20.

Official agents can issue tax receipts only for monetary contributions received within a specified period. The period starts from the day on which the candidate's nomination has been confirmed by the returning officer. It ends on the day that is one month after election day.

For tax receipting purposes, the date of the contribution is the date the official agent has control over the funds.

Tax receipts have to be issued on prescribed forms. The paper forms are available from Elections Canada. It is important to keep in mind that the official agent has to return all paper tax forms (copies of used pages, plus unused and cancelled receipts) to Elections Canada no later than one month after election day; otherwise the nomination deposit will be forfeited.

Alternatively, the official agent may use Elections Canada's Electronic Financial Return (EFR) software to issue all receipts, including tax receipts. One of the advantages of using the EFR software is that it makes the use of paper tax forms unnecessary and there is no risk of forfeiting the nomination deposit for not returning the tax receipts to Elections Canada on time. Please refer to the EFR User Guide for more information. The EFR User Guide can be found under the Help menu within the EFR software application. EFR is free and downloadable from the Elections Canada website.

What to keep in mind when administering contributions

As a best practice, it is recommended to only accept contributions made by way of a traceable instrument – such as a cheque or money order – that links the contributor to the contribution. Here are some important points to keep in mind when recording contributions or issuing receipts:

• Although it is recommended to only accept contributions made by way of a traceable instrument, in the event a contribution is received on a cheque from a joint bank account, it 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 be reported in accordance with that agreement.
• Contributions received before the candidate's nomination is confirmed are not eligible for tax receipts.
• 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 an electoral 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 official agent has to record and issue a receipt for a contribution of $500 and record an expense of $10.
• Although it is recommended to only accept contributions made by way of a traceable instrument, in the event 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 any 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.

Administering loans

The official 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 election day. Authorization is not required from Elections Canada or a judge before making these payments.

If a loan is paid in full after the candidate's return is filed, but before 36 months after election day, the campaign must file an updated return within 30 days of the final payment. The updated return must also indicate the source of funds used to pay the loan.

Loan repayments made more than 36 months after election day require authorization from Elections Canada or a judge. The request 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

Definition

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 and 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.

Transfer types

A monetary transfer is a transfer of funds. A non-monetary transfer is a transfer of property or services.

Transfers to the candidate

The following transfers may be accepted by the candidate's campaign:

• property, services or funds from the registered party or any registered association of the registered party
• funds from a nomination contestant who participated in the nomination contest in the same electoral district, including funds from the candidate's own nomination campaign

Note: Transfers may not be accepted from provincial parties or provincial electoral district associations. Transfers from a registered provincial division of a federal registered party are considered transfers from the registered party.

Transfers before an election

The registered party, registered association or nomination contestant may transfer funds, property or services to the candidate before the election is called provided the following conditions are met:

• the candidate has appointed an official agent
• the candidate has appointed an auditor
• the official agent has opened a bank account for the campaign

Transfers after an election

No registered party, registered association or nomination contestant may transfer funds to a candidate after election day, except to pay claims or loans related to the candidate's electoral campaign.

Therefore, it is important to verify whether a transfer is needed before accepting it.

Transfers of expenses are prohibited

It is important to differentiate between the candidate's electoral campaign expenses and the expenses of the candidate's registered party. The Canada Elections Act specifies separate expenses limits for the registered party and each of its candidates. The Act prohibits the transfer of expenses without accompanying property or services. Each entity has to report the expenses it incurred for property and services it used during the electoral campaign.

Administering incoming transfers

The official agent has to include the following information when reporting a transfer in the Candidate's Electoral Campaign Return:

• the full name of the affiliated political entity
• the date the transfer was received
• the amount of funds transferred and the commercial value of the property or services provided

Non-monetary transfers from the registered party or the registered association have to be reported even if the commercial value of the property or service received is less than $200.

Independent candidates

An independent candidate may not receive any transfers. Any property, services or funds received by an independent candidate, including his or her own funds, are governed by the rules for contributions and loans.

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.

Inflow type	Description	Example
Non-contribution portion of fundraising revenue	The inflows recorded for fundraising activities are: the contribution portion (see section 2.1, Contributions), recorded as a contribution the difference between the selling price and the contribution, recorded as other inflow	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 official agent has to record this amount as other inflow.
Refunds from suppliers	If a refund is received from suppliers, the official agent has to record the refunded amount as other inflow. The refunded amount may also need to be offset from the original election expense or candidate's personal expense, and classified as an amount not included in election expenses since it is not an expense subject to the election expenses limit.	The official 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 official agent returns 5 unused reams of paper and receives a $15 refund from the supplier. The official 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 election expenses.
Returned cash advances	If the campaign advanced funds for petty cash, travel or other expenses, the unused returned portions have to be recorded as other inflow.	The official agent gives $200 to an authorized person for travel expenses. At the end of the campaign, there is $50 left over and the official agent deposits this amount into the campaign bank account. The official 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 official agent purchases two brand new computers, at a cost of $2,000. After election day, the official agent sells the two computers for the amount of $1,500. This amount is recorded as other inflow.
Initial reimbursement of paid election expenses and candidate's personal expenses	If applicable, the initial reimbursement of paid election expenses and candidate's personal expenses received from Elections Canada should be recorded as other inflow.	The candidate received more than 10% of the valid votes cast. Later, the campaign receives the first installment of the reimbursement, which is 15% of the election expenses limit. The official agent has to record the reimbursement as other inflow.

Administering other cash inflows

For the inflows described in the preceding table, the official 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

2.6   Gifts and other advantages

Once a person becomes a candidate, there are restrictions on the gifts and other advantages that he or she may accept.

A candidate may not accept any gift or other advantage that might be seen to have been given to influence him or her as a Member of Parliament. However, a candidate may accept a gift or other advantage given by a relative or as a normal expression of courtesy or protocol.

A normal expression of courtesy or protocol is an expected act of showing thanks or politeness, such as gift exchanges with foreign delegates or the celebration of events such as holidays and birthdays.

Definition

A gift or other advantage is money, property or services provided without charge or at less than commercial value.

This definition excludes monetary or non-monetary contributions or transfers, as defined in the Canada Elections Act and in the preceding chapters of this manual.

Reporting gifts or other advantages received

The Candidate's Statement of Gifts or Other Advantages Received discloses all gifts or other advantages received from any one entity that exceed a total of $500. The benefit to the candidate is the difference between:

• the commercial value of the service or property, or the use of the property or money, and
• the cost, if any, to the candidate

Gifts or other advantages given by a relative or by non-discretionary testamentary disposition are excluded from this statement.

A relative is a person related to the candidate by marriage, common-law partnership, birth, adoption or affinity.

A common-law partnership is the relationship between two persons who are cohabiting in a conjugal relationship that has lasted for at least one year.

An affinity is a relationship other than by blood, especially a relationship by marriage or adoption.

Reporting period

The candidate is responsible for filing the Candidate's Statement of Gifts or Other Advantages Received. This document is confidential, except when required for enforcement purposes. It must be sent directly to Elections Canada within four months after election day.

The candidate is required to report gifts received between:

• the date of winning the nomination contest or the day the election is called (whichever is earlier), and
• the day the elected candidate becomes a Member of Parliament or withdraws from the election, or election day (if the candidate is not elected)

Administering gifts and other advantages

The following information needs to be recorded for gifts or advantages received:

• the nature of each gift or other advantage, its commercial value and the cost, if any, to the candidate
• the name and address of the person or entity giving the gift or other advantage
• the circumstances under which the gift or other advantage was given

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