Financing the political process – the political contribution tax credit (September 2021)
To win elections, politicians need votes. And to run the election campaigns needed to garner those votes, they need an organization, volunteers, and money — a lot of money. To wage the current federal election, the major political parties will need to raise and spend millions of dollars. Their task of raising that money is undoubtedly made somewhat easier by the fact that Canadian taxpayers who donate money to political parties or candidates can obtain some tax benefit from doing so.
Individuals who donate to the political party or candidate of their choice may or may not be happy with the outcome of the election, but no matter which registered party or candidate they donated to, it will be possible for them to claim a federal tax credit for those donations when they file their returns for 2021 next spring.
The credit provided under the Income Tax Act is available with respect to funds contributed to either a registered political party or to candidates running in a federal election. Contributions can be made at any time, not just during an election campaign, as long as the donation is received by an official candidate or a registered federal political party or association.
While the parties which currently hold seats in the House of Commons are, of course, the most well-known, there are in fact 20 political parties registered and in good standing with Elections Canada for purposes of the 2021 federal election. They are as follows, in alphabetical order:
Animal Protection Party of Canada
Canada's Fourth Front
Canadian Nationalist Party
Christian Heritage Party of Canada
Communist Party of Canada
Conservative Party of Canada
Free Party Canada
Green Party of Canada
Liberal Party of Canada
Libertarian Party of Canada
Marxist-Leninist Party of Canada
National Citizens Alliance of Canada
New Democratic Party
Parti pour l'Indépendance du Québec
Parti Rhinocéros Party
People's Party of Canada
Veterans Coalition Party of Canada
Donations to any one of these registered parties, within prescribed limits, would qualify for the federal political contribution tax credit.
Official candidates can, of course, be running either as candidates for one of the registered parties or as independents. Elections Canada provides a list of confirmed candidates who are running in this year’s federal election and that information can be found on the Elections Canada website at https://www.elections.ca/scripts/vis/FindED?L=e&PAGEID=20.
The federal political tax credit is calculated as a percentage of donations given. However, the credit percentage decreases as contributions amounts increase, and no credit at all is given for donations in excess of $1,275. The credit percentages allowed at different contribution levels are as follows:
Contribution amount Allowable tax credit
$0.01 to $400 75% of the contribution
$400.01 to $750 $300 plus 50% of the contribution over $400
$750.01 and over $475 plus 33⅓% of the contribution over $750
The maximum credit claimable in any taxation year by a single taxpayer is $650. Once the arithmetic is worked out, it becomes clear that the maximum credit obtainable is reached once contribution levels reach $1,275.
Contribution amount Allowable tax credit
$400 × 75% = $300
$350 × 50% = $175
$525 × 33.3% = $175
Where donations exceed $1,275 in any one taxation year, no tax credit can be claimed on the “excess” donation. As well, there is no provision which allows the taxpayer to carry over any “excess” contributions to a subsequent taxation year, meaning that no credit will ever be obtainable with respect to those “excess” contributions.
Many Canadians who are committed to a particular political party or candidate volunteer their time during a nomination or election campaign — canvassing for the candidate, putting up election signs, or telephoning voters to encourage them to vote for the candidate. However, in such cases, the work must be its own reward, as no income tax receipts can be issued for most such non-monetary contributions, and consequently, no credit can be claimed for the value of any non-monetary contribution (including volunteer hours) donated.
Where a qualifying contribution is made, an official receipt must be issued in order for the tax credit to be claimed. A receipt must be issued, in paper or electronic format, for every contribution over $20.
The actual credit for qualifying donations made is claimed on the tax return for the year in which the contribution was made. The amount of the credit is calculated (according to the formula outlined above) on the Federal Worksheet, and the amount of the actual credit entered on line 41000 of Schedule 1 of the federal tax return. By the time the 2021 return is filed, of course, the election will long since have been concluded, the newly elected government will be in place in Ottawa, and the taxpayer will be in a position to assess whether it was, in fact, money well spent.