21 February 2001 External T.I. 2000-0051515 - MUNICIPAL ELECTION CAMPAIGN FUND

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues

Must a municipal alderman who will no longer seek re-election in an upcoming city election and has been given legal advice that she can keep the campaign funds accumulated to date include the contributions as income when and if she takes the funds?

Position TAKEN
No

REASON FOR POSITION TAKEN

Municipal election contribution funds are not regulated by the Income Tax Act and the contributors are not allowed deductions for tax purposes.

XXXXXXXXXX 2000- 005151
C. Tremblay, CMA
February 21, 2001

Dear XXXXXXXXXX,

Re: Municipal Election Campaign Fund

This is in reply to your letter of October 11, 2000, and further to a telephone conversation (XXXXXXXXXX\Tremblay) of January 12, 2001. We also acknowledge receipt of additional information on February 15, 2001, concerning campaign funds of a municipal alderman for the City of XXXXXXXXXX.

You advise us that the alderman has raised campaign funds on a continual basis since XXXXXXXXXX and has approximately $XXXXXXXXXX left over in a campaign fund. The funds over the years have earned interest and the alderman has included this interest in income. The alderman may not run in the next municipal election and has been told that from a legal perspective she can retain the funds. You seek our opinion on whether or not she needs to include in income any surplus amount in the campaign fund that will be returned to her.

Our Comments

The particular circumstances described in your letter on which you have asked for our views are a factual situation involving a proposed transaction, and as explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following comments which may be of some assistance to you.

The Income Tax Act (the "Act") does not specifically regulate the income or expenditures of candidates in municipal elections. Generally, in our view, contributions to candidates in municipal elections are considered to be gifts. As such they are not income to the candidate from employment, business or property and there is no statutory authority to require candidates to include surplus funds in their income.

In a municipal election, the contributors are not entitled to political donation receipts under subsection 127(3) of the Act, as they are not contributing to a registered political party or a candidate in a federal election, as provided in that subsection. Further, the contributors are not allowed to deduct contributions made to the candidates in municipal elections as business expenses regardless of whether the contributions are made by individuals or by corporations.

We trust our comments will be of assistance

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

- 2 -