10 July 2008 External T.I. 2008-0278411E5 - Eligible Amount of Monetary Contributions

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.

Principal Issues: How is the eligible amount of a monetary contribution determined where a person who makes a monetary contribution to a party becomes entitled to a ticket to the party's annual convention.

Position: The eligible amount of a monetary contribution for purposes of the proposed amendments to subsection 127(3) of the Income Tax Act would be the amount of the person's monetary contributions to the party in the year, less the fair market value of any advantages that the person or persons not dealing at arm's length with the person became entitled to receive or enjoy in connection with having made the monetary contributions.

Reasons: Proposed legislation.

								2008-027841
XXXXXXXXXX 						Alison Campbell
(613) 957-8982
July 10, 2008

Dear XXXXXXXXXX :

Re: Tax Receipts for Political Contributions

We are writing in reply to your letter to XXXXXXXXXX , a copy of which was set to us for our views on the tax receipts which may be issued to persons making monetary contributions to the XXXXXXXXXX (the "Party") in XXXXXXXXXX , and who will also be attending the XXXXXXXXXX (the "Convention").

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency ("CRA").

A general summary of the rules in the Income Tax Act (the "ITA"), that provide for tax credits in respect of political contributions are as follows:

1. Subsection 127(3) of the Income Tax Act (the "ITA"), provides a graduated credit that reduces the federal income tax of contributors to registered political parties and officially nominated candidates at federal elections. Currently, the amount of the credit is based on what is referred to in subsection 127(3) of the Act as "the total of all amounts each of which is a monetary contribution referred to in the Canada Elections Act, made by the taxpayer in the year to a registered party,..."

2. A proposed amendment to subsection 127(3) of the ITA which, if it receives royal assent in its current form will apply to monetary contributions made after December 20, 2002, will change the phrase "the total of all amounts each of which is a monetary contribution referred to in the Canada Elections Act..." to "the total of all amounts each of which is the eligible amount of a monetary contribution that is referred to in the Canada Elections Act..."

3. In general terms, the "eligible amount of a monetary contribution" is defined by proposed subsection 248(31) of the ITA to be the amount by which the monetary contribution exceeds the amount of the advantage, if any, received in respect of the monetary contribution.

4. The term "advantage" in respect of a political contribution is very broadly defined in proposed subsection 248(32) of the ITA to include the value, at the time the monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal with the taxpayer at arm's length, has received, obtained or enjoyed, or is entitled either immediately or in the future and either absolutely or contingently, to receive, obtain or enjoy, that is in consideration for or in gratitude for the monetary contribution, or in any other way is related to the monetary contribution.

It is our understanding that under subsection 2(1) of the Canada Elections Act (the "CEA"), a "monetary contribution" is defined to mean "an amount of money provided that is not repayable", and a "contribution" is defined to be a "monetary contribution" or a "non-monetary contribution." We also understand that, pursuant to subsection 404.2(7) of the CEA, where an individual makes a payment of fees to attend an annual, biennial or leadership convention of a particular party, that payment is a contribution to the party.

Based on the proposed legislation outlined above, and our understanding of subsections 2(1) and 404.2(7) of the CEA, it is our general view that any person who made a monetary contribution to the Party in the year, and as a consequence was entitled to or became entitled to a ticket to the Convention, will have received an "advantage" referred to in proposed subsection 248(32) of the ITA. The amount of the advantage, which must be subtracted from the amount of the monetary contributions in determining the eligible amount of monetary contributions, as defined in proposed subsection 248(31), is the fair market value of the meals and refreshments and any other such benefits which may be made available to attendees at the Convention.

We hope that our comments will be of assistance to you.

Yours truly,

F. Lee Workman
Manager
Charitable and Financial Institution Sectors
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch