28 October 1991 Internal T.I. 9127307 F - Deductibility of Civic Election Campaign 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.

24(1)

7-912730

SUBJECT:  Deductibility of Civic Election Campaign Contributions

We are writing in reply to your memorandum of September 24, 1991 wherein you asked for our comments on the deductibility of Civic Election Campaign Contributions by  24(1)

Our understanding of the facts is as follows:

Facts

1.     

2.     

3.        24(1)

4.     

5.     

Taxpayer's Position

1.      .                                                 24(1)

District Office Position

1.        The claim of  24(1)   is not deductible in computing 24(1)  income because it was not incurred for the purpose of gaining or producing income from a business or property.  In support of your position, you referred to the following:

a)     In Decelles v MNR (78 DTC 1019), it was held that a candidate for the office of city councillor could not deduct the election expenses incurred as they were not incurred for the purpose of gaining or producing income from a business or property. It was held that there was nothing in the Income Tax Act (the "Act") allowing the deduction of expenses incurred in a municipal election campaign.

b)        In Herbert L. Wisebrod v MNR (78 DTC 1581), Mr. Wisebrod, a practising solicitor in the area of municipal law, ran unsuccessfully for a municipal office.  He claimed that two or three clients had provided business to his law firm as a result of his election exposure.  He then deducted the election expenses from his income.

     The taxpayer's appeal was dismissed.  It was decided that the relationship between the election expenses and many alleged income which would have been generated as a result was too remote (emphasis added)

2.        24(1)

Our Comments

1.     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 income.  There is not, at present, any statutory authority to require candidates to include surplus funds in their income."

2.     As the contributor to a candidate in a municipal election is not making a contribution to a registered political party or to an officially nominated candidate at a federal election, the contributor is not entitled to a political donation receipt for purposes of claiming a federal income tax credit under subsection 127(3) of the Act

3.     In our view, contributors are not entitled to deduct as business expenses contributions made to candidates in municipal elections.  In addition to the two cases cited above which supports this view, we refer to the following:

a)        In Ann Stasiuk v MNR (1985 DTC 615), where Ms. Stasiuk claimed a deduction for amounts expended for political purposes, it was held that as the amounts were not paid to a registered political party or to an officially nominated candidate at an election, the amounts were not deductible.

b)        In E. F. Anthony Merchant v MNR (84 DTC 6215), where Mr. Merchant incurred expenses in an unsuccessful attempt to win an election as leader of a provincial political party, it was held that the expenses were not deductible because the campaign activities were clearly anterior to and separate from any business of leadership he might have been involved in had he won the election, ie., there was a lack of continuity between the activity of running for the leadership and operation as leader.

    In our view, the lack of continuity or remoteness between a municipal election campaign contribution made by a taxpayer and any benefit back to the taxpayer as a result of the contribution would result in the non-deductibility of the contribution because the requirements of paragraph 18(1)(a) of the Act had not been satisfied.  Accordingly, ,we agree with your position that 24(1) contributions of 24(1)   are not deductible because as gifts they have not been made or incurred by 24(1)  for the purpose of gaining or producing income from a business

We trust that these comments will be of assistance.              

G. Thornley for E. WheelerChiefServices, Public Utilities & Exempt Corporations SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch