Site MenuRecommendations of the Chief Electoral Officer of Canada to the House of Commons Standing Committee on Procedure and House Affairs Respecting Specific Issues of Political Financing
2. Membership Fees and Tax Credits
Summary of Section
This section:
- notes the status of membership fees in a registered party or registered electoral district association as contributions under the Canada Elections Act;
- discusses the existing exemption for nominal fees paid by an individual for his or her own membership in a registered party; and
- discusses when one person may pay the membership fees of another in a registered party or registered electoral district association.
It recommends:
- that the Act be amended to expressly prohibit one person from paying the membership fees of another in a registered party or registered association.
Current Law
Membership Fees as Contributions Under the Canada Elections Act
As set out in Elections Canada Information Sheets 20 and 21, fees for membership in a registered party or a registered association currently constitute "contributions" for the purpose of the Canada Elections Act.
Payment of Membership Fees Must Comply With Statutory Requirements Respecting Contributions
Because the payment of membership fees, other than those minimal fees referred to in subsection 404.2(6), constitute making a contribution those payments must comply with the requirements of the Act respecting contributions – eligibility, caps and disclosure.
Operation of a Limited Exemption for Certain Memberships
As noted above, membership fees that meet the criteria specified in subsection 404.2(6) of the Act will not constitute contributions if they meet the criteria specified in that provision.
In order to fall within the exception set out in subsection 404.2(6), the following criteria must be met:
- The membership must be paid by an individual.
- The fee must be related to that individual's own membership.Footnote 1
- The individual must otherwise be eligible to make a contribution.Footnote 2
- The fee must not amount to more than $25 for a single year's membership.
- Memberships for a period of years can be purchased within a single year provided that the individual is not at any time a paid-up member for more than five years.
- The membership fee must be paid out of the individual's own resources.Footnote 3
The payment of any fee for membership in a registered party that does not meet these criteria constitutes a contribution. It must comply with the requirements of the Act respecting contributions, including those respecting eligibility, caps and disclosure.
Restricting the existing membership fees exemption in this way to only nominal amounts paid by an individual for his or her own membership ensures that membership fees cannot be used to avoid contribution caps or the eligibility rules.
Paying the Fee for the Membership of Another
Because the payment of membership fees constitutes making a contribution, the payment of one person's membership fee by another, including the payment of membership fees in bulk, is subject to the provisions of the Canada Elections Act respecting the making of contributions.
If the payment of the fee for membership in a registered party breaches any of the rules respecting contributions, that payment is prohibited under the Act.
Prohibition Against Indirect Contributions
Section 405.3 of the Act prohibits the making of indirect contributions. It provides that:
"No person or entity shall make a contribution to a registered party, a registered association, a candidate or a leadership contestant or a nomination contestant that comes from money, property or the services of any person or entity that was provided to that person or entity for that purpose."
Section 405.3 prohibits a person from making a contribution using another's money that was given to the person for that purpose. As a consequence, section 405.3 operates to prohibit an individual from either:
- purchasing a party membership directly using money that was given to the individual by another for that purpose; or
- permitting another person or entity to purchase a membership in the individual's name using the other person's or entity's money where the person in whose name the membership is purchased is reported as the contributor.
Any person or entity who contrives to provide the money for the purpose of paying for the memberships of others in the registered party without being reported as the actual contributor can also be included as a party in any prosecution of the person who permitted his or her membership to be paid by another contrary to section 405.3 (s. 21 Criminal Code).
Where any person or entity uses his, her or its own funds to pay the fee for the membership of another in a registered party, the person or entity paying the fee is the contributor. That person must be eligible to make contributions to the registered party, he or she must be reported as the contributor, and the payment will count toward that person's contribution cap.
Statutory Anti-Avoidance Prohibitions
Payment of the fee for the membership of another in a registered party without disclosing oneself as the contributor of the money can also amount to a breach of the anti-avoidance provisions of the Act found in section 405.2 both by the person providing the money and the person for whom the membership fee is being paid. For more information respecting anti-avoidance, see Elections Canada Information Sheet 9, Anti-avoidance Provisions in Relation to Contributions.
Eligibility
The person who provides the money for the payment of the fee for someone's membership in a registered party (who must be reported as the contributor) must be eligible to make contributions to a registered party. Thus, the fees for membership in a registered party can be paid only by individuals who are citizens or permanent residents as defined in subsection 2(1) of the Immigration and Refugee Protection Act.
Treatment Afforded the Legal Payment of Membership Fees by Persons Other Than the Member
If the Payment Is Made by Some Other Person
Where a person other than the member legally pays the fees for the membership of another in a registered party, the payment will be a contribution by the person who pays and will be subject to his or her contribution caps and the other rules respecting contributions, including those relating to eligibility and disclosure.
If the Payment Is Made Through a Leadership or Nomination Campaign Account
Because the payment of a membership fee is a contribution, the payment of those fees by a nomination contestant or a leadership contestant through a nomination campaign account or leadership campaign account will not constitute a nomination or leadership campaign expense. Rather, as paragraphs 404.2(3)(a) and (b) of the Act provide that the provision of funds from a nomination contestant or a leadership contestant to a registered party is not a contribution but a transfer, the payment of those membership fees in the registered party through the relevant campaign account will be treated as a transfer from the contestant to the registered party and will not be subject to any monetary limits. The transfer must be reported as such in the relevant returns of the nomination contestant (s. 478.23(2)(h)) or the leadership contestant (s. 435.3(2)(g)) and the registered party (s. 424(2)(h.2)) or registered association (s. 403.35(2)(g)).
Recommendations
No Extension of Existing Exemption
There should be no extension of the current limited exemption of membership fees from the concept of contribution. Creating an extended exemption for membership fees in excess of the current nominal amount would potentially create a funding mechanism for registered parties and a means to purchase influence outside of the controls of the Canada Elections Act. Such an extension of the existing limited exemption for nominal membership fees from the rules respecting contributions could, depending on the extent of the extension, provide the means for corporate or other ineligible money to flow to registered parties or registered electoral district associations, provide the means whereby money and other resources could flow outside of the contribution caps, and exempt such flows of political donations from the disclosure rules.
Also, to the extent that such fees constitute contributions they are eligible for income tax credits. This complements the overall purpose of the political tax credit of encouraging individuals to participate in the political process. Excluding membership fees generally from the concept of contributions would disqualify them from the income tax credit available respecting contributions to political parties and electoral district associations.
Remove Ability for One Eligible Entity to Pay the Membership Fees of Another
As noted above, the Canada Elections Act does not currently prohibit one person, who is otherwise eligible, from paying the membership fees of another in a registered party or a registered association provided that the person who actually pays the fee is reported as the source of the payment.Footnote 4 Such payments would constitute contributions by the person actually paying the fees and would be subject to that person's contribution caps.
However, while such payments do not offend the strict letter of the Canada Elections Act they offend the spirit of that law. This legal ability can be exploited by nomination and leadership contestants to purchase memberships for others as part of their nomination or leadership contests. Canadians have a right to assume that all new political recruits actually want to join a registered party or registered electoral district association and that they paid their own way.
Despite the legality of the current ability that opens the door to the purchase of bulk memberships as part of nomination or leadership campaigns, this is a practice that Canadians do not condone.
For that reason, the Canada Elections Act should be amended to prohibit the payment of one person's membership fees in a registered party or registered electoral district association by another.
Return to source of Footnote 1 The English version of subsection 404.2(6) refers to "The payment by an individual ... for membership in a registered party". The French version is clearer and refers to "le droit d'adhésion ... qu'un particulier paye ... pour être membre d'un parti enregistré."
Return to source of Footnote 2 This is implicit in subsection 404.2(6). The purpose of subsection 404.2(6) was to permit an individual to buy a membership in a registered party without having that contribution count toward the person's contribution cap. It was not intended to provide the means to avoid the rules respecting eligibility rules relating to contributions.
Return to source of Footnote 3 This is also implicit in subsection 404.2(6). Absent such an implication, the exception in subsection 404.2(6) would provide a simple means whereby ineligible entities could avoid the eligibility restrictions by funding memberships. The contribution caps could be avoided through similar funding arrangements. Parliament expressly provided in section 405.3 that contributions cannot be made using money, property or resources of another given to one for that purpose. It would not have intended subsection 404.2(6) to operate as a broad exception to that principle.
Return to source of Footnote 4 Payment of a membership fee for one person without reporting the true source of financing would amount to the making of a contribution that comes from the money of another that was provided for that purpose contrary to section 405.3 of the Canada Elections Act.