Policy Forum: Using Dual Structures for Political Activities--Charities and Non-Profits in the Same Family of Organizations

The rules in the Income Tax Act and in Canada Revenue Agency (CRA) policy limit the amount and type of political activity that registered charities are permitted to carry on. Since non-profits are not subject to these rules, organizations are known to use dual tructures to carry on political activity. In the past few years, the CRA has audited charities for their political activities, and although the audit program is being wound down, many charities remain concerned about these audits because of the significant costs involved in defending them and the risk of losing their charitable status. This article describes how dual structures are implemented, as well as the compliance issues that need to be considered for this type of planning. The authors' comments are based primarily on experience dealing with the CRA: few government documents have been published in this area, and there is little case law. Recently, a panel of experts appointed by the minister of national revenue prepared a report for the minister with recommendations on how to clarify and potentially broaden the ability of registered charities to carry on political activity. The CRA is expected to comment on the report in the coming months. It is expected that charities will continue to use dual structures to carry on political activity for the foreseeable future, since this type of planning offers various advantages.