Notice to the reader: Effective January 1, 2009, the Canada Revenue Agency (CRA) administers Ontario's corporate income tax, capital tax, corporate minimum tax, and the special additional tax on life insurers.
As a result, the Corporations Tax Act provisions described on this page and in other publications are only applicable to taxation years ending December 31, 2008 and prior.
For taxation years beginning January 1, 2009, the Taxation Act rules apply.
This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.
References: Section 36
This bulletin replaces Interpretation Bulletin 3002R published March 2004. This bulletin sets out the policy of the Corporations Tax Branch (Branch) in respect of Ontario political contributions. This bulletin is provided as a guide to taxpayers and is not intended as a substitute for the relevant legislation. Any references to legislation are to the provisions of the Corporations Tax Act (Ontario) (CTA) and its Regulations, unless otherwise noted.
Explanation of Changes
This interpretation bulletin is revised due to an increase in the contribution limits specified and the maximum deduction allowed for contributions made after December 31, 2003.
The paragraph has been expanded to clarify the non-deductibility of political contributions made outside Ontario.
Pursuant to sub-clause 36(1)(a)(iii) of the CTA, the maximum deduction allowed for political contributions in computing a corporation's taxable income for a taxation year has been increased from $15,000 to $16,800 for contributions made after December 31, 2003 and before January 1, 2009.
Paragraphs 4 and 5:
These new paragraphs describe the increase in the maximum deduction for taxation years that straddle the effective date of January 1, 2004.
This paragraph has been expanded to illustrate how the total deduction is reduced when it exceeds taxable income computed before deducting the contributions.
This new paragraph clarifies whether the deduction is reduced for short taxation years.
Former paragraph 8 has been expanded to include the current contribution limits. In accordance with clause 40.1(1)(a) of the Election Finances Act (EFA), the contribution limits are adjusted by an indexation factor every five years. For the first five-year period (1999 to 2003 calendar years), the indexation factor was 1. It has been increased to 1.12 for the next five year period effective January 1, 2004 (2004 to 2008 calendar years).
Former paragraph 9 has been revised to include the current indexation factor. The indexation factor is defined in section 40.1 of the EFA as the percentage change in the Canadian Consumer Price Index over the previous five-year period.
In addition to the above changes, we have renumbered some paragraphs and updated certain information.
Deductible Political Contributions
- Section 36 provides a deduction from Ontario net income for eligible Ontario political contributions made by a corporation. Eligible Ontario political contributions are contributions made under the EFA to Ontario parties and constituency associations or to candidates in an Ontario election.
- Ontario does not allow a deduction or tax credit for contributions made to a political party or constituency association established outside Ontario, or a candidate normally resident outside Ontario. Also, Ontario does not allow any deduction or tax credit for contributions made in respect of federal or municipal elections and candidates. However, federal political contributions may be eligible for a tax credit from the federal government and municipal political contributions may be eligible for a rebate from a municipal government. Corporations should refer to the applicable federal and municipal legislation for entitlement to such credits and rebates.
Calculating and Claiming the Deduction
- Pursuant to clause 36(1)(a), the maximum deduction allowed for political contributions in computing a corporation's taxable income for a taxation year, prior to the gross-up adjustment discussed in paragraph 7, is the least of:
- the total eligible contributions made in the current year plus any undeducted eligible contributions made in prior years,
- the corporation's taxable income for the taxation year before the deduction for eligible contributions, and
- the deduction limit which is $16,800 for contributions made after December 31, 2003 and before January 1, 2009, or $15,000 for contributions made after December 31, 1998 and before January 1, 2004.
Taxation Years Straddling January 1, 2004
- For a taxation year straddling the effective date of January 1, 2004, the deduction for the taxation year must be calculated separately for the contributions made before January 1, 2004 and the contributions made after December 31, 2003.
The following example illustrates a taxation year straddling January 1, 2004.
Corporation A has a June 30, 2004 taxation year end. Total eligible contributions are $16,500 for the taxation year, with $16,000 made before January 1, 2004 and $500 made after December 31, 2003. There are no undeducted contributions carried forward from prior taxation years.
Deduction allowed for 2003 contributions:
- the amount contributed $ 16,000
- the deduction limit $ 15,000
Deduction = $15,000
Undeducted contributions = $1,000
Deduction allowed for 2004 contributions:
the amount contributed (see Note 1) $ 500
the deduction limit (see Note 2) $ 1,800
Deduction = $500
Undeducted contributions = Nil
Note 1 The undeducted 2003 contributions ($1,000) cannot be added to the amount contributed under the 2004 calculation rather, they must be carried forward to the 2005 taxation year.
Note 2 The deduction limit for the 2004 contributions is reduced by the deduction allowed for the 2003 contributions ($16,800 - $15,000 = $1,800).
Subject to a limit for the taxable income of the corporation, the total deduction for the 2004 taxation year is $15,500 and the carry forward to the 2005 taxation year is $1,000.
Pursuant to subclause 36(1)(a)(ii), the deduction for eligible election contributions is limited to the taxable income of the corporation prior to the deduction of election contributions and may not create a loss. Any portion of eligible Ontario election contributions which cannot be deducted in a particular year can be carried forward indefinitely for deduction in subsequent taxation years.
Continuing the example from paragraph 5, with the additional assumption that the taxable income of the corporation for the 2004 taxation year is $5,000, the following illustrates how the total deduction is further reduced to the extent it exceeds taxable income computed before deducting the contributions. Any further reduction would be added to the carry forward.
The maximum deduction allowed is the lesser of:
- Total deduction allowed for the 2004 taxation year $ 15,500
- Taxable income for the 2004 taxation year $ 5,000
The total deduction for the 2004 taxation year is limited to $5,000 and the carry forward to the 2005 taxation year is increased to $11,500.
Less Than 100% Allocation to Ontario
The deduction for Ontario political contributions applies only to Ontario income. Where the corporation allocates a portion of its taxable income to other jurisdictions, a portion of the benefit of the deduction for eligible Ontario political contributions allowed in computing Ontario taxable income would be lost. To ensure that the full benefit of the political contributions deduction is recognized for Ontario tax purposes, subsection 36(3) effectively provides for a "gross-up" of political contributions. The grossed-up political contributions deduction equals:
Eligible political contributions / Ontario allocation percentage
For example, consider a corporation which made $12,000 of eligible political contributions in the year. The corporation allocates 60 per cent of its taxable income to Ontario. The grossed-up deduction for Ontario political contributions would be: $12,000 / 60% = $20,000
Short Taxation Years
- The number of days in a taxation year is not relevant for calculating the deduction of political contributions. The deduction is not reduced for a short taxation year.
Election Finances Act: Contribution Limits
- The CTA sets out the maximum amount of political contributions which may be deducted to arrive at taxable income. Subsection 18(1) of the EFA sets limits on the amounts that a corporation may contribute in any year to each registered provincial party, registered constituency association or registered candidate.
The new contribution limits along with the previous contribution limits are:
|Maximum Contributions Allowed under subsection 18(1) of the EFA
||For Calendar Years 1999-2003
||For Calendar Years 2004-2008|
|In Any Calendar Year
||During a Campaign Period
||In Any Calendar Year
||During a Campaign Period|
|To each Registered Party (Notes)
|To each Constituency Association
|To all Constituency Associations
|To each Candidate
|To all Candidates endorsed by any one party
Note 1 A campaign period is treated as a separate calendar year for contributions to a registered party; therefore, an additional $7,500 / $8,400 contribution, depending on the calendar year, is permitted to each registered party during an election.
Note 2 If a campaign period falls partly in 2003 and partly in 2004, it is deemed to fall entirely in 2003 as per subsection 40.1(4) of the EFA.
Election Finances Act: Indexation of Contribution Limits
- The maximum deduction discussed in paragraph 3 and the maximum contribution limits discussed in paragraph 10 are adjusted by an indexation factor every five years. The indexation factor is defined in section 40.1 of the EFA as the percentage change in the Canadian Consumer Price Index over the previous five-year period. The current indexation factor is 1.12 and covers calendar years 2004 to 2008 inclusive.
- Further information concerning the EFA can be obtained from:
Elections Ontario - Election Finances
51 Rolark Drive
Toronto, Ontario M1R 3B1
Telephone: 416 325-9401 or 1 800 566-9066
Facsimile: 416 325-9466
- Under the CTA, corporations are required to file official receipts with their tax return in which a deduction is being claimed. Administratively, the Ministry of Finance no longer requires this practice. However, a schedule which lists the contributions should be attached to the return and the receipts should be retained for review, if requested by the Ministry. Deductions which cannot be supported by official receipts will be disallowed.