ISSUE SHEET
TRUST FUNDS OF POLITICAL PARTIES
Issue
24(1)
Response
I NOTE THAT THIS ISSUE RELATES TO PROVINCIAL TAX ONLY. THE FEDERAL INCOME TAX ACT DOES NOT GOVERN THE MANNER IN WHICH A POLITICAL ORGANIZATION MAY EXPEND ITS FUNDS. THIS IS THE RESPONSIBILITY OF THE CHIEF ELECTORAL OFFICER OF THE PARTICULAR JURISDICTION.
THE TAXABILITY OF A TRUST IS A DETERMINATION INDEPENDENT FROM THE TAX STATUS OF A REGISTERED POLITICAL PARTY. THE CONFIDENTIALITY PROVISIONS OF THE INCOME TAX ACT PROHIBIT THE FROM DISCUSSING THE TAX STATUS OF ANY PARTICULAR TRUST.
Background
24(1)
* The Income Tax Act does not specifically regulate the operations or expenditures of political organizations (except with respect to the issuance of official receipts for contributions to federal parties). The 19(1) is responsible for regulating disbursement made by a registered party in the province, however, the relevant legislation does not govern in any material way the manner in which a political organization may expend its funds. Registered Canadian political parties (federal and provincial) are generally considered to be tax-exempt non-profit organizations.
* A trust is considered to be a taxpayer separate and distinct from its settlor or beneficiary. It is deemed to be an individual for tax purposes. The income of the trust is subject to the maximum federal tax rate of 29 percent (plus provincial tax). However, a trust is entitled to deduct, income that is paid or payable to a beneficiary. The income deducted, in turn, would be included in the income of the beneficiary generally as property income. The trust document will determine the specifics of income
* In the present case we are not given the complete facts. We are not aware who the settlor of the trust is, how the trust was settled, or who the beneficiaries are. Consequently we are not able to determine if the trusts referred to above are taxable, or if all the income of the trust has been paid or designated to beneficiaries, in which case the taxability of the particular beneficiary would have to be determined.
Approved by ADM_____________
For further information contact: Name: L. HollowayPhone: 957-2104November 6, 1990