On March 22, 2016 Canadian Finance Minister Bill Morneau introduced the first Federal Budget of the Trudeau Liberal Government. The budget included a deficit of approximately $30 billion dollars which grabbed much of the attention.
There are many parts to the budget which will have tremendous impact on the charity sector. There were huge investments by the Liberals in many areas that charities are involved in such as helping the poor, education, health care, foreign aid, medical research, affordable housing, the environment, arts and culture. Many subsectors will be either pleased or very pleased with some of the budget announcements.
As well the Canada Child Benefit will be revamped and more generous for lower income families, the Disability Tax Credit will be increased, and Canada Student Grants will be increased which will help people access college and university. The Youth Employment Strategy will be increased which will help youth find jobs. There were also promises to provide greater transparency in the way the Federal government operates.
Just as importantly this was not an austerity budget with huge cuts to social services or downloading to provincial or municipal governments as we have seen in other countries (and in Canada) and which could have had a decidedly negative effect on charities and those they serve.
In terms of the broader sector, there was very little information provided on tax incentives for donations and the regulation of registered charities. Keep in mind that the Liberals had in December 2015 previously announced a major tax incentive for those who donate to charity and whose earnings are over $200,000.
Probably the most substantive announcement that we found in the budget related to donations of real estate and shares of private corporations:
“DONATIONS OF REAL ESTATE AND SHARES OF PRIVATE CORPORATIONS
Budget 2015 included a proposal to provide, beginning in 2017, an income tax exemption in respect of capital gains on certain dispositions of private corporation shares or real estate, where cash proceeds from the disposition are donated to a registered charity or other qualified donee within 30 days. Budget 2016 confirms that the Government does not intend to proceed with this measure.” [our emphasis]
Essentially the Liberals are not extending the generous treatment that appreciated marketable securities receive to donations linked to the sale of real estate and private corporations. However, they are also not rolling back other generous tax incentives. Perhaps they thought that the increase in tax incentives for donations that help those earning over $200,000 was enough for one budget. The Liberals did not adopt the Imagine Canada Stretch Tax Credit.
Charities and political activities were also mentioned, however, it appears the Liberal government has made a commitment to consult on clarifying the rules surrounding political activities, but has not made a commitment to any changes in the rules:
“Pertaining to rules governing charities and their political activities, the CRA, in consultation with the Department of Finance, will engage with charities through discussions with stakeholder groups and an online consultation to clarify the rules governing the political activities of charities.”
The Liberals plan to continue to allow charities to invest in limited partnerships as provided in the 2015 budget.
The Liberals have also made a commitment to improve CRA client services and hopefully this will filter down to the Charities Directorate. The charitable sector is unfortunately experiencing extremely long wait times with CRA right now for charity applications and written requests to client services.
There was no mention of the NPO Risk Identification Project which dealt with the regulation of non-profits that are not registered charities and presumably it will proceed.
Mark Blumberg is a partner at Blumberg Segal LLP in Toronto, Ontario. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit www.canadiancharitylaw.ca or www.globalphilanthropy.ca
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
