In the past I have sworn off predicting developments relating to the charity sector, but 2013 is somewhat different in that several projects begun earlier can be expected to mature in the coming 12 months. And so, with more confidence than in past years, I present five issues that will affect the charitable sector in the upcoming year.
Finance Committee report
The 2011 federal budget adopted a previous motion by MP Peter Braid to ask the House of Commons Standing Committee on Finance to examine charitable donation incentives. At first, I was somewhat concerned that this mandate would morph into a far more wide-ranging review of the tax benefits given to the sector. And, while such concerns were raised during the hearings, it appears that for the most part, the committee stuck to the original purpose of the hearings. Nevertheless, this fear will persist until the committee releases its report in early 2013.
We do not expect any major surprises in the report – either inclusions or omissions. Fundamentally, the Finance committee has no particular reason to commit the politically difficult act of excluding any of the suggestions that were made at the hearings The difficulty in excluding ideas is twofold. First, the committee is comprised of MPs from all parties who are producing, as far as we know, only one report, so one would imagine that the report would tend to include more ideas rather than less.
Second, the final decision to implement any of these ideas lies with the Finance Minister. Assuming that the committee members do not know if any of the ideas are favourites of the Finance Minister, there is more political capital to be gained by including an idea that may find its way into the budget than not. So we would expect that all serious ideas will be included in the Finance committee report (there were not that many anyway).
In September 2012, Mr. Braid put forth a bill based on a suggestion made by the author via oral submissions to the Finance Committee. The bill, C-458 would allow donations made in the first 60 days of the year to be used against one’s taxes from the previous year. It would also make the last week of February “National Charities Week.”
Obviously, the timing is intended to coincide with the RRSP deadline. I made the suggestion because most people simply do not understand the charitable donation incentive system currently in place and it is hard to argue that an incentive is doing its job if people do not understand it. The goal in moving the deadline would be to create a season of tax-motivated giving when charities would be able to explain the incentive system to Canadians. Moving the deadline would also allow self-employed people to make donation decisions once they have a full picture of their financial situation for the previous year (this rarely happens by December 31).
Bill C-458 will move on to second reading sometime in early February. Technically it would then have 60 days to be studied in committee prior to moving on to third reading. As a private member’s bill it would be subjected to a free vote in the House of Commons.
The Finance Committee’s report should come out in plenty of time for the Finance Minister to consider its suggestions prior to finalizing Budget 2013. Given that Budget 2011 originally proposed this study, one imagines there would at least be a token inclusion of some of its ideas in Budget 2013. On the other hand, certain ideas have been suggested before (in some cases more than once) to the Department of Finance and have been resolutely rejected, so it may very well be that Budget 2013 will ignore all suggestions of the Committee. Our prediction though is that some ideas will merit serious consideration for inclusion in the budget by the Finance Minister.
We hesitate to predict any other budgetary changes which might affect the sector. It seems every year there are increasingly draconian provisions intended to clamp down on some conceivable wrong. This year there does not seem to be a particular bogeyman to attack, and so with luck, other than some good news regarding donation incentives, the budget will be silent with respect to charities.
Budget 2012 was generally quite stingy when it came to new spending. The most notable exception was an $8.5 million increase in the budget of the Charities Directorate intended to help police charities engaged in political activity. In my firm’s practice I believe that we are starting to see the use of these funds for increased scrutiny. If this preliminary interest in the activities of certain charities is any indication, 2013 will be a busy one for those organizations (and their lawyers) that have some involvement with the political system.
Social enterprise and social finance
It seems that after many years as grassroots ideals, social enterprise and social finance have finally filtered upwards to Canada’s legislative bodies. So far legislation has been passed in British Columbia and Nova Scotia attempting to ease the creation of social ventures, and the federal government is accepting applications from Canadians interested in working with them to provide public services. This may turn out to be the watershed event resulting in the more mainstream use of social finance in Canada.
Adam Aptowitzer of Drache Aptowitzer LLP is a charity law lawyer with a national practice based in Ottawa. He has been published in Canadian Taxpayer, Canadian Fundraising & Philanthropy and the Not-for-Profit News. He has also published a widely distributed study on the regulation of Canadian charities with the C.D. Howe Institute.
As a speaker, he has presented to the National Symposium of Charity Law, the C.D. Howe Institute, the Association of Fundraising Professionals, the Canadian Association of Gift Planners, the Ottawa Estate Planning Council and various large and small Canadian charities. He has also given expert advice on Parliament Hill. Adam is an executive member of the Canadian Bar Association’s Charity and Not-for-Profit Law section.
For speaking engagements and consultations, contact him at 613-237-3300 or visit http://www.drache.ca.