Today Finance Minister Jim Flaherty introduced the Canadian Federal Budget 2014.  The budget had a large number of provisions dealing with non-profits and charities. Here are some excerpts from the Federal Budget in one PDF document.    Overall I was very pleased with the provisions of the budget dealing with charities.

Here are some of the highlights of the 2014 Federal Budget:

  • The Federal government has discovered that charities are important: “The Government of Canada recognizes that the charitable sector plays an essential and irreplaceable role in our society by providing valuable services to Canadians, including to those most in need.“
  • CRA will receive funds to modernize their IT.  CRA will be able to have electronic filing of T3010 Registered Charity Information Returns and charity applications.  In terms of the T3010 this will presumably help charities in filing the form and speed up the availability of the information on the CRA website.  But most importantly use of electronic filing will reduce mistakes and help CRA in the long run in terms of reducing inputting costs.  It will also hopefully allow CRA to more easily change the T3010 and have more of the content provided by charities being accessible in the CRA database.  Currently CRA sometimes limits the information on the web to save keying costs. This new IT infrastructure will be a much needed $23 million investment over five years. 
  • “To improve public awareness, the Canada Revenue Agency will establish an enhanced web presence on charitable giving trends and characteristics in Canada.”  I am looking forward to this. 
  • “To encourage Canadians to make additional donations of ecologically sensitive land, the 5-year carry-forward period for claiming these donations will be doubled to 10 years.” This may encourage slightly the giving of ecologically sensitive land as some people may not have been able to use the tax benefit in the year of donation and subsequent 5 years.  Now they can use it in the next ten years. 
  • “To further facilitate charitable giving, the trustee of an individual’s estate will be allowed increased flexibility to apply charitable donation credits against the income tax liabilities of the individual or the estate.”  This focus on bequest giving is very welcome and will help in some circumstances trustees dealing with timing and tax benefit issues. Let’s hope it encourages people to consider having a will and leaving bequests to charity. 
  • The Budget “proposes to amend the Criminal Code to allow charities to conduct lotteries through the use of modern technology.” This will save some charities some money. 
  • “The Government will continue to work with leaders in the not-for-profit and private sectors to explore the potential for social finance initiatives.” 
  • There are some interesting arts and culture funding announcements. 
  • Under the category of “Other Tax Actions to Improve Tax Integrity, Strengthen Compliance and Enhance Fairness” the Budget announces that “Deeming the value of a gift of certified cultural property to be no greater than the donor’s cost of the property, if it was acquired under a gifting arrangement that is a tax shelter.” In layman’s terms the deemed fair market provisions of the Income Tax Act will now apply to gifts of certified cultural property that are part of a gifting arrangement.  This is a response to various abusive schemes involving cultural property and CPERB and probably some very good reporting by investigative reporter David Baines of the Vancouver Sun. 
  • The budget proposes a relatively narrow new provision which gives CRA the ability to revoke or prevent the registration of an organization if they receive funds from a “foreign state listed as a supporter of terrorism”.  Currently this means Syria or Iran.  The provision is very discretionary and dependent on the facts of the situation.  “The Minister of National Revenue will take into consideration the specific facts of each case, exercising this authority in a fair and judicious manner.”  “The Canada Revenue Agency helps charities understand and meet their compliance obligations. The Agency will provide information about best practices for exercising due diligence when accepting gifts and for preventing terrorist abuse of the registration system for charities. The Canada Revenue Agency will utilize existing compliance reporting and, as such, the measure will not impose an additional reporting burden on charities.”
  • The Federal government is going to have a consultation on non-profits (that are not charities) “to ensure that the tax exemption for NPOs is appropriately targeted and not subject to abuse by organizations that claim the exemption but are not operating in the manner intended, and to ensure that reporting requirements for legitimate NPOs provide the public and the Canada Revenue Agency with sufficient information to evaluate their activities.”  The Budget states “Concerns have been raised that some organizations claiming the NPO tax exemption may be earning profits that are not incidental to carrying out the organization’s non-profit purposes, making income available for the personal benefit of members or maintaining disproportionately large reserves.”
  • The Federal Government acknowledged the limited reporting requirements of non-profit organizations and is going to review “whether sufficient transparency and accountability provisions are in place”.