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HIGHLIGHTS OF BUDGET 2016 FOR CHARITIES

Posted on Thursday, Mar 24, 2016

On March 22, 2016, Finance Minister Bill Morneau tabled the federal government’s 2016 budget (“Budget 2016”). Although many of the funding announcements will be of interest to particular sectors within the wider charitable and non-profit sector, Budget 2016 contains few announcements applicable to the sector as a whole. The few points of interest are summarized below.

Excise tax on donations to charities

Under the Income Tax Act, if a donor provides a donation to a registered charity and receives property or services in return, the registered charity is permitted to provide a donation receipt for the amount of the donation that exceeds the value of the goods or services received by the donor. Under the Excise Tax Act, if a donor provides a donation to a registered charity and receives goods or services in return, GST applies to the full value of the donation.

In order to bring the Excise Tax Act more in line with the Income Tax Act, Budget 2016 proposes that if a donor provides a donation to a registered charity and receives property or services in return, GST will only apply to the value of the property or services received by the donor. These changes will apply where GST was not already exempt.

No exemption from capital gains tax

The 2015 federal budget proposed to provide an exemption from capital gains tax for certain dispositions of private corporation shares or real estate if the cash proceeds from disposition were donated to a registered charity or other qualified donee within 30 days. Budget 2016 confirms that the federal government does not intend to implement this 2015 proposal.

Increased funding for Canada Revenue Agency (CRA)

Budget 2016 proposes to improve client services at the CRA by providing the department with id="mce_marker"85.8 million over five years. The additional funding is intended to improve service delivery by enhancing telephone services and reducing wait times; revamping CRA correspondence to make it more straightforward and easier to read; providing additional help to lower-income individuals in completing their tax returns; and providing more timely resolution of taxpayer objections.

In addition, Budget 2016 proposes that the funds also be used for consultations between the CRA, the Department of Finance, charities, and other stakeholders in order to clarify the rules governing the political activities of charities. Clarification of these complex rules should be much welcomed by the charitable sector.

For more information, Budget 2016 can be read here. Information on the Budget 2016 tax measures can be read here.

 

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