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Review of Budget 2017 on Charities & Not-For-Profits

Posted on Thursday, Mar 23, 2017

Canada's Budget 2017 was released on March 22nd, 2017 and tabled by William Morneau, the Minister of Finance. Budget 2017, geared towards "building a strong middle class", introduced initiatives that focus on education, ways to enable inclusivity in Canada's labour force, and a corresponding recognition that the nature of work is changing.

Only a limited number of announcements in Budget 2017 are relevant to the non-profit and charitable sectors overall. However, several announcements may be of particular interest to specific non-profit and charitable organizations in certain sectors, particularly organizations dedicated to all levels of education and to technology innovation.

All quotes contained in this notice are from Budget 2017, found here, unless stated otherwise.

Funding for Safety at Gathering Places

Budget 2017 proposes funding of $5 million over five years, starting in 2017-18, for the Communities at Risk: Security Infrastructure Program. This program specifically provides funding to non-profit organizations "to make needed security infrastructure improvements such as the installation of outdoor lighting or security cameras" in an effort to combat hate-motivated crime at gathering places of worship, educational institutions and community centres.

Expiry of First-Time Donor's Super Credit

The First-Time Donor's Super Credit was a temporary, non-refundable credit designed to encourage charitable donations by allowing a first-time donor to effectively add 25% to their Charitable Donation Tax Credit for up to $1000 of monetary donations. The First-Time Donor Tax Credit was available for donations of money made after March 20, 2013 and will expire in 2017.

Budget 2017 has reaffirmed that the first-time donor's super credit will be allowed to expire, and cites "low take-up, small average amounts donated, and the overall generosity of existing tax assistance for charitable donations" in support of their decision.

Changes to the Ecological Gifts Program

Budget 2017 proposes a number of changes to taxation in order to ensure a fair taxation system for Canadians and crack down on tax evasion and tax avoidance. It also focuses on the protection of ecologically sensitive areas. Of potential impact to charities and non-profits is the proposed changes to the Ecological Gifts Program, discussed in the Supplementary Information on Tax Measures.

In order to ensure donated land is not subsequently used for other purposes, organizations that receive ecogifts must pay a 50% tax if they wish to change the use of the property or dispose of it without the consent of Environment and Climate Change Canada ("ECCC"). The Budget 2017 Supplement proposes to close a loophole that allows organizations to avoid that tax if there is consideration exchanged in the transfer (ie. the organization pays something for the property). The change proposes that the 50% tax would be applicable regardless of whether there was consideration in the transfer or not.

Additional changes to ecogifts include:

  • The ECCC has discretion to determine if the proposed change in the use of ecologically sensitive property would degrade conservation protection.
  • The ECCC is required to approve ecogifts to municipalities and municipal and public bodies performing a function of government
  • Private foundations are no longer eligible to receive ecogifts
  • Personal servitudes donated in Quebec may qualify as ecogifts in certain situations

 Dedicated Support for Housing Projects

Budget 2017 introduced a National Housing Strategy, in which the government's commitment to affordable housing in Budget 2016 was increased from the $2.2 billion over two years to the 2017 Budget commitment of $11.2 billion over 11 years. This commitment is for "a variety of initiatives designed to build, renew and repair Canada's stock of affordable housing and help ensure that Canadians have affordable housing that meets their needs."

The National Housing Strategy will include a $5 billion investment over 11 years to a new National Housing Fund which will provide capital contributions, low-cost loans, and other funding for construction, renewal, and innovation in the affordable and social housing sectors. The National Housing Fund will establish the Affordable Rental Housing Financing Initiative, a Sector Transformation Fund, and a Technical Resource Centre.

Also included in the National Housing Strategy is $225 million over 11 years to "provide financial support to housing providers serving Indigenous Peoples not living on-reserve" and $2.1 billion over 11 years "to expand and extend funding for the Homelessness Partnering Strategy".

More details about the National Housing Strategy and its associated initiatives is expected to be provided later in 2017.

No Additional Deductions for Corporation's Donated Medicine

Budget 2017 announced the proposed repeal of an additional tax deduction that was "available to corporations that donate medicine to eligible registered charities". This deduction was originally introduced in Budget 2007 as the provision of "a tax incentive for companies to participate in international programs for the donation of lifesaving medicines, such as those to combat AIDS and tuberculosis, to the developing world."

The removal of this additional deduction is cited in Budget 2017 as the result of "high compliance costs for charities and very low take-up". However, corporations will continue to be eligible for the deduction of "the fair market value of donated medicine", in accordance with the standard tax deductions available for corporation's non-cash gifts.

Support for Culture & Accessibility

Budget 2017 proposed to provide the following in support of culture and accessibility:

  • $300 million over 10 years to the Canada Cultural Spaces Fund to "help support the development of Canadian talent, and support entrepreneurialism in the arts and cultural communities".
  • $80 million over 10 years "to support the construction of community educational infrastructure in official language minority communities" to protect the language and culture of local official language groups
  • $77 million over 10 years "to expand the activities of the Enabling Accessibility Fund" to enable eligible accessibility projects such as the construction and renovation of infrastructure, the provision of accessible information and communication technologies, and retrofitting vehicles. Past projects supported by the Enabling Accessibility Fund include a large-scale accessibility retrofit of the Siloam Mission in Winnipeg and a new accessible reception desk and change table for London, Ontario's Boys and Girls Club.

Support for Research & Innovation

Budget 2017 provides an overview of federal investments in post-secondary research and research training for 2016-17. This includes $340 million "for equipment and facilities for post-secondary institutions, research hospitals, and other not-for-profit institutions".

Budget 2017 also introduced or expanded several programs that provide funding to non-profit organizations pursuing technological and innovative projects. The actual criteria that will be used in order to distribute the proposed financial support, however, is not provided in the budget document.

  • $29.5 million over five years is proposed to create a Digital Literacy Exchange program to "support non-profit organizations to implement initiatives that teach basic digital skills … [to] vulnerable groups such as low-income individuals and families, and seniors".
  • $22.3 million over five years is proposed to create an Accessible Technology Development program to "co-fund innovative projects led by private sector firms, non-profit organizations and research institutes, to develop new assistive devices and technologies" for people with disabilities to be able to "more fully participate in the digital economy".
  • A new Impact Canada Fund will be created to support "innovators from the private sector, non-profit organizations and social enterprises" to develop innovative solutions to clean technology ($75 million over two years) and smart cities ($300 million over 11 years).
  • $50 million over two years is proposed to "launch a competitive process through which digital skills training organizations can apply for funding" to teach school-age children, from kindergarten to grade 12, to code.
  • $225 million over four years, starting in 2018-19 and $75 million each year thereafter will be used to "establish a new organization to support skills development and measurement in Canada". This as-yet unknown organization will be tasked with "working in partnership with willing provinces and territories, the private sector, educational institutions and not-for-profit organizations" to identify skills employers are looking for in employees, develop "new and innovative approaches to skills development" and share their findings.

Support to Specific Youth Education Organizations

The government has undertaken to provide funding to several specific charitable organizations in furtherance of education:

  • $38 million over four years is dedicated to support Pathways to Education Canada, a charity dedicated to providing "academic, social and financial supports" needed for youth in lower-income communities to graduate high school and transition to post-secondary institutions.
  • $5 million per year for five years is dedicated to inspire, conditional on the charity raising $3 million per year from the private sector, in order to help Indigenous students attend post-secondary education.
  • $221 million over five years is dedicated to Mitacs, "a not-for-profit organization that builds partnerships between industry and educational institutions" to provide work-integrated learning placements (ie. work experience) for post-secondary students and graduates.
  • $14 million over two years is dedicated to Futurpreneur Canada, "a national not-for-profit organization that helps young entrepreneurs by providing them with mentorship, learning resources and start-up financing".

For More Information

For more information, visit the Government of Canada's Budget 2017 website here or download and read the Budget Plan, Supplementary Information, Fact Sheets, previous budgets and other documents here.

 

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