The 2018 Budget brought forth a number of changes to individuals, families and for-profit businesses. In addition to these amendments, changes to the taxation and registration of certain charities have also been proposed.
While these changes have merit, they will have little influence on Canadian taxpayers in general, instead affecting a small segment of not-for-profits.
Firstly, the Government of Canada is looking to simplify the registration process for certain eligible donnees.
This is because, at present, two separate legislations require certain donees, such as foreign universities, to register two times.
Firstly, they must register with the Canada Revenue Agency (CRA) to be listed on the eligible donee list online and secondly they must be specified in the ITA. To simplify legislation, the government of Canada proposes to remove the legislative duplication.
The second change is the inclusion of municipalities as eligible donnees, as applied to the reduction of the revocation tax. This change could be of great value to charities that are closing their doors.
Currently, a revocation tax of 100% is applied to the net value of a charity’s assets if it is deregistered, at it’s own request or due to non-compliance. To offset this revocation tax, registered charity’s can make qualified expenditures, such as gifting assets, to an eligible donee. Currently, donnees include registered charities whose directors are at arm’s length of the charity making the expenditure.
The 2018 Budget proposes to expand the list of donees to include municipalities, on a case-by-case basis. For more information on how these changes could affect your eligible charity, contact us today.
