Federal Budget 2024: Charity Highlights

There are some important updates for charities in the 430-page, $40B deficit-predicting Federal Budget 2024 and accompanying Supplementary Information released earlier this week.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is meant to ensure that individuals and trusts pay at least a minimum level of tax. It generally targets high-income earners who use strategies and structures to pay preferred (e.g. lower) tax rates due to credits and/or deductions.

Budget 2023 had already proposed a number of changes to the AMT, including:

• Raising the capital gains inclusion rate for donations of publicly listed securities from 0% to 30%
• Including the capital gains on gifts of capital property to charities at a rate of 100%
• Reducing the basic minimum non-refundable tax credits to 50%, down from 100%

Raise Charitable Donation Tax Credit to 80%

• Budget 2024 proposes to modify these changes by allowing individuals to claim 80% (instead of 50% as mentioned above) of the Charitable Donation Tax Credit when calculating AMT.

Exempt Certain Trusts that Benefit Indigenous Groups

Budget 2024 also proposes to modify the AMT by exempting certain trusts that benefit Indigenous Groups, including registered charities or non-profits that are organized and operated primarily for health, education, social welfare, or community improvement for the benefit of the members of an Indigenous group. There are a number of requirements that must be met for the exemption to apply.

The government is inviting stakeholders to participate in a consultation on exemptions for Indigenous settlement and community trusts. Email your submissions to the Department of Finance Canada, Tax Policy Branch at consulation.legislation@fin.gc.ca by June 28, 2024

The AMT amendments would apply to tax years that begin on or after January 1, 2024 (see supplemental information, p 9-11).

Donation Receipts

Budget 2024 proposes to remove the requirement that official donation receipts contain:

• Place receipt was issued (s 3501(1)(d))
• Name and address of appraiser, if donated property has been appraised (s 3501(1)(e.1)(iii))
• Donor’s middle initial (s 3501(1)(g))

Charities could also mark donation receipts as “void” instead of “cancelled” if the receipt is spoiled (s 3501(5)). Charities would not have to store the “void” receipt with a duplicate copy.

Proposed changes would expressly permit charities to issue electronic donation receipts. Electronic receipts need to:

• Contain all the required information
• Be issued in a secure and non-editable format
• Be kept in electronic copy by the charity

These changes would apply upon Royal Assent (see supplemental information, p 15-16).

CRA – Electronic Communication

Budget 2024 proposes changing how Canada Revenue Agency (CRA) is allowed to communicate with charities.

If a charity has chosen to receive information from CRA electronically, certain official notices can also be sent electronically. For example, notices of intention to revoke, annul or suspend registration, or other compliance-related notices.

If a charity has not chosen to receive information from CRA electronically, official notices would still be sent by registered mail.

Budget 2024 also proposes to make revocation of a registered charity or other qualified donee effective upon publishing an official notice of revocation on a government webpage. Currently, these notices are effective upon publication in the Canada Gazette.

Budget 2024 also proposes to remove the requirement that certain objections be addressed directly to the Assistant Commissioner of the CRA’s Appeal Branch.

These changes would apply upon Royal Assent (see supplemental information, p 14).

CRA – Call Centre Wait Times

Budget 2024 proposes to provide CRA with $336M over two years, starting in 2024-25 to maintain call centre resources and improve its call centre efficiency (p 345).

CRA – Online Services

Budget 2024 proposes to create a single sign-in portal for federal government services. Budget 2024 allocates to Employment and Social Development Canada $25.1M over 5 years, starting in 2024-25 for this project (p 345).

CRA – Information Requests

Budget 2024 proposes to enhance CRA’s information-gathering and compliance-enforcement power. It would create:

• A new type of notice of non-compliance to a person who has not complied with a requirement to give CRA assistance or information. For each day that the notice is outstanding, a person could be fined $50, up to a maximum of $25,000. If the notice of non-compliance is vacated by either CRA or the Court, the penalty would not apply.
• The ability for CRA to require information (oral or written) to be provided under oath or affirmation.
• Penalties for taxpayers who do not comply with CRA information requests. The current consequence is a contempt order, which Budget 2024 describes as “time consuming to obtain”, “not effective”, and “does not generally impose a material financial cost on the taxpayer.” The new penalty would be equal to 10% of the tax payable for tax years relating to the compliance order; however, the penalty would only be applied if tax owing in one of the years was more than $50,000.

These changes would come into effect on Royal Assent of the enacting legislation (see supplemental information, p 31-32).

CRA – Reassessment Limitations

Budget 2024 proposes to expand “stop the clock” rules whenever a taxpayer seeks judicial review (goes to court) of any requirement or notice issued to the taxpayer by CRA in relation to an audit and enforcement process, or during any time when a notice of non-compliance is outstanding.

This means that CRA’s reassessment time period is extended by the amount of time it takes the court to make a decision on the issue.

These changes would come into effect on Royal Assent of the enacting legislation (see supplemental information, p 32).

Foreign Charities Registered as Qualified Donees

Foreign charities can be temporarily registered as a qualified donee for a 24-month period if it has received a gift from His Majesty in Right of Canada, and the charity is providing urgent humanitarian aid, relief activities in response to a disaster or activities in Canada’s national interest.

Budget 2024 proposes expanding the eligibility period from 24 to 36 months. It would also require foreign charities to submit an annual information return to CRA with total amounts of receipts issued to Canadian donors, total amount of gifts from qualified donees, and how those funds were used. This information would be made public.

These changes would apply to foreign charities registered after Budget Day (see supplemental information, p 14).

Funding

International Humanitarian Assistance

Budget 2024 proposes to provide an additional $350 million over two years, beginning in 2024-25, to Global Affairs Canada to enhance Canada’s ability to respond to large-scale and deteriorating humanitarian crises around the world (p 322).

Community Sports

Budget 2024 proposes to provide $15 million over two years, starting in 2024-25 to the Department of Canadian Heritage to help support community sport programming and reduce barriers to sport participation (p 237).

Security Infrastructure Program

This program provides funding to organizations to protect communities at risk of hate-motivated crime by enhancing physical security at their gathering spaces such as community centres, places of worship, day schools, and other institutions.

Budget 2024 also proposes to provide $32 million over six years, starting in 2024-25, and $11 million ongoing, for Public Safety Canada to further enhance the Security Infrastructure Program (p 233).

Religion: Antisemitism and Islamophobia

Budget 2024 proposes to provide $7.3 million over six years, starting in 2024-25, with $1.1 million ongoing, to the Department of Canadian Heritage to support the Special Envoy on Preserving Holocaust Remembrance and Combatting Antisemitism.

Budget 2024 proposes to provide $7.3 million over six years, starting in 2024-25, with $1.1 million ongoing, to the Department of Canadian Heritage to support the Special Representative on Combatting Islamophobia (p 232).

Non-Profit Housing

Budget 2024 announces the government’s intention to introduce flexibilities to the Federal Community Housing Initiative to ensure that eligible housing providers can access funding to maintain housing affordability for low-income tenants and co-op members (p 79).

Budget 2024 also announced the launch of Canada Builds, which will allow provinces and territories to access federal financing, subject to certain conditions, including building on non-profit, community-owned, government, and vacant land (p 37-45).

There are also plans to introduce “flexibilities to the Federal Community Housing Initiative” so that eligible housing providers can maintain affordable housing for low-income tenants and co-op members (p 79).

Combatting Hate

Budget 2024 states that “the government remains steadfast in its commitment to protect the rights and dignity of all Canadians, fostering an inclusive Canada welcoming for all, regardless of their race, faith, sexual orientation, gender identity, or disability.”

Budget 2024 proposes to provide $273.6 million over six years, starting in 2024-25, for Canada’s Action Plan on Combatting Hate to support community outreach and law enforcement reform, tackle the rise in hate crimes, enhance community security, counter radicalization, and increase support for victims.

Examples of how this money will be spent include:

• $25 million over five years, starting in 2024-25, to the Department of Canadian Heritage to support Anti-Hate programming and promoting intercultural ties and community-based activities;
• $28 million over six years, starting in 2024-25, to the Department of Justice for the Federal Victims Strategy to provide support to victims following a hate-motivated crime; ­
• $1.5 million over five years, starting in 2024-25, to the Department of Justice for developing and delivering specialized training to Crown prosecutors and to raise awareness in the judiciary about the unique dynamics of hate crime;
• $12 million over five years, starting in 2024-25, to Women and Gender Equality Canada to fund projects aimed at combatting hate against the 2SLGBTQI+ community;
• $3 million over two years, starting in 2024-25, to Women and Gender Equality Canada to support security needs for Pride festivals; [230]

What’s Next?

The House of Commons will debate the budget for a maximum of four days, then it will vote. Motions related to the government’s budgetary policy are generally considered confidence motions. The confidence convention means that “if the government is defeated in the House on a question of confidence, then it is expected to resign or seek the dissolution of Parliament in order for a general election to be held.”