Federal Budget 2025: Charity Highlights

Though they don’t occupy the headlines, there are some important updates for charities in the 493-page, $78B deficit-predicting Federal Budget 2025 and accompanying Supplementary Information released on November 4. The list that follows is not exhaustive, but it highlights the most significant changes impacting charities.

What is Not in the Budget

Before we look at what is in the Budget, even more important is what is not included.

Two recommendations from the House Finance Committee in December 2024 created ongoing concern about charitable status.

• Recommendation 429: no longer provide charitable status for anti-abortion organizations
• Recommendation 430: amend the Income Tax Act to provide a definition of charity which would remove the privileged status of advancement of religion as a charitable purpose.

Neither recommendation is included in the Budget.

As we shared before the Budget was tabled, the Finance Minister confirmed the government did not intend to remove advancement of religion as a charitable purpose. No similar statement was made about “anti-abortion organizations”; however, neither 429 nor 430 appear in Budget 2025.

Prohibition on Cash Donations of $10,000

Earlier this year, the government introduced Bill C-2, Strong Borders Act. Bill C-2 would amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Cash Transactions) to prohibit cash donations of $10,000 or more in a single transaction or prescribed series of related transactions.

More recently, Bill C-12, Strengthening Canada’s Immigration System and Borders Act was introduced to fast track certain elements of Bill C-2 through the Parliamentary process. The cash donation prohibition was not included in Bill C-12.

But the prohibition is now in the Budget.

It is appropriate and reasonable for the government to tackle issues of money laundering and terrorist financing. However, the government should first consider the compliance tools at its disposal and identify why and how they are inadequate to address the concerns. Likewise, the concerns themselves should be demonstrable, not just theoretical.

Duty Drawback for Surplus Imported Goods Donated to Charities

Budget 2025 proposes an amendment to the Customs Tariff to allow duty drawback for obsolete or surplus goods donated to a registered charity for use in the charity’s programs (not for re-sale).

The government expects this to “benefit frontline charities and low-income people who use charitable services to meet their essential needs, including clothing” (see Budget 2025, Impacts Report, p 45).

A duty drawback allows a taxpayer (e.g. importer, manufacturer) to recover all or part of the customs duties paid on imported goods.

Dissolving Federal NPO’s Listed as Terrorist Entities

If a federal corporation becomes a listed terrorist entity under the Criminal Code, proposed amendments would allow for quicker dissolution under the Canada Not-for-Profit Corporations Act, the Canada Cooperatives Act, and the Canada Business Corporations Act.

The government expects this to “strengthen federal anti-terrorism tools and help maintain public trust in our institutions, including the federal corporate registry.” Others in the sector have identified a lack of oversight for entities other than charities, particularly as it relates to listed terrorist entities.

Previously Announced Measures

This is where the budget gets tricky. It confirms the government plans to move ahead with some previously announced measures, “as modified to take into account consultations and deliberations since their release.” But they don’t share what has been “modified” or how. It also means reviewing past statements, draft legislation and proposals to figure out what is included.

1. Proposals Released on August 15, 2025

A. Reporting by Not-for-Profit Organizations (*NOT registered charities)

Though Budget 2025 commits to implementing enhanced reporting for non-for-profit organizations (that are not registered charities), the government is reviewing consultation feedback. Final proposals will be released “in due course.”

The August 15 draft legislation would have added a new group of NPOs that have to file a T1044 return. Currently, those with passive income exceeding $10,000, assets exceeding $200,000 or where a return was required for a preceding fiscal period had to complete the form. The August proposals would add NPOs with more than $50,000 in gross revenues to the list. It would also create a new return for NPOs with less than $50,000 in gross revenue that identifies the directors, the NPO’s activities, total assets, liabilities and revenues.

Whether the final proposals are significantly different remains to be seen. Regardless, the effective date will be pushed to tax years beginning January 1, 2027 or later.

B. Technical Amendments to the ITA and Regulations (Bare Trust Reporting)

Starting in 2022, the rules around trust reporting changed. The legislative proposals expanded reporting obligations to include bare trusts, which are not defined in the Income Tax Act. CRA clarified that charities with internally held trusts did not have to separately file; however, the rules are fairly complex, and the August 2025 proposed amendments still don’t provide a lot of clarity.

2. Proposal Released January 23, 2025 – Charitable Donations Deadline Extension

Remember the Canada Post strike in 2024 and the donation extension? Budget 2025 will implement the legislation that allowed for the extension.

3. Proposals Announced in the 2024 Fall Economic Statement

Included in the 2024 Fall Economic Statement was an October 2024 Ways and Means motion that would require charities providing reproductive health services to disclose, in all public communications, the services they do not provide. Specifically, if they don’t provide abortions and contraceptives. In other words, this motion targeted pro-life charities.

Budget 2025 indicates the government will implement proposals from the 2024 Fall Economic Statement, “including with respect to the following measures” and goes on to list five measures. The Ways and Means motion is not part of that list.

In legalese, the word “including” usually means the list that follows is not exhaustive. So arguably the government could still move forward with the Ways and Means motion. At this point, we are not aware of a specific initiative to do so, and our information suggests otherwise. Of course, formal, official confirmation is preferable, and we will ask the Minister for such confirmation.

4. Proposals Released on August 12, 2024 for Charities and Qualified Donees

A. Registered Foreign Charity

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.

Previous proposals would expand the eligibility period from 24 to 36 months. Foreign charities would have 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.

B. Electronic Communication by CRA

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, suspend tax-receipting privileges 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.

Revocation of a registered charity or other qualified donee would be effective upon publishing an official notice of revocation on a government webpage. Currently, these notices are effective upon publication in the Canada Gazette.

C. Enhanced CRA Enforcement Powers

CRA’s information-gathering and compliance-enforcement power would be enhanced through:

• 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 is described 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.

D. Content of Official Donation Receipts

Official donation receipts would no longer have to include:

• 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

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.”