{"id":35982,"date":"2022-11-25T14:25:42","date_gmt":"2022-11-25T19:25:42","guid":{"rendered":"https:\/\/www.cccc.org\/news_blogs\/?p=35982"},"modified":"2022-11-29T12:30:01","modified_gmt":"2022-11-29T17:30:01","slug":"federal-bill-c-32-whats-relevant-for-charities","status":"publish","type":"post","link":"https:\/\/cccc.org\/news_blogs\/legal\/2022\/11\/25\/federal-bill-c-32-whats-relevant-for-charities\/","title":{"rendered":"Federal Bill C-32: What’s Relevant for Charities?"},"content":{"rendered":"\n

The Federal government introduced Bill C-32<\/a> earlier this month. The House Standing Committee on Finance<\/a> is taking a close look at Bill C-32 as is the Senate Standing Committee on National Finance<\/a>. <\/p>\n\n\n\n

What is Bill C-32?<\/h2>\n\n\n\n

The full name of the Bill is a mouthful: \u201cAn Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022.\u201d<\/p>\n\n\n\n

In other words, it\u2019s an act to implement budget and fall economic statement spending promises.<\/p>\n\n\n\n

What\u2019s Relevant for Charities?<\/h2>\n\n\n\n

As with most budget bills, this is a long one. This post is not an exhaustive overview. Instead, we\u2019ve picked out a few items that will be of interest for charities.<\/p>\n\n\n\n

DISBURSEMENT QUOTA<\/h3>\n\n\n\n

Increase to 5% for Property Exceeding $1M<\/h4>\n\n\n\n

Bill C-32 changes the definition and calculation of disbursement quota (DQ) in the Income Tax Act <\/em>(ITA).  As promised in the 2022 Federal Budget<\/a>, the DQ increases from 3.5% to 5% for the portion of property not used in charitable activities or administration that exceeds $1M.<\/p>\n\n\n\n

This change is effective for tax years beginning on or after January 1, 2023.<\/p>\n\n\n\n

See section 34(1) of Bill C-32; section 149.1(1) ITA.<\/p>\n\n\n\n

Management & Administration Not Included<\/h4>\n\n\n\n

Bill C-32 clarifies that \u201cexpenditures on administration and management of the charity\u201d are not deemed to be an amount spent on charitable activities or a gift to a qualified donee (basically, another charity). In other words, these costs don\u2019t count toward a charity\u2019s obligation to meet its DQ.<\/p>\n\n\n\n

This change is effective for tax years beginning on or after January 1, 2023.<\/p>\n\n\n\n

See section 24(2) of Bill C-32; *new* section 149.1(1.1)(d) of ITA<\/p>\n\n\n\n

Discretionary Reduction in DQ<\/h4>\n\n\n\n

Bill C-32 amends the wording around the Minister\u2019s discretionary reduction of the DQ.<\/p>\n\n\n\n

In its current form, when the Minister agrees to reduce the disbursement quota for a charity\u2019s tax year, the amount is \u201cdeemed to be an amount expended by the charity.\u201d The new version will have the Minister \u201cspecify an amount\u201d and the \u201cdisbursement quota shall be deemed to be reduced by that amount.\u201d<\/p>\n\n\n\n

Charities must still apply and the Minister still has discretion to grant or not grant the reduction. It\u2019s simply that the prescribed amount is now deemed a reduction rather than an amount expended.<\/p>\n\n\n\n

See section 34(4) of Bill C-32; section 149.1(5) ITA<\/p>\n\n\n\n

Disclosing Applications for Reduction in DQ<\/h4>\n\n\n\n

The government can disclose \u201cto any person\u201d the application, information filed in support of a charity\u2019s application, and a partial or full copy of any letter or notice from the Minister to the charity about its application to reduce its DQ.  This change is effective January 1, 2023.<\/p>\n\n\n\n

This change is effective for tax years beginning on or after January 1, 2023.<\/p>\n\n\n\n

See section 55(1) Bill C-32; s 241(3.2) ITA.<\/p>\n\n\n\n

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Photo by Tierra Mallorca<\/a> on Unsplash<\/a><\/sup> – five small, red, block buildings lined up in a row<\/sup><\/figcaption><\/figure>\n\n\n\n

ACCUMULTATION OF PROPERTY<\/h3>\n\n\n\n

The section allowing charities, with the Minister\u2019s approval, to accumulate property for a specific purpose, on specific terms and conditions, for a specific time, has been repealed. <\/p>\n\n\n\n

This change is effective for applications made on or after January 1, 2023.<\/p>\n\n\n\n

See section 34(5) of Bill C-32; former section 149.1(8) ITA<\/p>\n\n\n\n

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Photo by Kelly Sikkema<\/a> on Unsplash<\/a> – part of a paper sticking out of a file folder with a sticky note reading “sign here”<\/sup><\/figcaption><\/figure>\n\n\n\n

TRUST REPORTING<\/h3>\n\n\n\n

New Trust Reporting Requirements<\/h4>\n\n\n\n

In section 150(1.1) of the ITA, there is an exemption (s 150(1.1)) to filing required information returns. Bill C-32 changes that section so that there are more kinds of trusts that have to file T3 returns, unless the trust fits into a list of exceptions.<\/p>\n\n\n\n

Content of Trust Reporting<\/h4>\n\n\n\n

Required information for trust reporting is listed in the Income Tax Regulations <\/em>(ITA Regs). It includes:<\/p>\n\n\n\n