On March 17, 2016, Quebec released its provincial budget. The budget contained several measures designed to increase the benefit to Quebec resident donors from charitable donations and to facilitate the operations of resident donors in Quebec.
Improving the Tax Treatment of Donations
Prior to the Quebec 2016 Budget, save for a few exceptions, the tax credit available for donations made by an individual could only be used against 75% of the individual’s annual income. Any amount of excess donation tax credit could be carried forward for the 5 years following the year in which the donation was made.
According to Revenu Québec’s statistics, less than one-third of 1% of Quebec donors exceed the annual 75% limit. Given that the 75% limit is rarely applied and the many exceptions to the limit, the calculation of the tax credit for charitable donations was needlessly complicated. Therefore, the Government of Quebec has proposed to abolish the income limit for the purposes of calculating the tax credit for donations made by individuals. This means that for the 2016 taxation year and going forward, charitable donation tax credits for individuals may be used against 100% of the individual’s income rather than just 75%.
Increasing the Tax Credit
Presently, the tax credit available for charitable donations made by individuals equals 20% of the first $200 donated and 24% for donations in excess of the first $200 donated. In the Quebec 2016 Budget, for donations made as of January 1, 2017, an individual will be entitled to the following charitable donation tax credits:
- 20% of the first $200 donated;
- 25.75% of the amount of donation between $200 and the threshold for the fourth tax bracket (for 2016 this limit is $103,150); and
- 24% on amounts donated over the threshold for the fourth tax bracket.
Increase in the Allowable Amount of Food Donations from Food Processors
In its 2015 budget, the Government of Quebec increased the charitable deduction limit and charitable tax credit for food donations made by food processors to Quebec food banks by 50%. In the Quebec 2016 Budget, the Government of Quebec has expanded the list of qualified donees to whom such donations can be made. The Quebec 2016 Budget has also expanded the types of donations that will qualify for the enhanced credit to include not only fresh food and produce but also certain processed foods.
Simplification of the Procedure to Register a Charity in Quebec
Quebec is the only province that requires a charity to be registered separately from the charitable registration regime provided for under the Income Tax Act (Canada). Without registration under the Taxation Act (Quebec), a charitable donation receipt may be refused under the Taxation Act (Quebec).
In the Quebec 2016 Budget, the government of Quebec has announced that to assure an equivalent treatment, a charity that is registered with the Canada Revenue Agency will be deemed to be registered under the Taxation Act (Quebec). Revenu Québec has retained the ability to modify, annul, or revoke the deemed charitable registration status. This modification will take effect retroactively to January 1, 2016.
Additionally, donations made before January 1, 2016 to an organisation that, at the time of the donation, was registered with the Canada Revenue Agency as a charity, shall be deemed to be made a charity registered under the Taxation Act (Quebec).