The Minister of Finance tabled the Government's 2016 Federal Budget on March 22, 2016. There are few tax measures in Budget 2016 that impact registered charities, which are highlighted below, and none for non-profit organizations (NPOs).
- Investments by Registered Charities in Limited Partnerships: Budget 2016 confirms the Government's intention to proceed with the measure announced in Budget 2015 which allows registered charities to acquire or hold passive investments in limited partnerships.
- Donations Involving Private Company Shares or Real Estate: Budget 2016 announces the Government's intention not to proceed with the measure announced in Budget 2015 that would provide an exemption from capital gains tax for certain dispositions of private company shares or real estate where cash proceeds from the disposition are donated to a registered charity within 30 days. The removal of this capital gains exemption will come as a disappointment for some in the charitable sector.
- GST/HST on Donations to Charities: In addition to the exemptions available for many goods and services provided by charities, Budget 2016 proposes a relieving change to provide that when a charity supplies property or services in exchange for a donation and when an income tax receipt may be issued for a portion of the donation, only the value of the property or services supplied will be subject to GST/HST. The proposal will ensure that the portion of the donation that exceeds the value of the property or services supplied is not subject to GST/HST. It also brings the GST/HST treatment of this type of exchange into line with the split-receipting rules under the Income Tax Act.
- Political Activities: Budget 2016 also confirms the Government's commitment to review and clarify the rules governing political activities of charities. The Canada Revenue Agency, in consultation with the Department of Finance, will engage with charities through discussions with stakeholder groups and an online consultation.
Budget 2014 announced the Government's intention to review whether the income tax exemption for NPOs remains properly targeted and whether sufficient transparency and accountability provisions are in place. Once again, Budget 2016 was silent on the proposed consultation on the income tax exemption for NPOs. As part of the proposed review, the Government indicated that it would release a consultation paper for comment and further consult with stakeholders as appropriate. To date, nothing has been released. The status of the proposed consultation remains uncertain.
For more information on Budget 2016, our Budget Bulletin is available click here