The reality of a majority Conservative government means the measures introduced in Finance Minister Jim Flaherty’s June 2011 Budget are likely to become law. Below is a brief snapshot of some of the Budget 2011 proposals that will impact the sector:
- The extension of record-keeping and receipting requirements and penalties applicable to registered charities to qualified donees, such as registered Canadian amateur athletic associations (RCAAAs), Canadian municipalities, municipal and public bodies performing a function of government in Canada, housing corporations in Canada constituted exclusively to provide low-cost housing for the aged, Canadian students in universities outside of Canada and certain other charitable organizations outside of Canada that have received a gift from Canada;
- The identification of qualified donees on a public list maintained by the Canada Revenue Agency (the CRA);
- New regulatory requirements for RCAAAs with respect to information returns, exclusivity of purpose and function, undue benefits and public access to informa tion;
- New eligibility requirements for directors and others who control or manage registered charities;
- New reassessment powers for the CRA where gifts or property are returned by a registered charity to a donor;
- An extension of rules regarding non-qualifying securities applicable to private foundations and other registered charities not at arm’s length with donors to all gifts of non-qualifying securities to all registered charities;
- New anti-avoidance rules regarding non-qualifying securities received by a registered charity;
- New rules delaying recognition of gifts of options to acquire property to qualified donees to when option is exercised; and
- A limitation of the availability of capital gains tax exemption where flow-through shares are donated to a qualified donee.
In addition to these measures, the Conservative Government has also supported a motion calling for the House Standing Committee on Finance to study charitable donation incentives. The measures affecting the charitable sector described above will apply on or after the later of January 1, 2012 and Royal Assent to the enacting legislation. However, the measures relating to returned gifts or property, non-qualifying securities received by a charity, options to acquire property received by a charity and flow-through shares received by a charity will apply in respect of transactions on or after March 22, 2011.
Draft legislation in respect of the Budget 2011 measures, which is expected to provide further clarity with respect to these measures is still pending. In the meantime, charities and qualified donees alike are well-advised to familiarize themselves with these proposals as they are expected to have a significant impact on the sector, particularly in the areas of compliance and governance.