QUALIFIED DONEE STATUS FOR FOREIGN CHARITABLE
ORGANIZATIONS
A foreign charitable organization may currently be registered as
a qualified donee where it can demonstrate that: (1) it was the
recipient of a gift from the Government of Canada; and (2) except
for the residency requirement, it would meet the Canadian common
law definition of charitable and would generally be eligible for
registration in Canada. Qualified donee status permits a foreign
charitable organization to issue official donation receipts for
gifts received from a Canadian donor and enables a Canadian
registered charity to make first to the foreign charitable
organization without risking the Canadian charity's registered
status.
Budget 2012 proposes to limit the circumstances in which a
foreign charitable organization can be registered as a qualified
donee. The changes will give the Minister of National Revenue
discretion to register a foreign charitable organization as a
qualified done as long as it receives a gift from the Government of
Canada and: (1) pursues activities related to disaster relief or
urgent humanitarian aid; or (2) pursues activities that are in the
national interest of Canada.
Foreign charitable organizations currently registered as
qualified donees under the existing rules will be permitted to
retain that status until their registration period expires.
POLITICAL ACTIVITIES
Currently, a charity that makes a gift to another qualified
donee is considered to have devoted the amount of the gift to
charitable purposes and activities – even where the gift
is intended for political activities undertaken by the recipient.
Budget 2012 proposes to treat a gift that is intended to support
political activities by a qualified donee recipient as an
expenditure made by the gifting charity on political
activities.
Intermediate sanctions are not currently available in the
context of political activities undertaken by charities. Budget
2012 proposes to extend the intermediate sanction of suspending a
charity's tax-receipting privileges for one year to a charity
that exceeds the limitations imposed on political activities
undertaken by a registered charity. Further, Budget 2012 will grant
the CRA the authority to suspend the tax-receipting privileges of a
charity that provides inaccurate or incomplete information on its
annual return until the required information is provided.
TAX SHELTERS
Budget 2012 proposes to encourage tax shelter registration and
reporting with the following measures:
increasing the maximum penalty applicable to: (1) promoters of
unregistered tax shelters; and (2) persons who file false
information in an application to register a tax shelter, to the
greater of the penalty amount under the existing rules (i.e., $500
and 25 per cent of the consideration received or receivable in
respect of the tax shelter) and 25 per cent of the amount asserted
by the promoter to be the value of property that tax shelter
participants can transfer to a donee;
imposing an additional penalty equal to 25 per cent of the
consideration received or receivable by a promoter in respect of
all unreported interests in a tax shelter or, in the case of a
charitable donation tax shelter for which amounts are unreported,
the greater of 25 per cent of the consideration received by the
promoter and the amount asserted by the promoter to be the value of
the property transferred to a donee; and
limiting the validity of a tax shelter identification number to
the calendar year identified in the application for the number
filed with the CRA (tax shelter numbers issued for applications
made before Budget Day will be valid until the end of 2013).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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