The 2015 Federal Budget, tabled by Finance Minister Joe Oliver,
contains a few measures aimed at supporting charities.
Specifically, Budget 2015 proposed measures that allow
charities to diversity their investments by permitting them to
invest in limited partnerships; provide a capital gains tax
exemption for the donation of proceeds from the disposition of
private corporation shares and real estate; and allow Foreign
Charitable Foundations, in certain circumstances, to be registered
as "qualified donees".
Investments By Registered Charities In Limited
Budget 2015 implemented a long-awaited measure whereby a
registered charity will no longer be considered to be
"carrying on a business" solely because it acquires or
holds an interest in a limited partnership. Registered charities
designated as charitable organizations or public foundations are
prohibited from "carrying on a business" unless that
business qualifies as a "related business", and
typically, investments in limited partnerships do not meet the
"related business" test. Furthermore, registered
charities designated as private foundations are prohibited from
carrying on any business at all. If a registered charity fails to
abide by these restrictions, they can be subjected to sanctions,
including the suspension of receipting privileges and the
revocation of registered charity status.
This measure allows registered charities to further diversify
their investment portfolios by limiting the scope of what is
considered "carrying on a business". However, to ensure
that a registered charity's investment in a limited partnership
remains a passive investment (as opposed to the carrying on of a
business), this measure will only apply if: the charity is at
arm's length with each general partner of the limited
partnership; and the charity, together with all non-arm's
length entities, holds 20% or less of the interests in the limited
partnership. In addition to registered charities, this measure also
applies to Canadian amateur athletic associations.
The opportunities this measure allows for may be of particular
interest to investment fund managers who have traditionally
structured certain investment products as trusts rather than
limited partnerships, so as to facilitate investments by registered
Donations involving Corporate Shares or Real Estate
At the present time, the disposition of listed securities and
ecological gifts, and the exchange of partnership units for listed
securities, are exempt from capital gains tax where certain
conditions are met. With the goal of further incentivising
donations to registered charities, Budget 2015 proposes to expand
this exemption to the proceeds from the dispositions of private
corporation shares and real estate where: the cash proceeds from
the disposition are donated to a qualified donee within 30 days;
and the private corporation shares or real estate are sold to a
purchaser who is at arm's length with both the donor and the
qualified donee to which cash proceeds are donated. This measure is
set to apply to donations occurring after 2016.
In conjunction with the expansion of this exemption, Budget 2015
also proposes anti-avoidance rules such that the exemption will not
be available in circumstances where: the donor, or a person not at
arm's length with the donor, directly or indirectly reacquires
the shares (including substitute shares) or real estate within 5
years; or with regards to a disposition of shares, the shares that
were disposed of are redeemed by the corporation within 5 years and
the donor is not at arm's length with the issuing corporation
at the time of redemption.
Gifts to Foreign Charitable Foundations
In addition to the aforementioned measures, Budget 2015 also
proposes to allow Foreign Charitable Foundations to be registered
as "qualified donees", whereas, as the present time, only
Foreign Charitable Organizations can be so registered. In order for
a Foreign Charitable Organization to be eligible to register, it
must receive a gift from the Canadian Government and it must be
pursuing activities related to disaster relief, urgent humanitarian
aid or that are in Canada's national interest. This measure
will take effect upon Royal Assent.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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