Finance Minister Bill Morneau delivered the government's
2016 federal budget yesterday. Below is a summary of some of the
announcements from the budget that will impact charities.
Update on Previous Budget Proposal: Capital Gains Exemption for
Donations of Real Estate and Private Company shares
The 2015 federal budget proposed to extend the exemption for
capital gains tax to situations where the proceeds from the sale of
private company shares or real estate are donated to charity, as
discussed in this
previous post. In yesterday's budget, the government
announced that it does not intend to proceed with these
changes. This is unfortunate news for the charitable sector,
as it was hoped that this change would help boost charitable
Update on Previous Budget Proposal: Investment in Limited
The 2015 federal budget proposed an amendment to the Income Tax
Act that would allow registered charities to invest in limited
partnerships where certain requirements are met, including that the
charity holds 20% or less of an interest in the limited partnership
and the charity deals at arm's length with the general partner
of the limited partnership. The federal government confirmed that
they still intend to move forward with these changes.
GST/HST Rules that Apply to Charitable Donations
Prior to budget day, where a charity supplied property or
services to a donor in exchange for a donation, GST/HST applied to
the full value of the donation, even though an income tax receipt
was issued for a portion of the donation only (being the amount
paid by the donor less the value of any property or services
received by the donor). The Budget proposes to bring the treatment
of this type of exchange in line with the split-receipting rules
under the Income Tax Act. The budget proposes that where a donation
is made to a charity and the donor receives a split receipt, the
donor will only be subject to GST/HST on the value of the property
or services supplied by the charity to the donor, not the entire
amount of the donation. For example, if you purchase a ticket
to an event hosted by a charity for $250 and the value of the meal
provided is $75, the charity will now be required to charge you
GST/HST on the $75 meal portion (assuming it is not otherwise
exempt from GST/HST), and not on the $175 donation portion.
The government announced that the Canada Revenue Agency, in
consultation with the Department of Finance, will engage with
charities through discussions with stakeholder groups and an online
consultation to clarify the rules governing the political
activities of charities. It remains to be seen whether this
process will result in any changes to the rules around charities
engaging in political activities.
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