Canada: Charitable Sector Measures

Changes Affecting Charities and Non-Profits

The 2011 Budget proposes numerous changes that will affect charities, qualified donees and other non-profits, and donors.  A summary of these changes is below.  For a more detailed review of these changes, see the Budget Edition of the Miller Thomson Charities & Not-for-Profit Newsletter.

Flow-Through Shares

The Budget proposes to limit the availability of the exemption from tax on capital gains where flow-through shares are donated to a qualified donee.  Prior to this change it was possible to combine the charitable donation tax credit or deduction with the flow-through share tax incentives to reduce the cost of charitable giving dramatically.

Effective immediately, the exemption from tax on the capital gain that arises from the donation of the shares will only apply to the extent that the cumulative capital gains in respect to the gift or disposition of the shares exceed the original cost of the flow-through shares.  This will have the effect in most provinces of causing a donation of flow-through shares to be no more attractive than a gift of cash.

Regulatory Changes Affecting Qualified Donees

The Budget has proposed significant changes to the regulatory regime that applies to qualified donees other than registered charities.  The Income Tax Act provides that official donation receipts can be issued not only by registered charities, but also by other organizations that meet the definition of "qualified donee," including registered Canadian amateur athletic associations (RCAAAs), Canadian municipalities, and prescribed foreign universities.  Historically, these organizations have been subject to less stringent regulatory rules than registered charities.  The Budget proposes to close this gap significantly and extend most of the regulatory rules and associated penalties that currently apply only to registered charities to RCAAAs.  In addition, most qualified donees would be made subject to the rules governing record-keeping and the issuing of donation receipts (as well as to penalties for non-compliance, including revocation of qualified donee status).  The Budget also proposes to require that all qualified donees be included on a publicly-available list maintained by CRA.

The Budget proposes several additional changes that will apply specifically to RCAAAs.  It proposes to change the test which must be met by an RCAAA in order to qualify for qualified donee status.  RCAAAs are currently required to be established with the promotion of amateur athletics in Canada on a nation-wide basis as their primary purpose and function.  The Budget proposes that RCAAAs be required to have the promotion of amateur athletics in Canada on a nation-wide basis as their exclusive purpose and function.

CRA Governance Control

The Budget also proposes, effective 2012, that the CRA be given discretionary power to refuse or revoke registration of a charity where one of its directors has been convicted of a financial or other relevant crime, has been convicted in the past 5 years of a regulatory offence (including a violation of fundraising licensing rules), was a director of another  charity whose charitable status was revoked for cause in the past five years, or was a promoter of a donation tax shelter for which a charity had its registration revoked.  We expect, notwithstanding Federal Government's suggestion to the contrary in the Budget materials, that this will cause charities to begin background checks against directors and senior staff.

Returning Gifts

The Budget proposes rules to address the situation where a qualified donee, such as a charity, returns a gift.  We note that it is rare for a charity to be able to return a gift legally. However, if this occurs, the new rules deem the gift not to have occurred.  If the returned property is not identical property, then the person is deemed to have disposed of the original property at the time the person acquires the returned property.   For returned amounts above $50, charities will be required to issue replacement receipts and file them with CRA.   CRA will have the authority to reassess a tax return even where the return is for a statute-barred year.

Non-Qualifying Security Anti-Avoidance Rules

The Budget proposes anti-avoidance provisions to broaden the rules on donations of non-qualifying securities. These rules prevent a person from receiving a donation tax receipt for a gift to a qualified donee of a share, debt obligation or other security of the person or of a person not at arm's-length to the person — known as a non-qualifying security (a "NQS") — until the NQS is sold or is no longer a NQS.  The Budget proposes that where a charity sells the NQS, the donor will not receive a receipt if the consideration for the sale is another NQS of any person.  Second, the Budget proposed new rules to catch situations whereby, through a series of transactions, a donor avoids the application of these rules, but at the end of the series of transactions the qualifying donee obtains a NQS.

Gifts of Options

The Budget has introduced provisions designed to delay the recognition of a gift where an option to acquire a property is granted to a qualified donee.  Prior to the introduction of these provisions, where a donor granted an option in a property to a qualified donee, the gift was recognized immediately for the value of the option and a receipt could be issued.

Now, when a donor issues an option to a qualified donee, the recognition of the resulting gift is delayed until the option is exercised by the qualified donee.

These rules are designed to be in keeping with the (still-proposed) split-receipting 80/20 tax rule that provides that where an advantage associated with a gift exceeds 80 per cent of the value of the property transferred, there is no gift.  As such, where 80 per cent of the fair market value of the underlying property exceeds the total of any consideration paid for either the option or the property by the qualified donee, the exercise of the option will not be considered to be a gift unless the donor can establish that the granting of the option and the exercise thereof was made with the intention of making a gift to a qualified donee.  The proposed provisions also deal with the value of the gift for receipting purposes when the option is exercised, and when the option is disposed of by the qualified donee prior to being exercised, the proceeds of disposition to the donor and the value of the gift for receipting purposes.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Borden Ladner Gervais LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Borden Ladner Gervais LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions