Canada: Federal Budget 2017 – Tax Measures

The Honourable William Morneau, Minister of Finance, tabled the Government's 2017 Federal Budget (Budget 2017) yesterday, on March 22, 2017 (Budget Day).

Registered Charities

The only tax measures affecting registered charities in Budget 2017 are certain measures intended to better protect gifts of ecologically sensitive land.

The ecological gifts program provides a way for Canadians with ecologically sensitive land to contribute to the protection of Canada's environmental heritage. Under this program, certain donations of ecologically sensitive land or easements, covenants and servitudes on such land (ecogifts) are eligible for special tax assistance. Individual donors are eligible for a charitable donation tax credit, while corporate donors are eligible for a charitable donation tax deduction. The donation must be made to a qualified donee that is either (i) the federal or a provincial government in Canada, a municipality in Canada or a municipal or public body performing a function of government in Canada, or (ii) a registered charity one of the main purposes of which is the conservation and protection of Canada's environmental heritage. The amount of the donation, up to 100 percent of net income, may be claimed in a year and unused amounts may be carried forward for up to ten years. In addition, any capital gains associated with the donation of ecologically sensitive land (other than a donation to a private foundation) are exempt from tax.

The ecogift program is primarily administered by Environment and Climate Change Canada (ECCC). In order for a gift to meet the requirements of the ecogift program, the Minister of ECCC must:

  • certify that the land is ecologically sensitive and that its conservation and protection is important to the preservation of Canada's environmental heritage;
  • approve the organization that will receive the gift, if it is a registered charity; and
  • certify the fair market value of the donation.

In addition, any easements, covenants or servitudes must run in perpetuity in order to qualify as ecogifts.

To help ensure that donated land is not subsequently used for other purposes, the Income Tax Act imposes a tax of 50 percent of the fair market value of the land upon a recipient who, without the consent of ECCC, changes the use of the property or disposes of it. The Canada Revenue Agency is responsible for assessing and collecting the tax in such situations.

The proposed measures in Budget 2017 for ecogifts are as follows:

  • Transfers of Ecogifts: Budget 2017 proposes to impose a tax of 50 percent of the fair market value of a property on a transferee where ecogifts are transferred between organizations for consideration if the transferee changes the use of the property, or disposes of the property, without the consent of ECCC.
  • Program Administration: To ensure the effective operation of the ecogift program, Budget 2017 proposes to clarify that the Minister of ECCC has the ability to determine whether proposed changes to the use of lands would degrade conservation protections.
  • Approval of Recipients: Budget 2017 also proposes that the requirement to approve recipients by the Minister of ECCC be extended, on a gift-by-gift basis, to municipalities and municipal and public bodies performing a function of government, which previously automatically qualified as eligible recipients.
  • Private Foundations: Budget 2017 proposes that private foundations no longer be permitted to receive ecogifts. This measure is intended to prevent potential conflicts of interest in non-arm's length transactions, which often exist with private foundations.
  • Personal Servitudes: Budget 2017 proposes that certain donations of personal servitudes in Quebec (in addition to real servitudes) qualify as ecogifts. Qualifying donations will be required to meet a number of conditions, including a requirement that the personal servitude run for at least 100 years.

These measures will apply in respect of transactions or events that occur on or after Budget Day.

Non-Profit Organizations

Budget 2017 does not include any tax measures for non-profit organizations. In Budget 2014, the Government announced its intention to review the income tax exemption for non-profit organizations. As part of the review, the Government indicated that it would release a consultation paper for comment and will further consult with stakeholders as appropriate. To date, nothing has been released. As in previous years, Budget 2017 was silent on the proposed consultation process.

For more details on all of the tax measures announced in Budget 2017, you can check out BLG's bulletin "Federal Budget 2017 – A Focus on Innovation and Tax Fairness for the Middle Cass", which is available here:

About BLG

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.

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