The Charitable Sector Responds to Budget 2022

Federal Budget 2022: Impact on Charities and Not-For-Profits

In this Carters bulletin, charity lawyers comment on provisions proposed in Budget 2022 that impact the charitable and the not-for-profit sector. Read an excerpt of the bulletin below: 

One of the key proposals affecting charities in Budget 2022 is to amend the Income Tax Act (“ITA”) to allow charities to make “qualified disbursements to organizations that are not qualified donees,” provided that certain requirements in the ITA designed to ensure accountability are met. Budget 2022 indicates that these changes are “intended to implement the spirit” of Bill S-216, the Effective and Accountable Charities Act (“Bill S-216”), which is currently being considered by Parliament. However, Budget 2022 does not set out exactly how the ITA is proposed to be amended, and it is not clear whether or how the proposed changes may be different from the ITA amendments contained in Bill S-216.

By way of background, the ITA currently contains unnecessary and archaic provisions that have been in place since the early 1950s, requiring charities to devote all of their resources to charitable activities carried on by the organization itself. This is known in the charitable sector as the “own activities test.” This has led the Canada Revenue Agency (“CRA”) to implement an administrative policy that charities must direct and control the use of their resources when working through an intermediary, known as the “direction and control” requirement. This mechanism is built upon the fiction that everything that a charity does through a third-party intermediary must be structured as the activity of the charity itself when the reality is that the activity is, more often than not, intended to be the activity of the recipient third party. Such a requirement severely limits how charities can work with third parties that are not qualified donees. Many in the charitable sector have consistently expressed concerns with the CRA’s interpretation of the “own activities test” and the “direction and control” mechanism for years.

Click here to read the full bulletin. 

2022 Federal Budget: Highlights for the Charitable and NPO sector

This communiqué, published by Miller Thomson, provides their highlights of the 2022 Budget affecting the charitable and non-profit sector. Read an excerpt below: 

On April 7, 2022, the Honourable Chrystia Freeland tabled a new federal budget (the “2022 Budget”). This is only the second federal budget since the beginning of the COVID-19 pandemic and a lot has happened since the 2021 federal budget. Canadians have witnessed new waves of COVID-19 with the Delta and Omicron variants, record-breaking inflation, discoveries of mass unmarked graves at residential schools, a snap federal election, the fall of Afghanistan, the first ever invocation of the Emergencies Act, the Russian invasion of Ukraine, surging energy prices and a Liberal-NDP confidence deal.

The 2022 Budget reflects the government’s spending priorities in response to both this past year’s events and the last federal election. It focuses on affordability, growing the economy and includes targeted spending. The government is attempting to rein in its spending during the pandemic, while also laying the ground work for continued recovery and resiliency for Canadians. For the charitable sector, this means new measures designed to increase flexibility to encourage charitable spending (increasing the disbursement quota) and to carry out their charitable activities (permitting qualifying disbursements to non-qualified donees. There is also significant proposed spending and investments in new funding opportunities for charities and non-profit organizations working in almost every sector.

Click here to read the full communiqué.

Budget 2022: A Step Forward and New Opportunities for Collaboration with the Nonprofit and Charitable Sector

This news release, published by Imagine Canada, notes progress on several key sector priorities. Read an excerpt below: 

Together with our allies in the nonprofit sector, Imagine Canada has long advocated for changes to the rules that govern the way that charities are able to partner with and provide funds to non-charities. We were pleased to see the budget proposal to “amend the Income Tax Act to allow a charity to provide its resources to organizations that are not qualified donees, provided that the charity meets certain requirements designed to ensure accountability.” The Budget explicitly notes that the government intends to implement the spirit of Bill S-216, The Effective and Accountable Charities Act, a piece of legislation we fully support. This is an encouraging step forward on one of the nonprofit sector’s key policy priorities and we look forward to learning more about the details of how the government intends to implement its proposal. In addition we offer to work with the government to ensure confidence that charitable dollars are being used in an accountable and transparent way to enable investments in many underfunded communities.

Click here to read the full news release.

Cooperation Canada is encouraged by the increase to international assistance in the 2022 federal budget

This press release, published by Cooperation Canada, comments on Budget 2022. Read an excerpt below: 

April 7, 2022 (Ottawa) – As conflict, humanitarian emergencies, COVID-19 and climate change wreak havoc across the globe, Cooperation Canada is encouraged by today’s 2022 federal budget which includes an increase in Canada’s international assistance and a willingness to address barriers to charitable activities in international cooperation. 

This budget demonstrates that the government remains committed to international assistance as an effective way of enhancing health, security, prosperity and human rights around the world. 

Click here to read the full press release.