February 12, 2014
The 2014 federal budget, Items of interest to charities and nonprofits
The 2014 federal budget, tabled on February 11, sets the stage for balanced budgets beginning next year. Imagine Canada’s budget night statement is available here.
The Minister of Finance announced that the deficit will decline to $2.9 billion for the 2014-15 fiscal year (which begins April 1, 2014), and projected a surplus of $6.4 billion for the following year. These figures incorporate a $3 billion annual adjustment for risk, and a two-year freeze on public service compensation. While this puts the government on track for a balanced budget in 2015, measures to achieve the public service freeze may have an impact on our sector – both in terms of the federal government’s ability to partner with organizations, and its ability to deliver services to Canadians
The budget’s proposed measures are divided into four broad categories:
- Connecting Canadians With Available Jobs;
- Fostering Job Creation, Innovation and Trade;
- Responsible Resource Development, Conserving Canada’s Natural Heritage, and Investing in Infrastructure and Transportation; and,
- Supporting Families and Communities.
The projected surplus in 2015 will give the federal government greater flexibility to make new investments in next year’s budget, which will be the last budget prior to the October 2015 general election. In its 2011 platform, the government made a number of commitments to be fulfilled once a balanced budget is achieved, notably income-splitting for eligible couples with children. While meeting these commitments would reduce the room for other investments, we are nonetheless confident that a compelling case has been made for the implementation of the Stretch Tax Credit (or an equally significant measure to enhance charities’ contributions) in the 2015 budget.
It is significant to note that the comprehensive Budget Plan has a section devoted to charities. This is the first time that measures affecting charities have been highlighted in this manner and bodes well for our concerted efforts to encourage the government to recognize us as an important sector of the economy and critical catalysts for communities. The budget also uses very strong positive language about the sector: “The Government of Canada recognizes that the charitable sector plays an essential and irreplaceable role in our society by providing valuable services to Canadians, including to those most in need.”
Budget measures affecting charities generally
Access to Mitacs (p. 118)
Imagine Canada’s top recommendation for this year’s budget was to expand charities’ and nonprofits’ access to federal business development programs, to help organizations better achieve their earned income objectives and access skills they may not have in-house. As a priority, we cited the case of Mitacs – which is funded largely by Industry Canada to provide opportunities for highly-skilled graduate and postgraduate students and researchers to partner with organizations to develop innovative solutions to challenges they face. The funding agreement with Industry Canada has previously limited participation to for-profit entities. Significantly, Budget 2014 renders charities and nonprofits eligible for all of Mitacs programming, be it at the graduate or post-graduate level and domestic or international talent. We will be working with Mitacs and the Department of Industry in the weeks to come to ensure that the eligibility criteria for our sector is broad-based so as to encourage a wide array of organizations and projects to benefit from this continuum of talent.
Electronic filing (p. 100 & p. 213)
Imagine Canada had recommended to the Minister that automation of T3010 reporting would help to reduce administrative costs, while improving the quality of data gathered. The budget announces that “To reduce the administrative burden on charities, the Government will modernize the CRA’s information technology systems to permit electronic filing. Enabling charities to apply for registration and file their annual information returns electronically will reduce the time it takes charities to meet their compliance obligations under the Income Tax Act and allow them to spend more time on their charitable activities.” To achieve this modernization, $23 million will be invested over five years.
Enhance public awareness of charitable giving (p. 213)
Alongside the modernization of information filing, the budget tasks the Canada Revenue Agency with establishing an enhanced web presence on charitable giving trends and activities. Over the next two years, $1.5 million will be invested to achieve this. We look forward to working closely with the CRA to maximize the impact of these efforts and to align them with the efforts that CRA has previously supported to develop and promote Charity Focus, Imagine Canada’s online portal for information about charities.
Donations of ecologically sensitive land (p. 159, p. 213, p. 332)
The budget proposes to double the carry-forward period for donations of ecologically sensitive land. This will encourage such donations by allowing donors to make greater use of the tax credit available. It had been recommended during the Finance Committee hearings on tax incentives for charitable giving by the Canadian Land Trust Alliance
Estate donations (p. 214, p. 332-333)
To further facilitate charitable giving, the trustee of an individual’s estate will be allowed increased flexibility to apply charitable donation credits against the income tax liabilities of the individual or the estate. The federal government expects to invest $105 million over the next five years as a result of this measure. This is a significant new investment and a very welcome clarification of the rules for charitable giving. The lack of clarity around this issue has been one that charities have sought to address for a number of years. It had been raised repeatedly by charities and by supporters of the sector, including by the Canadian Bar Association during the Incentives for Charitable Giving hearings and by CAGP in discussions with CRA. We understand that it will create greater certainty for donors and greater discretion for trustees.
Charitable lotteries (p. 214-215)
In order to reduce administrative costs associated with charitable lotteries and allow charities to modernize their lottery systems, the budget proposes to amend the Criminal Code to allow charities to conduct various aspects of lotteries through the use of a computer. The use of a computer will also allow charities to use modern e-commerce methods for the purchasing, processing and issuing of lottery tickets and issuing of receipts to donors. The federal government will consult with the provinces and territories on the proposed amendments to the Criminal Code in order to enact this legislation. Sick Kids Foundation, the Canadian Cancer Society, the Heart and Stroke Foundation, the CHEO Foundation and the London Health Science Foundations (in partnership with St Joseph’s Health Care Foundation and Children’s Health Foundation) made this joint recommendation during the pre-budget process.
State supporters of terrorism (p. 334)
The budget proposes that where a charity (or a Canadian amateur athletic association) accepts a donation from a foreign state (or agency thereof) listed as a supporter of terrorism for purposes of the State Immunity Act, the Minister of National Revenue may refuse to register the charity (or amateur athletic association) or may revoke its registration. (Syria and Iran are the only two countries currently listed as supporters of terrorism).
The Canada Revenue Agency will provide information about best practices for exercising due diligence when accepting gifts and for preventing terrorist abuse of the registration system for charities.
We have confirmed that the Canada Revenue Agency will utilize existing compliance reporting and, as such, the measure will not impose an additional reporting burden on charities. We will be looking to ensure that this new measure will not impact charities’ ability to deliver humanitarian relief and respond to crisis situations.
Consultations on nonprofit organizations (p. 335)
Budget 2014 announces the Government’s intention to review whether the income tax exemption for NPOs remains properly targeted and whether sufficient transparency and accountability provisions are in place. This review will not extend to registered charities or registered Canadian amateur athletic associations. As part of the review, the Government will release a consultation paper for comment and will further consult with stakeholders as appropriate. We will monitor this consultation very closely with an eye to assessing what negative or unintended consequences may affect the ability of nonprofits to attract resources and carry out their work.
Charities as employers
A number of budget measures that are focused on skills shortages may affect charities as employers and providers of training and internship opportunities. Imagine Canada will work in the coming weeks to determine whether charities are eligible to access these programs which in the first instance are directed to small and medium sized enterprises. Specific measures include:
- Launching the Canada Job Grant to encourage greater employer participation in skills training decisions. Small business will benefit from flexible arrangements, such as the potential to count wages as part of the employer contribution. (p. 59)
- $40 million dedicated towards supporting up to 3,000 internships in high-demand fields. Of this amount, $30 million will be provided to the National Research Council’s Industrial Research Assistance Program to support youth internships in small and medium-sized enterprises undertaking technical research and development projects. The remaining $10 million will be delivered by employment and Social Development Canada under the Youth Employment Strategy. (p. 73)
- $15 million annually reallocated within the Youth Employment Strategy towards supporting up to 1,000 internships in small and medium-sized enterprises. (p. 74)
- Revising remittance thresholds for employer source deductions by reducing the maximum number of payments that employers are required to make to the government on account of source payroll deductions (personal income tax, Canada Pension Plan contributions, and Employment Insurance premiums). This measure will particularly benefit small and medium sized employers. (p. 97-98)
Other items of interest
In addition to measures affecting charities as a whole, the budget contains a number of items that will be of particular interest to one or more subsectors. Some of these investments are new dollars and some are continuations or reallocations of previously committed investments. These include:
Arts and cultural industries
The budget announces $105 million per year in support of core cultural programs. (p. 216) This includes:
- $25 million for the Canada Council for the Arts;
- $30.1 million for the Canada Cultural Investment Fund;
- $30 million for the Canada Cultural Spaces Fund;
- $18 million for the Canada Arts Presentation Fund;
- $1.8 million for the Fathers of Confederation Buildings Trust;
- $9 million per year for the Canada Book Fund (p. 217);
- $8.8 million per year for the Canada Music Fund (p. 217); and
- Ongoing funding of $4.2 million per year for the Virtual Museum of Canada and $1.2 million per year for the Online Works of Reference. The funding and responsibility for these programs will be transferred to the Canadian Museum of History. (p. 217 -218)
The budget proposes a change to the receipting of donations of cultural property. The value of a gift of certified cultural property will now be deemed to be no greater than the donor’s cost of the property, if it was acquired under a gifting arrangement that is a tax shelter. (p. 260)
- Create the Canada First Research Excellence Fund with $1.5 billion in funding over the next decade to help Canadian post-secondary institutions excel globally in research areas that create long-term economic advantages for Canada. (p. 115)
- An additional $46 million per year on an ongoing basis to the granting councils in support of advanced research and scientific discoveries, including the indirect costs of research. (p. 116-117)
- $10 million over two years for social innovation research projects connecting colleges and polytechnics with the research needs of local community organizations. (p. 119)
- $3 million over three years to the Canadian Digital Media Network for the creation of the Open Data Institute. (p. 122-123) This has the potential to contribute to the data available to charities.
- An additional $40 million over four years to the Canada Accelerator and Incubator Program (p. 71).
Sports and Recreation
- Maintain the Government of Canada’s record level of investment in sport including ongoing programming support for our Olympic, Paralympic and Special Olympic athletes and coaches. (p. 218)
- Ongoing funding of $23 million per year for the Sport Support Program. (p. 218-219)
- Additional funding of $10.8 million over four years for Special Olympics Canada. (p. 219)
- Provide greater retirement savings opportunities in respect of income contributed to amateur athlete trusts. (p. 220)
- $1 million over two years to Le Grand défi Pierre Lavoie. (p. 221)
- Double annual funding for the Recreational Fisheries Conservation Partnerships program by providing an additional $15 million over two years. (p. 158)
- $10 million over two years to the National Trails Coalition to improve and expand snowmobile and recreational trails across the country. (p. 159)
- $3 million over three years to support the Earth Rangers Foundation to expand its existing family-oriented conservation and biodiversity programming. (p. 160)
- $1.9 billion in new investments to support the implementation of a First Nations Control of First Nations Education Act. (p. 76)
- “Going forward, the Government will continue to seek ways to improve the governance, coherence and effectiveness of its international aid spending.” (p. 234)
Although the Budget 2014 made no new announcements with regards to Canadian aid, it is worth noting that, over the last several years, the government has continued to cut or reduce spending in this area.
People with disabilities:
- Renew the Homelessness Partnering Strategy as announced in Economic Action Plan 2013, and continues to work with communities, provinces and territories and the private and not-for-profit sectors to implement a Housing First approach to homelessness. (p. 208)
- $222 million annually over four years, matched by the provinces and territories, for a new generation of Labour Market Agreements for Persons with Disabilities. (p. 61-62)
- Ongoing support for the Canadian Employers Disability Forum. (p. 62)
- $15 million over three years to the Ready, Willing & Able initiative of the Canadian Association for Community Living. (p. 62-63)
- $11.4 million over four years to the Sinneave Family Foundation and Autism Speaks Canada to support the expansion of vocational training programs for persons with Autism Spectrum Disorders. (p. 64)
- $305 million over five years to extend and enhance access to high-speed broadband networks to a target speed of 5 megabits per second for up to an additional 280,000 Canadian households. (p. 179)
- Increase funding for the New Horizons for Seniors Program by an additional $5 million per year. This funding can support municipalities, not-for-profits, social enterprises and other
community partners to address the needs of seniors. (p. 206)
Search and Rescue Volunteers
The budget proposes a new Search and Rescue Volunteers Tax Credit to recognize the important role played by ground, air and marine search and rescue volunteers. (p. 229)
Imagine Canada would like to take this opportunity to congratulate those organizations that, through diligent effort, achieved significant milestones in the budget. We would also like to thank the many of you whose advice, support, and encouragement helped us in our efforts to raise the profile of the sector and to make real progress in a number of areas.
February 12, 2014
For more information, please contact Imagine Canada’s Public Policy team.