On March 29,2012, Federal Finance Minister Jim Flaherty presented the government’s 2012 budget in the House of Commons. This budget made a number of changes that will have an effect on the Christian charity sector, which are outlined below.
- Enhanced public transparency and accountability of charities
- Increased GST rebate for charities that give away printed books
- Doubled thresholds for charities using the Streamlined GST/HST method
- Increased age eligibility for the Old Age Security Pension from age 65 to age 67
- Changed rules for foreign charities to be eligible for qualified donee status
- Increased penalties for unregistered charitable tax shelters
Enhanced public transparency and accountability
The budget introduced new enforcement tools for greater accountability and transparency. Canada Revenue Agency (CRA) will now be granted the authority to suspend the tax-receipting privileges of a charity that provides inaccurate or incomplete information in its annual information return, until the charity provides the required information.
This will require charities not only to file their returns on time, but also to fully complete the return and to do so accurately. CCCC has developed a CRA-approved fillable, saveable T3010 form to assist you in completing your return available at www.cccc.org/members_t3010. We also recommend that you consult CRA’s guide .
Currently, a charity is allowed to engage in limited political activity that is non-partisan, ancillary, and incidental to its charitable purposes and activities. The Budget proposes that where a gift is made by a charity to a qualified donee and it can reasonably be considered that a purpose of the gift is to support the political activities of the qualified donee, then the gift will be considered to be a political activities expenditure of the gifting charity.
It is unclear whether the entire gift would be considered “political,” even if a small portion is used for political activities by the qualified donee. Therefore, charities need to carefully examine their transfers to qualified donees to ensure that they continue to stay within political activity expenditure limits.
Increased GST rebate for charities that give away printed books
Government policy to promote literacy will benefit those Christian charities involved in literacy promotion by providing a full GST rebate (and the federal portion of the HST) on the printed books they acquire to give away. The process for charity and qualifying non-profit literacy organizations to apply will be prescribed by regulation and available from the CRA. The rebate will apply to acquisitions and importations of printed books in respect of which tax becomes payable after March 29, 2012 (Budget Day).
Doubled thresholds for Streamlined GST/HST
Beginning after 2012, the Budget proposes to double the threshold that permit s you to have a streamlined GST/HST process. Charities will be entitled to use the streamlined method if
- total taxable supplies do not exceed $1,000,000 (formerly $500,000) in either the preceding fiscal year or in the preceding quarter, and
- total purchases of taxable property and services (excluding zero rated or exempt purchases) in the preceding fiscal year do not exceed $4,000,000 (formerly $2,000,000)
In addition, the annual taxable sales threshold, which allows charities to use the Quick Method, will increase to $400,000 (from $200,000).
Old Age Security Age of Eligibility
The age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) will be gradually increased from 65 to 67, starting in April 2023, with full implementation by January 2029.
An 11-year notification period, followed by a 6-year phase-in period, will ensure that individuals have significant advance notification for retirement planning purposes.
Individuals who were born on March 31, 1958 or earlier will not be affected by this change. Those who were born on or after February 1, 1962 will have an age of eligibility of 67. Those who were born between April 1, 1958 and January 31, 1962 will have an age of eligibility between 65 and 67.
While there will be little impact on charity employees in the short-term, ministries may find that employees may choose to work longer as these changes are phased-in.
Gifts to Foreign Charitable Organizations
Foreign charities that received donations from the Government of Canada in the past were eligible to receive “qualified donee” status. There are currently only nine organizations on this list. That status allowed Canadian charities to make a gift to them. It also allowed Canadians to donate to these foreign charities and receive official receipts for tax purposes. The rules will be changed so that only those foreign charitable organizations that receive a gift from the Government may apply for qualified donee status IF they pursue activities
• related to disaster relief or urgent humanitarian aid; or
• in the national interest of Canada.
Once the status is obtained, it will be made public and will be granted for a 24-month period starting normally from the date of the gift from the Government. We expect to receive further guidance from the CRA in the coming weeks about the administration of this new approach. The effective date will be on or after the later of January 1, 2013 and Royal Assent to the Budget enacting legislation.
This announcement does not impact charities who have joint ministry agreements.
Increased Penalties for Promoters of Unregistered Charitable Tax Shelters
Tax shelters are currently required to register and report annually to CRA to facilitiate proper investigation of “abusive tax planning arrangements.” The Budget increases the penalties on promoters who fail to comply with these registration and reporting requirements. A tax shelter identification number will now be valid only for the calendar year identified in the application for the number filed with the CRA.
CCCC advises registered charities not to get involved in tax shelter gifting arrangements. Registered charities should be aware that participating in such arrangements can jeopardize their charitable status or expose them to monetary penalties.