Bill C-19 has passed. Also known as the Budget Implementation Act, 2022 No. 1 (BIA), the BIA means significant change for charities.
Bill C-19 Budget Implementation Act (BIA) Changes: Qualifying Disbursements
The BIA amends the Income Tax Act (ITA) to allow charities to work with non-charities. How? It adds a new category of permitted resource expenditures called “qualifying disbursements.”
To make “qualifying disbursements” charities need to maintain documentation sufficient to demonstrate:
- The purpose for the disbursement and
- That it is exclusively applied to charitable activities in furtherance of a charitable purpose
This brings the BIA more or less in line with Bill S-216, Effective and Accountable Charities Act. The focus is on the purpose of the disbursement and ensuring the activities are charitable, rather than a focus on means of control.
The BIA does not eliminate “own activities” and direction and control from the ITA like Bill S-216 proposed. Instead, as explained above, it creates a new category of “qualifying disbursements.”
Bill C-19 Budget Implementation Act (BIA) Changes: Reporting
The BIA requires charities to report on every qualifying disbursement greater than $5,000, including the name of the grantee organization, total amount received and the purpose of the disbursement. As others have noted, this section creates problems because it requires disclosure of potential sensitive information (e.g. charities working in areas with security risks or potential persecution).
Bill C-19 Budget Implementation Act (BIA) Changes: No Directed Giving
The BIA prohibits charities from receiving donations that are expressly or implicitly conditional on the charity making a gift to another organization other than a qualified donee. As others have noted, this section creates problems because it precludes charities “from fundraising for programs being run by grantee organizations.”
What happened to Bill S-216?
Bill S-216 is repealed.
Now that the BIA has passed, CRA will undoubtedly prepare guidance as to what it considers “sufficient documentation.” Charities need this clarity. It helps ensure compliance and consistency.
In an earlier version of the BIA, there was a long list of requirements charities had to meet in order to make qualifying disbursements. The Finance Committee deleted the list at the urging of the charitable sector. Even though the mandatory list is gone, we shouldn’t be surprised to see some of the same elements appear in a guidance document.
What Can You Do? Tell Us What You think!
What do you want to see (or not!) in CRA Guidance? What would be most helpful for you? Do you think a $5000 threshold for reporting is reasonable? We’re talking about this right now in The Green – join us! Your input and feedback is essential and will help us represent you – our members – as we have opportunity to engage with government on this topic.
Looking for More? Check out our Direction & Control series…
Direction and Control – Advocacy Opportunity (26 May 2022)
Update: Bill S-216 on Direction and Control (3 March 2022)
Bill S-216 on Direction and Control – Different Name, Same Aim (9 December 2021)
What’s Happening with Bill S-222? (30 June 2021)
Bill S-222: From Direction and Control to Reasonable Steps (10 February 2021)
Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.