Authored by Barry W. Bussey, Director, Legal Affairs
The 2019 Federal Budget addressed several areas of concern involving charities. Few of these measures will affect our membership. You may read the budget in full here. For your easy reference we note the following three points.
Social Finance Fund
The government reiterated its 2018 Fall Economic Statement wherein it proposed to make available up to $755 million on a cash basis over 10 years to establish a Social Finance Fund (SFF). The SFF will help charitable, non-profit and other social purpose organizations access financing for projects that reduce poverty, expand employment opportunities for persons with disabilities, build more affordable housing, etc.
Professional investment managers will manage the fund by investing in existing or emerging social finance intermediary organizations that have leveraged private or philanthropic capital for co-investment. The fund manager(s) will also be required to leverage a minimum of two dollars of non-government capital for every dollar of federal investment, with the exception of investments for Indigenous-led or Indigenous-owned funds.
A minimum of $100 million will be allocated towards projects that support greater gender equality. A $50 million investment will be made in the newly proposed Indigenous Growth Fund.
Supporting Canadian Journalism
The 2019 budget also reiterated government’s 2018 Fall Economic Statement to introduce three new tax measures to support Canadian journalism:
• A new refundable tax credit for journalism organizations.
• A new non-refundable tax credit for subscriptions to Canadian digital news.
• Access to charitable tax incentives for not-for-profit journalism.
An independent panel of experts from the Canadian journalism sector will be established to assist the Government in implementing these measures, including recommending eligibility criteria for Qualified Canadian Journalism Organizations (QCJO) to be registered.
Budget 2019 further proposes to add registered journalism organizations as a new category of tax-exempt qualified donee. To qualify, a QCJO will be required to be a corporation or trust and to have purposes that exclusively relate to journalism. These organizations will not be permitted to distribute their profits, if any, nor allow their income to be available for the personal benefit of individuals connected with the organization.
QCJO will not be used to promote the views or objectives of any particular person or related group of persons. A registered journalism organization:
• will be required to have a board of directors or trustees, each of whom deals
at arm’s length with each other;
• must not be factually controlled by a person (or a group of related persons); and
• must generally not, in any given year, receive gifts that represent more than 20 per cent of its total revenues, including donations, from any one source (excluding bequests and one-time gifts made on the initial establishment of the particular registered journalism organization).
The names of all registered journalism organizations will be listed on the Government of Canada website. They will be required to file an annual return with the CRA disclosing their activities, the name(s) of any donors that make donations of over $5,000, and the amount(s) donated. Similar to registered charities and registered Canadian amateur athletic associations, these information returns will be made public along with certain additional information.
Donations of Cultural Property
There will be enhanced tax incentives to encourage donations of cultural property to certain designated institutions and public authorities in Canada, in order to ensure that such property remains in
Canada. These will include a charitable donation tax credit (for individuals) or deduction (for corporations), and an exemption from income tax for any capital gains arising on the disposition.
To qualify, donated property must be of “outstanding significance” by reason of its close association with Canadian history or national life, its aesthetic qualities, or its value in the study of the arts or sciences. It also has to be of “national importance” to such a degree that its loss to Canada would significantly diminish the national heritage.
However, Budget 2019 proposes to amend the Income Tax Act and the Cultural Property Export and Import Act to remove the requirement that property be of “national importance” in order to qualify for the enhanced tax incentives. No changes are proposed that would affect the export of cultural property. This measure will apply in respect of donations made on or after Budget Day.
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.