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

By Terrance S. Carter, Theresa L.M. Man, Ryan M. Prendergast, Esther Shainblum, Esther S.J. Oh, Jennifer M. Leddy, Sean S. Carter, Adriel N. Clayton and Martin U. Wissmath

Finance Minister Chrystia Freeland tabled the sixth budget of the Liberal federal government (“Budget 2022”) on April 7, 2022. Budget 2022 is comprised of nine chapters and three appendices focussing on a wide range of matters, such as housing affordability, climate change, reconciliation, health care, support for diverse communities, and tax fairness.

This Charity & NFP Law Bulletin provides a summary and commentary on provisions proposed in Budget 2022 that impact the charitable and not-for-profit sector. Budget 2022 includes a number of legislative proposals that will impact the operations of charities, including charities “partnering” with non-qualified donees in a legislative initiative aimed at reflecting the “spirit of Bill S-216”, increasing the disbursement quota for charities with investments above $1 million from 3.5% to 5%, and expanding the scope of Canada’s anti–money-laundering and anti–terrorist-financing (AML/ATF) regime to cover crowdfunding platforms. Additionally, Budget 2022 responds to some of the challenges of the past couple of years by including a number of health-related initiatives, funding for Canada’s Performing Arts and Heritage Sectors, and financial support and funding for Indigenous communities, Black Canadian communities, and various religious communities through different programs and funds.

For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 510.

Draft Budget Implementation Legislation Tabled in the House of Commons

By Theresa L.M. Man and Terrance S. Carter

Draft legislation for the Budget Implementation Act, 2022, No.1 (“BIA”) was tabled in the House of Commons on April 26, 2022, through a “Notice of Ways and Means Motion to introduce an Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures” (the “Motion”). After the Motion is debated at the House of Commons, the Motion will need to be adopted before it is introduced as a bill.

The BIA contains a number of proposed legislative changes relevant to charities. As well, the BIA provides further information about the federal government’s intentions regarding Bill S-216, An Act to amend the Income Tax Act (use of resources of a registered charity), which was recently explained in-depth by The Honourable Senator Ratna Omidvar in her presentation Bill S-216 — ‘Resource Accountability’ and the Vulnerable Sector on February 17, 2022. In this regard, the BIA proposes that if Bill S-216 received royal assent before or on the same day as the BIA, then Bill S-216 would be deemed never to have come into force and would be repealed on the day the BIA came into force.

Key proposed draft changes to the Income Tax Act and Income Tax Regulations contained in the BIA relevant to registered charities include:

• Introducing a new regime permitting registered charities to make “qualifying disbursements” to “grantee organizations” which are newly defined terms in the Income Tax Act;
• Preventing a charitable organization that has gifted 50% of its income in a year to qualified donees from making qualifying disbursements;
• Requiring qualifying disbursements to meet detailed prescribed conditions set out in new Income Tax Regulation 3703;
• Requiring a charity that has made over $5,000 in qualifying disbursements to a grantee organization in a year be reported in its T3010 Registered Charity Information Return under new Income Tax Regulation 3704; and
• Expanding the power of the Minister of National Revenue to revoke the registration of a registered charity if a gift was made “expressly or implicitly conditional” on the charity making a gift to another person, club, society, association or organization other than a qualified donee (a power that is currently limited to registered Canadian amateur athletic associations and registered journalism organizations).

An in-depth commentary of the BIA will follow in a future Charity and NFP Law Bulletin.

​Read the April 2022 Charity & NFP Law Update