By Terrance S. Carter and Adriel N. Clayton

Standing Committee on Finance Makes Recommendation on Alternative Minimum Tax Regime

In anticipation of the 2024 Federal Budget, a report of the House of Commons Standing Committee on Finance entitled Shaping Our Economic Future: Canadian Priorities (the “Report”) was released in February 2024. Following a study of the pre-budget consultations launched in June 2023, the Report sets out 359 recommendations over five broad categories, including support for businesses, support for people, support for communities, climate change and energy policy, and federal fiscal framework and government.

Notably, for the charitable sector, Recommendation 311 states:

Before proceeding with the proposed changes to the Alternative Minimum Tax, determine the impact these changes will have on charitable revenues by conducting an independent economic and financial analysis.

As discussed in our August 2023 Charity & NFP Law Update, the alternative minimum tax (“AMT”) is a way of ensuring that every individual pays at least a minimum amount of tax. Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations (Budget 2023 and other proposals), released by the Department of Finance on August 4, 2023 proposes to significantly expand the scope of the AMT, which would, in turn, significantly reduce tax benefits to donors, subject to the AMT when those individuals donate publicly listed securities and capital property to charities.

Following this, various organizations voiced concerns and recommendations on the proposed new AMT provisions, as reported in our September 2023 Charity & NFP Law Update. While Recommendation 311 calls on the federal government to consider the impact of the new AMT provisions on the charitable sector, it remains to be seen what, if any changes, will be made to the AMT in the upcoming Federal Budget.

Public Safety Canada Updates Guidelines on Supply Chains Act

As reported in our November 2023 Charity & NFP Update , Canada implemented the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) on January 1, 2024. This law mandates that entities which fall under the provisions of the Act must file public reports with the Minister of Public Safety, Democratic Institutions and Intergovernmental Affairs (the “Minister”) regarding their efforts to limit and eliminate forced and or child labour within their supply chains. Charities and not-for-profits are not exempted under the Act. Should they fulfill the criteria for being categorized as “entities” within the Act, they must submit annual reports. As reported upon previously, considering the high threshold requirements under the Act, the definition of “entities” will generally only apply to large organizations.

A guidance was released in December 2023 in anticipation of the Act coming into effect. This guidance was updated by Public Safety Canada on March 7, 2024 (the “Updated Guidance”). The Updated Guidance contains a number of changes from the original guidance, one of which appears to create some uncertainty, as it seems to contradict the Act itself.

Under the Act, applicable entities which produce (defined in section 2 as “manufacturing, growing, extracting and processing of goods”) sell, or distribute goods in Canada or elsewhere, or import goods into Canada, must file reports to the Minister. Entities that control other entities engaged in these activities are also required to file under the Act. However, the Updated Guidance removes the references to “distributing” and “selling”, leaving “producing” and “importing” as the actions which would make an entity responsible to file a report. Despite this change to the Updated Guidance, the Act has not been amended. As the text of the Act has not changed, the law remains the same notwithstanding the wording of the Updated Guidance.

Another change in the Updated Guidance concerns subsidiaries and parent entities. Under the Act, parent entities can make one report that includes information from their subsidiaries which are also caught under the Act. The new Updated Guidance stipulates that, parent companies would use consolidated financial statements to determine if they meet the thresholds set out in the Act. Conversely, subsidiaries must assess if they are caught under the Act without using consolidated statements of the parent company in this determination.

The original guidance stated that reports should be 10 pages long. The Updated Guidance clarifies that this is not a requirement, but only a suggestion.

Finally, the Minister posted a list of frequently asked questions and answers, which is a helpful resource tool.

Organizations, including charities and not-for-profits, are reminded to check with their legal counsel to determine if they are required to file a report under the Act before the May 31, 2024 deadline.

​Read the March 2024 Charity & NFP Law Update