Budget Implementation Act, 2016, No. 2 is Released
On October 19, 2016, the Department of Finance released the Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures
(the “Budget Implementation Act, 2016, No. 2”) and the accompanying Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Texts (the “Explanatory Note”). Of primary interest to charities is clause 42, which implements amendments to the definition of total charitable gifts, total cultural gifts, and total ecological gifts in subparagraph 118.1(1) of the Income Tax Act (“ITA”), specifically with regard to gifts made by an individual’s graduated rate estate. Clause 42 also implements the changes to ITA subparagraphs 118.1(5.1) and 118.1(19)(c), which deal with gifts by an individual’s graduated rate estate and excepted gifts in respect of the gift of non-qualifying securities. These changes will apply to the 2016 and subsequent taxation years.
Also potentially of interest to charities and not-for-profits is clause 71 of the Budget Implementation Act, 2016, No. 2, which adds Part XIX Common Reporting Standards to the ITA, and will come into force on July 1, 2017. Part XIX “implements the reporting and due diligence standards of the Common Reporting Standard … developed by the Organisation for Economic Co-operation and Development that underpins the automatic exchange of financial account information.” It will require financial institutions to report certain information to CRA on reportable accounts.
Bill C-2 Amending the ITA on Donation Tax Credits Receives Second Reading in the Senate
On September 20, 2016, An Act to amend the Income Tax Act (“Bill C-2”) was passed by the House of Commons. Bill C-2 was originally introduced on December 9, 2015 to change the federal personal income tax rates for individual taxpayers as of January 1, 2016. On October 6, 2016, Bill C-2 received its second reading in the Senate and was then referred to committee. Bill C-2 will amend the formula used to calculate the donation tax credit in subsection 118.1(3) of the ITA by reducing the second personal income tax rate to 20.5% from 22% and the introduction of a new 33% personal income tax rate on individual taxable income in excess of $200,000 effective for the 2016 and subsequent taxation years. One of the consequential proposals contained in Budget 2016 was to provide a 33% charitable donation tax credit on donations above $200 to trusts that are subject to the 33% rate on all of their taxable income. This measure was also intended to extend the 33% charitable donation tax credit contained in Bill C-2 to donations made by a graduated rate estate during a taxation year of the estate that straddles 2015 and 2016.
2017 Public Budget Consultations
On September 26, 2016 the Minister of Finance launched pre-budget consultations for 2017. The general public, including charities and not-for-profits, are invited to submit their opinions online at the #Budget2017Consultations website and via Twitter with the hashtag #Budget2017. The website has a survey, a discussion forum, and email contact for submissions. Submitted briefs, witnesses and the meeting schedule are available to the public on the parliamentary website.