Economic Action Plan 2014 further responds to the recommendations in the report of the House of Commons Standing Committee on Finance on charitable donation tax incentives by proposing to reduce the administrative burden on charities and enhance public awareness.
Registered charities must file annual information returns with the Canada Revenue Agency. Unlike other groups, however, charities do not have the option of filing their information returns electronically. This poses a significant administrative burden for volunteers and staff of some 86,000 registered charities across Canada. This issue must be addressed to allow charities to devote more time and resources to charitable activities rather than administration. In addition, making data on charitable giving and trends more accessible will enhance public understanding of the charitable sector.
Both information technology modernization and enhanced public awareness have been identified as key priorities by the charitable sector. Accordingly, Economic Action Plan 2014 proposes the following measures:
- To reduce the administrative burden on charities, funding will be provided to the Canada Revenue Agency to modernize its information technology, thereby enabling charities to apply for registration and file their annual information returns electronically for the first time. This will represent an overall cash investment of $23 million over five years.
- To improve public awareness, the Canada Revenue Agency will establish an enhanced web presence on charitable giving trends and characteristics in Canada.
These measures are expected to cost $1 million in 2014–15 and $0.5 million in 2015–16.
Through Canada’s Economic Action Plan, the federal government is committed to providing assurance to Canadians that charities are using their resources appropriately.
About the Initiative
The Government of Canada provides registered charities with generous assistance under the tax system in recognition of the valuable work that they perform. Registered charities are exempt from tax on their income and may issue official donation receipts for gifts received. In turn, donors can use those receipts to reduce their taxes by claiming the Charitable Donations Tax Credit (for individuals) or Charitable Donations Tax Deduction (for corporations). In 2012, federal tax assistance for charitable donations exceeded $2.9 billion.
Canadians have shown that they are willing to donate generously to support charities, but want to be assured that charities are using their resources appropriately. In this regard, charities are required by law to operate exclusively for charitable purposes and to devote their resources exclusively to charitable activities.
Given their unique perspectives and expertise, it is broadly recognized that charities make a valuable contribution to the development of public policy in Canada. Accordingly, under the Income Tax Act charities may devote a limited amount of their resources to non-partisan political activities that are related to their charitable purposes.
Previous concerns had been raised that some charities may not be respecting the rules regarding political activities. There had also been calls for greater public transparency related to the political activities of charities, including the extent to which they may be funded by foreign sources.
The Canada Revenue Agency (CRA), as administrator of the tax system, is responsible for ensuring that charities follow the rules. Accordingly, to enhance charities’ compliance with the rules with respect to political activities, Economic Action Plan 2012:
- Provided funding to CRA to enhance its education and compliance activities with respect to political activities by charities.
- Improved transparency by requiring charities to provide more information on their political activities, including the extent to which these are funded by foreign sources.
The Income Tax Act has also been amended to restrict the extent to which charities may fund the political activities of other qualified donees, and to introduce new sanctions for charities that exceed the limits on political activities, or that fail to provide complete and accurate information in relation to any aspect of their annual return.
Who Will Benefit
Canadians will be able to have greater confidence that charities are using their resources appropriately. In turn, charities will benefit from increased support when donors know that their contributions are used for charitable purposes.
The Jobs, Growth and Long-term Prosperity Act implementing these legislative changes received Royal Assent on June 29, 2012.
Find Out More
For more information, please visit the Canada Revenue Agency’s web page on this subject.