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 2011, federal tax assistance for the charitable sector was approximately $2.9 billion.
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.
However, concerns have been raised that some charities may not be respecting the rules regarding political activities. There have 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 provides that the CRA will:
- Enhance its education and compliance activities with respect to political activities by charities.
- Improve 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. In addition, at the request of the Government, the House of Commons Standing Committee on Finance is studying current and proposed incentives for charitable giving to ensure that the tax incentives are as effective as possible.
Find Out More
For more information, please visit the Canada Revenue Agency’s web page on this subject.