Budget 2021: Reading the tea leaves

After reading through the almost 700 pages of the 2021 budget (just kidding) there are a few nuggets at the bottom of the barrel for the charitable sector. It’s longer on promises than concrete action, but it’s worth taking note of them nevertheless.

• Consultations to amend the disbursement quota set out in subsection 149.1(1) of the Income Tax Act (“ITA”). The current rate of 3.5% is exceeded by many charities, but there is also an apparent $1 billion gap. Look for a closer look (we hope) at donor-advised funds.
• The budget proposes amendments to the ITA to prevent terrorist abuse of charitable status, something that has been in place in the USA for some time. However, these provisions also often add an additional burden on Canadian charities that operate overseas in conflict zones.
• Revisions to the ITA definition of “ineligible individuals” to those serving on boards who have a criminal record or have been associated with a charity under suspension.

Beyond the regulatory provisions in the budget, there are promises of a financial lifeline to charities and nonprofits.

• In an effort to support Canada’s recovery in the wake of the pandemic, Budget 2021 proposes to provide temporary support of Canada’s social sector, including charities, non-profits, and “social purpose organizations”, by providing financial support and funding through various programs and funds.

Whether these are new or recycled funds and what the nature of “temporary” support remains to be seen.

For an excellent overview of the budget and its implications see Charity lawyer Terry Carter’s budget analysis: Charity & NFP Law Bulletin No. 492.