Cathy Hawara, Director General of the Charities Directorate, made some comments on the 2012 Federal budget changes affecting the category of qualified donee charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift. She also addressed some of the media confusion about those changes.
“Finally, I will turn now to the changes that have been proposed to the provision for charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift.
In general, a donation made by a Canadian to a foreign charitable organization is not eligible for a charitable donation tax credit or deduction. However, a foreign charitable organization that receives a gift from the Government of Canada may apply to be registered as a qualified donee under the Income Tax Act. As a qualified donee, the foreign charitable organization may issue official donation receipts for gifts received from Canadian donors. In addition, a foreign charitable organization that becomes a qualified donee is eligible to receive funds from Canadian registered charities.
Budget 2012 has proposed a modification to the rules for registering foreign charitable organizations as qualified donees. The amendment would require that a foreign charitable organization applying for qualified donee status:
1. has received a gift from the Government of Canada;
2. meets the definition of a charitable organization in Canada; and
3. pursues activities related to:
• disaster relief,
• urgent humanitarian aid, or
• other activities in the national interest of Canada.
To anticipate one of your questions, you might ask what would be considered “activities in the national interest of Canada”? Well, we will be developing guidance in consultation with our colleagues from the Department of Finance, but I can provide you with one example. There is a hospital in Germany that has treated Canadian soldiers wounded in Afghanistan. Given the important role it plays, the hospital would likely be considered to be carrying on activities in the national interest of Canada. It would also likely qualify as a charitable organization if it were resident in Canada. Therefore, if it received a gift from Her Majesty in right of Canada, it would be eligible to be listed as a qualified donee.
The Minister of National Revenue will have the discretionary authority to grant qualified donee status to a foreign charitable organization meeting these criteria, following consultation with the Minister of Finance. In the coming months, we will work closely with our colleagues from the Department of Finance to develop the necessary procedures that will need to be in place when the legislation comes into force.”
Cathy Hawara also earlier made some comments about media confusion between the foreign activity provisions and those relating to political activities:
“Let me now turn to some of the highlights of Budget 2012 that relate to registered charities. As you know, the 2012 Budget proposes several measures related to compliance and transparency with respect to political activities carried on by registered charities and RCAAAs. Changes have also been introduced to the qualified donee provision for charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift.
I should clarify at the outset that these are two separate, independent measures. We have seen some media reports that have mistakenly linked the two together – the implication being that foreign charities not operating within the “national interest of Canada”, would no longer be considered a qualified donee. I will speak to each of these changes and explain exactly what has been proposed.”
Here is the full text of Cathy Hawara’s comments on the CRA website:
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.