David Sherman, a very knowledgeable and respected Canadian tax writer and practitioner, had expressed a concern that the changes in the 2018 Federal Budget that were meant to have simplified the system for recognizing prescribed foreign universities may have the unintended consequence of not including all foreign prescribed universities that were currently on the list. Today Finance released the Legislative Proposals Notice of Ways and Means Motions and Explanatory Notes. In it they make certain additional changes to ensure that there is no question that all the foreign prescribed universities that were on the list will be recognized.
I communicated with Finance about this issue a few times since March 1 when David Sherman raised the issue and Finance immediately assured me that there was no intention to do anything other than simplify and speed up the process for having foreign universities be listed. Consequently, I was not worried about the issue but I am glad that the issue can be put to rest and it was done within 3 weeks. Finance should be commended for moving quickly to address and fix the issue.
Here is the Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures and Explanatory Notes and you can see the change on page 31:
Here is the new wording as amended:
25 (1) Subparagraph (a)(iv) of the definition qualified donee in subsection 149.1(1) of the Act is replaced by the following:
(iv) a university outside Canada, the student body of which ordinarily includes students from Canada, that has applied for registration, or
(2) Subsection (1) is deemed to have come into force on February 27, 2018, except that (a) if a university has applied for registration prior to February 27, 2018 and is registered by the Minister on or after that day, subsection (1) applies in respect of the university as of the day it applied for registration; and (b) any university named in Schedule VIII to the Income Tax Regulations at the end of February 26, 2018 is deemed to have applied for registration.
Back to our coverage of the Federal Budget 2018 the Budget stated "To simplify the administration of these rules and streamline the registration process for universities outside Canada as qualified donees, Budget 2018 proposes to remove the requirement that universities outside Canada be prescribed in the Income Tax Regulations. This measure will apply as of Budget Day." I noted "The best thing about the change is it highlights the importance of the over 600 foreign prescribed universities." Since 1966 Canada has given generous tax incentives to Canadians who donate to these foreign prescribed universities. In fact it is the same generous incentives that apply when a Canadian donates to a Canadian university! My main concern at the moment is that there is little awareness of this important fundraising mechanism in many countries, such as India and China. If you care about a foreign university and the work they do, then check whether they are on the list of prescribed foreign universities. If they are not on the list then encourage them to learn more about this important category of qualified donee either on the CRA site or our recent article Foreign Universities Applying for Prescribed University Status in Canada 2018. It is easy to qualify for the list if you are a non-Canadian university and typically have 2 Canadian students studying at the university. The good thing about the Budget 2018 simplification is that now the 1-2 year wait to be placed on the list optimistically should only take 6 months to a year.
We have assisted foreign universities to obtain this status and also with operational issues such as issuing official donation receipts. If you require assistance you can contact us.
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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.