The 2011 Federal Budget (the “Budget”) contains a number of anti-avoidance measures described below. It does not contain any measures designed to assist with charitable giving or to lessen the regulatory load on Canadian charities. Rather the changes proposed are consistent with the promotion of transparency and accountability, as well as the Government’s long-standing fight against what it views as abusive tax shelters.
What is interesting at this point is that the Budget may not pass. As of publication time, all opposition parties have indicated their intention to vote against the Budget. If this occurs, these budget proposals will be defeated. It is customary for the Department of Finance to propose technical changes to the Income Tax Act, that are not passed for many years, but CRA still treats them as being in effect from date of announcement (on the basis of a retroactive effective date in the eventual legislation). While a subsequent government (of any party) can be expected to bring back some of the charity Budget proposals, it will be very interesting to see whether changes from a defeated 2011 Budget that are sought to be brought back in a second 2011 Budget are given an effective date of the first or the second 2011 Budget.
Charities and donors caught by the Budget changes should seek specific legal advice on whether the changes are likely to have effect on March 22, 2011 or perhaps at a later date.