Amendments to Gifts to Foreign Charitable Foundations

April 21, 2015

( Disponible en anglais seulement )

The Budget proposes an amendment to expand the availability of “qualified donee” status to certain foreign charitable foundations.  Entities that are “qualified donees” are eligible to receive outright grants from registered Canadian charities and can issue official donation receipts for gifts from individuals and corporations, thereby allowing the donor to claim charitable donation credits or deductions against Canadian income.

Under the current rules in the Act, which were introduced in the 2012 Budget, a foreign charitable organization that has received a gift from the federal Crown within the previous 24 months can apply for status as a qualified donee, provided that the charity is carrying on disaster relief work, urgent humanitarian aid, or other work in the national interest of Canada (effective for applications made by foreign charitable organizations made on or after January 1, 2013).  Whether a given foreign organization meets these criteria is at the discretion of the Minister of National Revenue in consultation with the Minister of Finance.  Qualified donee status is granted for a 24-month period that begins on a date chosen by the Minister of National Revenue, and the organization is included on a list of registered foreign charities maintained on the Canada Revenue Agency’s website.

The current rules are drafted such that this qualified donee status is available only to foreign entities that would meet the definition of “charitable organization” in the Act.  Among other things, this would generally mean that the organization is spending more than 50% of its funds on its own charitable activities, as opposed to gifts to other charities.  Charitable foundations, which spend more than 50% of their income on grants to other charities, are not included.

Budget 2015 proposes to amend the Act to allow foreign charitable foundations (in addition to foreign charitable organizations) to be registered as qualified donees if they otherwise meet the conditions for status above and are granted qualified donee status by the Minister of National Revenue in consultation with the Minister of Finance.  It is not clear to us that this change was necessary as a matter of statutory interpretation, but it is a useful clarification.

It is unclear whether this will result in a significant number of new foreign entities being registered.  Relatively few organizations have been granted qualified donee status since the new criteria, introduced in the 2012 Budget, became effective in 2013.  Nonetheless, the additional flexibility is desirable.

The Budget confirms that this measure will apply upon Royal Assent to the enacting legislation.

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