Summary#
This bill changes the Income Tax Act to let registered charities share money, staff time, or other resources with groups that are not “qualified donees,” if the charity takes reasonable steps to ensure the resources are used only for a charitable purpose (s. 149.1(1), s. 149.1(27)). It applies to both charitable organizations and charitable foundations (s. 149.1(2.1)). It also tightens some accountability rules and sets a review of the changes by the government.
- Lets charities fund or collaborate with non-qualified donees if they meet a “reasonable steps” test before and during the project (s. 149.1(1)(b), s. 149.1(27)).
- Keeps the disbursement quota rule: charities must spend enough each year on charitable activities or gifts to qualified donees (s. 149.1(2)(b), (3)(b), (4)(b)).
- Deems certain payments to qualified donees as charitable activity for compliance purposes (s. 149.1(10)).
- Imposes a 110% penalty if related charities transfer property and fail to spend the required extra amount at arm’s length (s. 188.1(12)).
- Confirms public policy dialogue done in furtherance of a charitable purpose is a charitable activity (s. 149.1(1)(a)).
- Takes effect two years after royal assent; a government review is due within five years after coming into force, with a report to Parliament within one year after the review starts (Coming into Force; Review and Report).
What it means for you#
- Households (donors): No change to donation tax credits or rates. Your chosen charity may work with more local or international partners that are not registered as charities. Data unavailable on any revenue effects.
- Registered charities (operating charities):
- You may grant or share resources with non-qualified donees if you take “reasonable steps” to ensure exclusive charitable use. Before funding, collect information on the partner’s identity, experience, and activities. During funding, set measures, conditions, or other actions to satisfy a reasonable person that funds are used only for a charitable purpose (s. 149.1(27)).
- You still must meet the annual disbursement quota by spending on charitable activities or gifting to qualified donees (s. 149.1(2)(b)). Grants to non-qualified donees count as your own “charitable activities” if you meet the reasonable-steps test (s. 149.1(1)(b), s. 149.1(27)).
- Payments to qualified donees that are not from income (for example, from capital) are deemed a devotion of resources to charitable activity (helps with compliance tracking) (s. 149.1(10)).
- You can carry a “disbursement excess” forward up to five years or back one year to help meet the quota in other years (s. 149.1(20)–(21)).
- The Minister may, on application, deem amounts as spent on charitable activities for quota purposes (s. 149.1(5)).
- Effective date is two years after royal assent; plan for new due‑diligence procedures before then (Coming into Force; s. 149.1(27)).
- Charitable foundations (grantmaking):
- You have explicit authority to fund non-qualified donees under the same “reasonable steps” standard (s. 149.1(2.1), s. 149.1(27)).
- The same disbursement quota and carryforward/back rules apply (s. 149.1(3)(b), (4)(b); s. 149.1(20)–(21)).
- Community groups, including Indigenous communities, that are not qualified donees:
- You may receive funding or other resources from registered charities if you agree to reasonable safeguards and reporting so the charity can ensure exclusive charitable use (s. 149.1(1)(b), s. 149.1(27); Preamble).
- Expect information requests before funding and conditions during the project.
- Related or affiliated charities (not at arm’s length):
- If you receive property from a related registered charity, you must spend, by the end of the next year and in addition to your disbursement quota, an amount equal to the property’s fair market value on charitable activities or gifts to arm’s‑length qualified donees. If you fall short, a penalty of 110% of the shortfall applies (s. 188.1(12)).
- Charities using related corporations:
- A corporation whose property is used entirely by a registered charity in its administration or charitable activities is excluded from the “non-qualified investment” category (s. 149.1(1)(e)). This clarifies treatment of entities wholly used for the charity’s work.
Expenses#
Estimated net cost: Data unavailable.
- No direct appropriations, new taxes, or changes to donation credit rates appear in the bill text. It mainly changes compliance rules and definitions (Bill passim).
- The bill sets a penalty rate of 110% for certain non‑arm’s‑length property transfers that do not meet expenditure requirements (s. 188.1(12)). Fiscal impact: Data unavailable.
- Government review and reporting duties are mandated but not costed (Review and Report). Data unavailable.
Proponents' View#
- Improves effectiveness: Charities can work directly with local groups, including Indigenous communities and international partners, without forcing “direction and control” structures, while still ensuring accountability through the “reasonable steps” test (s. 149.1(1)(b), s. 149.1(27); Preamble).
- Maintains accountability: The law requires due diligence before funding and safeguards during funding to satisfy a reasonable person that resources are used only for charitable purposes (s. 149.1(27)).
- Clarifies permitted activities: Public policy dialogue done in furtherance of a charitable purpose remains clearly within “charitable activities,” reducing uncertainty (s. 149.1(1)(a)).
- Helps quota compliance: Deeming certain payments to qualified donees as charitable activity and allowing carryforward/back of disbursement excess give charities practical tools to meet annual rules (s. 149.1(10), s. 149.1(20)–(21)).
- Strengthens anti‑abuse rules: The 110% penalty discourages related‑party transfers that are not matched by required spending at arm’s length (s. 188.1(12)).
- Ensures oversight: A mandatory review within five years after coming into force and a report to Parliament support future course corrections (Review and Report).
Opponents' View#
- Vagueness risk: The “reasonable steps” and “satisfy a reasonable person” standards are not defined in detail, which may create audit uncertainty and uneven enforcement across charities and projects (s. 149.1(27)).
- Compliance burden: Charities must collect partner information and impose conditions on projects with non‑qualified donees, which may require new documentation and monitoring systems. Cost data unavailable (s. 149.1(27)).
- Potential for misdirected funds: Relaxing limits on working with non‑qualified donees could raise the risk that resources are not used as intended, especially where oversight is difficult. The bill relies on the charity’s “reasonable steps” rather than direct control (s. 149.1(1)(b), s. 149.1(27)).
- Penalty exposure: The 110% penalty on shortfalls in related‑charity transfers increases financial risk if organizations miscalculate or miss deadlines (s. 188.1(12)).
- Transition lag: The two‑year delay before the law takes effect postpones benefits and leaves uncertainty about interim compliance approaches (Coming into Force). Data unavailable on transition guidance.