The government of Canada has released its plan for the upcoming year in Budget 2024. Several items will be interesting to charities, not-for-profits, and donors. This article will give a brief overview of these items of interest.

Alternative Minimum Tax

The Alternative Minimum Tax (“AMT“) is a separate tax calculation, which allows fewer tax benefits than ordinary income tax. The Charitable Donation Tax Credit (“CDTC“) was not one of the benefits disallowed under the AMT. Where the AMT exceeds regular income tax, a taxpayer pays the AMT. Last year’s Budget 2023 announced further reduction to benefits allowed on the AMT. In August, the government released proposed legislation which fleshed the changes out. The proposal cut the CDTC available on the AMT by 50%. This proposal could cause a big problem for charities; donors expect to receive a tax credit.

Budget 2024 proposes to reduce the CDTC available on the AMT to 80%. This is much more palatable than the earlier proposal of 50%, though it may still hurt charities.

For example, where a person donates $1,000, that person’s taxable income for the AMT would be reduced by $1,000. Under the Budget 2024 proposal, their taxable income for the AMT would be reduced by $800.

Simplified Receipts

Registered charities and qualified donees can issue donation receipts to donors. Donors use these receipts to claim the CDTC (on regular income tax or on the AMT). Budget 2024 proposes to make receipts simpler. The proposals include removing certain required items from the receipts. They also make it easier to deal with voided or cancelled receipts. Finally, the proposals would expressly allow electronic receipts. Although the CRA has permitted this practice, the legislation was not clear.

“Modernizing”

The Budget 2024 proposals include a few minor updates to CRA processes. The big change here allows the CRA to send various official notices electronically. The proposals also alter the procedural requirements for revocation of charitable registration. While this isn’t a good thing in and of itself, the existing revocation system is old-fashioned.

Foreign Charities

Certain foreign charities can register as qualified donees. This registration lasts for 24 months. Budget 2024 proposes to extend this to 36 months. It also would require an annual information return by these charities.

For any questions about this or other charity-related topics, reach out to our Charities & Not-For-Profits Law group. Have other questions about Budget 2024? The lawyers in our Tax Law group would be pleased to answer questions or cover items of interest with further articles here on our blog. Get in touch!