By Terrance S. Carter, Jacqueline M. Demczur, and Adriel N. Clayton

Federal Government Announces Changes to Capital Gains Inclusion Rate

Following its announcement in the 2024 Federal Budget, the Government of Canada has proposed adjustments to the capital gains inclusion rate effective for gains realized as of June 25, 2024. The federal government introduced the Notice of Ways and Means Motion to introduce An Act to amend the Income Tax Act and the Income Tax Regulations in Parliament on June 10, 2024, proposing to increase the capital gains inclusion rate for corporations and trusts from 1/2 of the capital gain to 2/3 of the capital gain. Similarly, for individual taxpayers, where capital gains exceed an annual threshold of $250,000, the capital gains inclusion rate would be increased from 1/2 of the capital gain to 2/3 of the capital gain. This will  have an impact on donors who wish to make donations of capital property to charities, particularly if those donors are affected by the new Alternative Minimum Tax regime involving charitable donations set out in the 2024 Federal Budget, and as discussed in Charity & NFP Law Bulletin No. 526 and the May 2024 Charity & NFP Law Update.

Of note for registered charities, the Notice of Ways and Means Motion proposes amendments to paragraph 110(1)(d.01) of the Income Tax Act concerning charitable donations of employee option securities. Currently, where an employee acquires a security under an option and donates it to a qualified donee, the employee will be entitled to a deduction under paragraph 110(1)(d.01) (in addition to the option share deduction) equal to one-half of the security option benefit. The Notice of Ways and Means Motion proposes to increase this deduction to an amount equal to two-thirds of the security option benefit.

Federal Bill C-70, An Act respecting countering foreign interference Receives Royal Assent

Bill C-70, An Act respecting countering foreign interference received Royal Assent on June 20, 2024. The Bill enacts measures to counter foreign interference aimed at all levels of government, the private sector, academia, diaspora communities, and the general public. The Bill also introduces the Foreign Influence Transparency and Accountability Act, which will create the Foreign Influence Transparency Registry and which will be brought into force on a date to be set by the Governor-in-Council, according to a news release by Public Safety Canada.

Compared to the draft Bill in its initial stages, the final assented-to Act remains largely unchanged, although it contains additional clarifications to revisions of the Canadian Security Intelligence Service Act; additional language indicating that appointment of the Foreign Influence Transparency Commissioner will require approval by resolution of the Senate and House of Commons; a stated response time from the Minister following a review of the new Act; and transitional provisions regarding federal, provincial, territorial, municipal, and Indigenous processes.

As set out in further detail in Charity & NFP Law Bulletin No. 527,  Bill 70 requires individuals and entities, including Canadian charities and not-for-profits, that enter into an arrangement with a foreign principal to register their arrangements and disclose any foreign influence activities undertaken where they are in relation to government or political processes in Canada, with certain stated exemptions. This will now be an important compliance issue for charities and not-for-profits that have international relationships to be aware of.

Fighting Against Forced Labour and Child Labour in Supply Chains Act Filing Deadline Passed

As reported in our November 2023 Charity & NFP Update and March 2024 Charity & NFP Law Update, Canada implemented the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) on January 1, 2024. This law mandates that entities which fall under the provisions of the Act must file public reports with the Minister of Public Safety, Democratic Institutions and Intergovernmental Affairs (the “Minister”) regarding their efforts to limit and eliminate forced and/or child labour within their supply chains. While filing requirements only apply to “entities” as defined under the Act, which will generally only include large organizations, charities and not-for-profits that are “entities” are not  exempt from filing requirements.

The filing deadline for this year was May 31, 2024. Although this date has now passed, Public Safety Canada is providing entities with a grace period, and has indicated that it will continue to accept late submissions and publish any reports that may be received beyond the deadline. In addition to late filings, Public Safety Canada will also accept revised versions of previously submitted reports. Reports can be revised by re-completing the online questionnaire.

Bill S-279 Completes Second Reading in the Senate

Bill S-279 An Act to amend the Income Tax Act (data on registered charities) (the “Bill”) completed its second reading in the Senate on May 30, 2024. Previously explained in the February 2024 Legislation Update,  the Bill proposes to authorize the collection of diversity data under the Income Tax Act for the purpose of fostering transparency and inclusivity within the charitable sector. Some recent reactions from the charitable sector are discussed in this month’s CRA News.

PEI Bill 41, Benevolent and Community Crowdfunding Act

Prince Edward Island has enacted new legislation governing public appeals and crowdfunding. Bill 41, Benevolent and Community Crowdfunding Act (the “Act”) was introduced in the provincial Legislative Assembly on November 23, 2023 and received Royal Assent on April 23, 2024. The Act is largely based on the Uniform Law Conference of Canada’s (“ULCC”) Uniform Benevolent and Community Crowdfunding Act, 2020 (the “Uniform Crowdfunding Act, 2020”), and generally follows the same structure as the ULCC’s proposed legislation.

As reported in the August 2020 Charity & NFP Law Update, the Uniform Crowdfunding Act, 2020 was introduced by the ULCC to provide an appropriate legal framework to assist in the creation and administration of funds from an “informal public appeal” (e.g. informal fundraising carried out in response to a specific event or concern, such as the crowdfunding initiatives in response to the 2018 Humboldt Broncos tragedy) in order to ensure that trust law applies evenly to all appeals. PEI is the second province in Canada, following Saskatchewan, to enact public appeals legislation. 

​Read the June 2024 Charity & NFP Law Update