By Terrance S. Carter and Urshita Grover

Draft Legislation Released to Amend the Income Tax Act

The Department of Finance Canada (“Finance”) released draft legislation through Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations (Technical Amendments) (the “Draft Legislation”) on August 12, 2024. The Draft Legislation was accompanied by the Explanatory Notes to Legislative Proposals Relating to the Income Tax Act and Regulations (Technical Amendments), released concurrently.

Among the many proposed changes to the Income Tax Act (“ITA”) set out in the Draft Legislation is a proposal to amend paragraph 149.1(1.1)(d) to expand the exclusion of specified items from what constitutes a disbursement in meeting a charities’ disbursement quota. Paragraph 149.1(1.1)(d) currently states that, for purposes of satisfying a charity’s disbursement quota, “expenditures on administration and management of the charity” are not considered to have been expended on charitable activities carried on by the charity. The Draft Legislation proposes to include “fundraising” in the paragraph 149.1(1.1)(d) list of exclusions, such that expenditure on fundraising would not count towards satisfying the disbursement quota.

As well, the Draft Legislation proposes an amendment to subsection 188(1.1) of the ITA with respect to subsection 188(1.1), which imposes a revocation tax for charities. As a result of earlier amendments to subsection 188(1.2), which sets out provisions for a charity’s wind-up period on revocation of the charity’s registration, the Draft Legislation now proposes a consequential amendment to correct a cross-reference contained in subsection 188(1.1) referencing subsection 188(1.2).

Finally, of important note, the Draft Legislation proposes complicated amendments the trust reporting rules. Further details on these amendments are discussed in Charity & NFP Law Bulletin No. 528.

​Read the August 2024 Charity & NFP Law Update