2014 Federal Budget & New Developments for Charities

To encourage charitable giving, the 2014 Federal budget proposes to offer a more flexible tax treatment of charitable gifts made by a Will or by designation under a registered account (RRIF, TFSA, RRSP).

For income tax purposes, a charitable donation made in the context of death is considered to be made by the individual immediately before their death. For deaths that occur in 2016 or following years (under the proposed plan) the government will consider charitable donations to be made by the estate at the time they are transferred to the beneficiary.

In effect, the Executor can maximize the tax benefits for the estate by choosing which year to allocate the donation:

• -the taxation year it’s made
• -an earlier taxation year of the estate
• -the last two taxation years of the deceased

It is important to note that under the new proposition, the eligible amount of a gift (left in a Will) is determined by using the fair market value of the property at the time it is transferred to the charity. Currently, the value to be used is the fair market value immediately prior to the individual’s death. Since the value of property may vary significantly between these periods, the distinction should be noted by organization receiving gifts after 2016.

Charitable organizations are required to file an annual information return (T3010) with CRA. Currently, there is no option to file electronically. The 2014 Budget recognizes this administrative burden and proposes to provide $23 million over five years to CRA to modernize its technology and to allow for electronic filing. This investment “will allow charities to devote more time and resources to raise awareness of tax incentives for charitable giving and other charitable activities, rather than administration.”