On December 16, 2024, Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, was supposed to release the “2024 Fall Economic Statement: Boosting innovation to create good jobs, growth and prosperity” (“FES”) but Minister Freeland resigned today and the government still released the FES.
There are a number of significant changes relating to non-profits that are not charities and their reporting requirements. There is also going to be more focus on non-profits that are not charities and their vulnerability to terrorism and anti-money laundering. There were some funding announcements, some of which relate to charities and non-profits. There were also large funding announcements on border security and housing. The high deficit of $61.9 billion will mean that there will be little limited room for this government or any other government to spend more on the priorities of charities and non-profits.
NPO FILINGS
The FES announces that more NPO groups will need to file the T1044 but also will provide a simplified filing for groups that don’t have to file the T1044 and have under $50k in revenue. This will mean that CRA will have a far better idea about the NPO sector in Canada. What is not clear is whether the public will see any of these filings. If they do not, then it is not clear that there will be greater transparency in the NPO sector, only that the government is collecting more information. Quite clearly Canada has a problem in front of its upcoming Mutual Evaluation by the FATF in 2025-26 and I don’t think that this and the other initiative belong on AML/terrorism will satisfy FATF’s concerns.
Reporting by Non-profit Organizations
The Income Tax Act provides an exemption from income tax for organizations that meet the definition of a non-profit organization (NPO). Generally, an NPO is any club, society or association that is organized for social welfare, civic improvement, pleasure or recreation or any other purpose except profit.
Charities are exempt from income tax under separate rules.
The 2024 Fall Economic Statement proposes several changes to the reporting requirements for NPOs in order to improve transparency in this sector.
Changes to the Annual Return
Currently, there is limited reporting required by NPOs that claim an income tax exemption. An NPO is required to file an annual information return if:
− the total of all passive income in the fiscal period exceeds $10,000;
− the organization’s total assets at the end of the preceding fiscal period exceeded $200,000; or,
− an information return was required to be filed by the organization for a preceding fiscal period.The 2024 Fall Economic Statement proposes to amend the Income Tax Act to require NPOs with total gross revenues over $50,000 to also file the annual NPO information return.
New Filing Requirement for Small NPOs
The 2024 Fall Economic Statement also proposes to amend the Income Tax Act to require NPOs that do not meet the thresholds for filing the annual NPO information return to file a new, short-form return that contains basic information about the organization, including:
− its business number or trust number;
− the name of the organization and its mailing address;
− the names and addresses of the directors, officers, trustees or similar officials;
− a description of the organization’s activities, including whether it conducts activities outside Canada;
− the organization’s total assets and liabilities and annual revenues; and,
− other prescribed information.Coming into Force
These measures would apply to the 2026 and subsequent taxation years.
The government reports that the costs of these measures will be zero in 2024/2025 and rising to 11m in 2025/26 and going down significantly in subsequent years to $7m, $5m, $3, and 2m. Keep in mind that the NPO sector might be a $150 billion sector, but we really don’t know.
There was a section dealing with “Cracking Down on Money Laundering and Terrorist Financing” and the last paragraph is particular important for non-profits. We have complained that the current Canadian approach focuses almost exclusively on registered charities and not non-profits. Presumably, this is an attempt to respond to FATF concerns about NPOs that are not charities especially in light of the FATF mutual evaluation of Canada coming up.
“The 2024 Fall Economic Statement also announces the government’s intent to launch interdepartmental dialogues with non-profit organizations to deepen awareness, enhance communication, and better combat money laundering, terrorist financing, and sanctions evasion risks.”
Here is the full statement :
Cracking Down on Money Laundering and Terrorist Financing
Financial crimes are not victimless. Money laundering perpetuates crimes such as human trafficking, fentanyl trafficking, and other illicit drug trafficking, as well as fraud, theft, and other economic crimes. Terrorist financing wreaks havoc on communities at home and around the world. Iran’s theocratic dictatorship is a particularly egregious financier of terrorism. Dictators, autocrats, and their oligarch cronies use illicit financing networks to evade sanctions and fund their oppressive regimes. Transnational organized criminal groups based in China have been identified as an acute threat to Canada’s financial integrity.
Since 2015, the government has strengthened enforcement of and invested in combatting financial crime to protect Canadians and safeguard the integrity of the financial system. These include successive legislative amendments to the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to strengthen the investigative, enforcement, and information-sharing tools of Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime.In Budget 2024, the government enhanced the ability of reporting entities to share information with each other to fight financial crime, while maintaining privacy protections for personal information. Draft regulations to implement these changes were pre-published on November 30, 2024, for a 30-day public consultation.
Canada recognizes the importance of the Financial Action Task Force (FATF) in establishing and reviewing strong international AML/ATF standards. As a founding member and current Vice-President of the FATF, Canada is leading in the global fight against financial crime.
The 2024 Fall Economic Statement announces the government’s intent to introduce legislative and regulatory measures to further strengthen Canada’s AML/ATF framework, as well as support its upcoming Mutual Evaluation by the FATF in 2025-26. Proposed changes to the PCMLTFA and its regulations would:
˗ Strengthen enforcement by expanding the application of the AML/ATF framework to include company service providers that can be used to facilitate money laundering and terrorist financing activities;
˗ Require mandatory enrollment with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) for all reporting entities that are not already registered;
˗ Permit FINTRAC to disclose information to support the Office of the Commissioner of Canada Elections to detect and deter illicit financing and foreign interference in Canadian elections;˗ Make technical amendments to:
* Clearly prohibit the opening of anonymous accounts;
* Clarify the enhanced authorities provided to the Canada Border Service Agency to combat trade-based financial crime in the 2023 Fall Economic Statement; and,
˗ Advance the coming into force date of FINTRAC disclosures to provincial civil forfeiture offices.The 2024 Fall Economic Statement also announces the government’s intent to develop a new taskforce for law enforcement and the financial sector to exchange and analyze information relating to high-end money laundering schemes, including related to fentanyl trafficking, modelled after the United Kingdom’s Joint Money Laundering Intelligence Taskforce (JMLIT) and tailored to Canada’s legal context.
The 2024 Fall Economic Statement also announces the government’s intent to launch interdepartmental dialogues with non-profit organizations to deepen awareness, enhance communication, and better combat money laundering, terrorist financing, and sanctions evasion risks.
The FES renewed certain previously announced measures including:
– Legislative proposals included in the notice of ways and means motion tabled on October 29, 2024, related to charities and reproductive services.
˗ Charities and Qualified Donees;
There is also a provision relating to duty relief and this may be helpful for some charities when they are importing goods from certain countries:
Duty Relief for Donated Goods
In FES 2024, the government proposes to amend the Customs Tariff to allow for duty drawback for certain goods when they are donated to a registered charity under the Income Tax Act, provided they are to be used in the organization’s charitable programs and not re-sold in Canada.
Here are some other measures:
Key measures in the 2024 Fall Economic Statement for safer and healthier communities include:
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Protecting women’s reproductive health, by providing $90 million over six years, with $20 million ongoing, to expand and make permanent the Sexual and Reproductive Health Fund, and $7.5 million over four years to run new surveys about sexual and reproductive health and rights.
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Supporting women’s organizations, by providing $15 million over three years to the Women’s Program, to help advance projects focused on ending gender-based violence and to help more women and girls to live safe, healthy, and prosperous lives.
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Investing in community security infrastructure, to ensure that all Canadians have the freedom to live and practice their religion in safety. Thanks to funding provided in Budget 2024, the Canada Community Security Program is now open. It will help protect Canadians from violence, threats and hate, and support communities with security measures to help keep them safe.
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Establishing Canada’s Black Justice Strategy, to help protect Black communities from prejudice, discrimination, and hatred. The 2024 Fall Economic Statement proposes to provide $77.9 million over two years to reduce the injustices faced by Black Canadians.
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Strengthening the Black Entrepreneurship Program, to help Black entrepreneurs and small business owners who face systemic barriers that limit their access to the capital needed to grow their businesses. The 2024 Fall Economic Statement proposes to provide $189 million over five years to help Black entrepreneurs and business owners thrive.
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Supporting Black community organizations, by investing $36 million for the Supporting Black Canadian Communities Initiative, which empowers Black-led, Black-serving, and Black-focused community organizations to promote inclusiveness and address systemic racism.
Supporting Non-Profit and Co-Op Housing Residents
The Federal Community Housing Initiative is a $618.2 million fund that supports community housing projects, including co-operative housing, with the funding they need to keep rent low and keep up with maintenance. This funding is essential to preserving the existing supply of affordable housing.
Specifically, the initiative provides support through two streams. First, it provides direct rental assistance payments to cover the cost of low-income tenants’ rent that is above 30 per cent of their household income. Second, it provides transitional funding to housing providers to ensure they can maintain and operate their existing housing stock—without raising rent.
The 2024 Fall Economic Statement proposes to provide $362.7 million over five years, starting in 2028-29, to extend the Federal Community Housing Initiative, which will provide tens of thousands of households with certainty they will continue to receive the rental assistance they count on.
Here is our most recent submission that we have made to the Finance Committee of the House of Commons on improving transparency in the non-profit and charitable sector: Blumbergs’ Pre-Budget Submission for the 2025 Canadian Federal Budget