A number of groups, including Imagine Canada, have called for an extension of the normal December 31 deadline for charitable donations because of the postal strike.
I am not convinced that this proposal to extend the deadline past Dec 31 is a good idea and I am concerned that it will have many negative consequences.
Below are some of my concerns with the extension proposal.
The extended period will confuse donors. Many donors plan their charitable giving based on the calendar year to align with their tax planning. Changing the deadline could create confusion and potentially discourage some donations.
Extending the deadline may complicate tax filings for both donors and the CRA. Tax software and systems are set up to process charitable donation claims based on the calendar year. In 2026, when donors file their 2025 return, they will need to subtract donations they made in the extension period. Some donors who donate in the extension period and would have donated anyway will potentially have to change their systems to add those donations to their 2024 tax filing and not claim them in 2025.
Some people and their recordkeeping may view their January donation, even if it is for 2024 tax purposes, as a 2025 donation, which may undercut the December 2025 giving season.
The extension will create accounting and administrative burdens for charities, as we saw recently with the “simple” proposal to have a GST holiday on certain items, which created a headache for many businesses. It will complicate the T3010 filing.
Charities would need to adjust their accounting practices to accommodate donations received in the extended period, leading to discrepancies between fiscal and calendar year reporting.
It is worrisome that providing such an extension may be used to set a precedent for future requests for an extension, and it may be not just postal strikes but natural disasters, economic downturns, etc..
Canada Post and CUPW have been negotiating a contract for a long time, and on November 12, 2024, CUPW issued its 72-hour strike notice. Charities and donors had a long time to pivot and adapt to the likelihood of a strike and the actual strike. Groups that invested heavily in direct mail from mid-October to mid-November knew that there was a greater risk of problems.
If the postal strike had continued until or after December 31, there would have been a stronger argument for this exceptional extension. However, the strike ended two weeks before the end of the year, so people had significant time to mail in cheques if they wished to. Any envelope stamped by Canada Post before December 31 would be eligible for a 2024 tax receipt even if received by the charity a week or two later. So, even today, people can send in cheques.
The world is increasingly moving towards digital payments, and charities should be investing more in digital solutions rather than traditional mailouts. The Federal government should encourage, rather than discourage, this digitalization.
At the moment, we have a system that works quite well in that donors know that if they want a tax receipt for a particular year, they need to donate within the year. We don’t want the clarity of this proposition to be muddied and for people to think in future years that there may be an extension and that the December 31 deadline doesn’t really mean that much. People donating at the end of December are already procrastinating tremendously, and one does not want to encourage that further.
Unfortunately, instead of some charities emphasizing the urgency of donations, some charities have been emphasizing the importance of the government considering extending the deadline, which undercuts the notion of there being an urgency to donate to charity.
As we have noted before, there are alternatives that are better than trying to extend the deadline.
We need to be less fixated on bringing in more dollars into the ‘sector’ and more fixated on making sure that once money comes into the sector, it is actually deployed and used. We have over $130 billion in private and public foundations that are not being provided to operating charities. This number increases every year.
In the current political climate, this particular proposal may be successful as it would be a way for Finance to say yes to a proposal from the charity sector that does not require much effort or cost on the part of Finance. If this extension proposal turns out to be a massive headache for charities and donors, Finance can just say that it was a proposal requested by some groups in the charity sector and the Premiers! With all of the uncertainty people, businesses, and charities are dealing with, especially those relating to the US, the extension proposal is one complexity people don’t want to have to deal with.