AFP Canada Government Relations Update
Summer has been a busy time for our sector in relation to the federal government. The recent cabinet shuffle is one of the largest and most significant mid-mandate changes that the Prime Minister has made to cabinet since the 2015 election. In addition, two policy issues arose over the summer months: changes to Alternative Minimum Tax (AMT) and to reporting for trusts.
So how does this impact AFP members?
We are making progress on our request for a dedicated secretariat for the charitable sector in the federal government. Through meetings with multiple government officials, we learned of plans for cross-country consultations with our sector.
A secretariat remains the top priority for AFP Canada, as it is foundational to establishing a new, comprehensive and effective relationship with government that will focus on growing our impact for Canadians, while mitigating or preventing challenges posed by legislation without consultation or consideration (e.g., AMT and new trust reporting requirements). As such, this is the sole recommendation in our pre-budget submission to the Standing Committee on Finance.
While the cabinet shuffle resulted in a number of significant changes in government we are optimistic about the support in government for our sector and the creation of a secretariat.
The 2023 Federal Budget, tabled in March, included changes to AMT. In short, under the new legislation, a new minimum 30% capital gains tax will apply to in-kind gifts of securities. This proposed change is expected to be part of Budget Implementation Act 2, to be tabled this fall. Though this legislation may seem to affect a relatively small number of donors, gifts of securities tend to represent larger donations and it will negatively impact the capitalization of privately held foundations. AFP is following this issue closely, working alongside sector allies, and will share more information as we receive it.
Through discussions and correspondence with senior officials at the Department of Finance and the CRA, it recently became clear that the legislative intent of the changes to the new trust reporting provisions in the Income Tax Act is to include express internal trusts held by charities. This will cause a significant administrative burden to charities that hold multiple funds such as endowments at universities and hospitals, as each fund would require reporting. Currently, charities are exempt from this requirement. As with the changes to AMT, we are following this issue closely and will share updates as we receive them.
The proposed changes to both AMT and trust reporting are examples of why our sector needs a permanent, dedicated secretariat in the federal government. A secretariat would provide valuable, direct input from the sector to government when changes to existing or new polices are considered. This could avoid unintended, negative impacts to our sector and save time and cost for government in revision processes.
To learn more about AFP Canada’s work in government relations visit our website.
Aaron Sanderson, MA, CFRE, ACFRE
Chair, AFP Canada Government Relations Committee
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