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Reading the tea leaves: Understanding the conditions which charities will face in the upcoming year

Despite the fact that predicting the future is usually a job for soothsayers and readers of tea leaves, we nevertheless take the opportunity of the new year to try and understand the conditions which charities will face in the upcoming year.

Of course, it is possible that our predictions will be proven wrong, but in the same way that Canadians are glued to weather forecasts to prepare themselves for the worst possible conditions, charities would do well to at least have an idea of what the road conditions are like before getting behind the wheel.

There may be several issues that arise for charities in the coming year. Perhaps the most interesting will come from a government that is almost finished closing a deficit gap and facing an election in the near future.

As regular readers will recall, the Finance Committee produced a report recommending that the government implement a number of suggestions once the budget is balanced. While such recommendations are generally ignored by sitting governments, the fact that the hearings were originally ordered by the government in a previous budgets (keeping in mind that such hearings are not usual for this government) and that the recommendations were contingent on balancing the budget, may mean the recommendations will resurface. (The fact that 2015 is an election year does not hurt).

The First Time Donor’s Credit – first proposed in Budget 2013 – may in this year develop as an important bellwether. Imagine Canada has been lobbying hard and long for the now well – known Stretch Tax Credit, but so far without success. The thinking seems to be that the First Time Donor’s Credit (FTDC) is a test of some of the criticisms of the Stretch Tax Credit. This being the first year of operation of the FTDC it will be interesting to see the extent to which the sector makes use of the ‘opportunity’, because we can be assured that the Department of Finance is watching closely.

Much has been made in the past couple years of charities engaging in certain political activities. This may be the year where the chickens come home to roost (or the salmon to spawn depending on your area of the country).

Audits of charities take a long time and one would imagine that audits that began in the last half of 2012 should proceed to their conclusion in 2014. We may finally see what all the fuss was about. (In addition, given the happenings in the U.S. with clearly partisan audits designed to make life difficult for the ‘right wing’, you can expect the CRA’s Charities Directorate to have done backflips to appear even-handed).

Finally, in an attempt to balance the budget by managing their expenditures, the CRA’s budget for auditors has shrunk (the rationale for which we do not understand either). While it is unknown whether the Charities Directorate is actually losing auditors, it seems clear that they will not be gaining more of them.

Given that the number of charities continues to grow, the Directorate may be exploring different ways of pursuing its mandate with fewer auditors.

It would appear that this has already resulted in shorter allowable response times to the Directorate before it closes its file, and may involve plans to conscript auditors from elsewhere in the CRA to ride herd over charities.

Incidentally, the same may be true of the Charities Redress Section which is clearly understaffed as the delays before an officer even gets assigned a file is often more than 12 months.

There is an old saying, attributed as Chinese curse, ‘may you live in interesting times’. Some time ago we hoped for boredom as a blessing in disguise. Given the year forecasted, it seems that our prayers will go unanswered.

Adam Aptowitzer
Drache Aptowitzer LLP

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Drache Aptowitzer LLP

Tax and Charity Lawyers at Drache Aptowitzer LLP
Drache Aptowitzer LLPis one of Canada’s foremost experts in the law related to charities and non-profit organizations. Their team of bloggers is led by Adam Aptowitzer LLB. He is a lawyer practicing in the areas of charity and tax law. He is a member of both the bars of Alberta and Ontario. He has been speaking and writing on the topic of charity law for several years and been published in numerous publications including the Canadian Taxpayer, the Canadian Fundraiser and the Not-for-Profit News and has been cited as an expert in many publications including the National Post.Read more here
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