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 that charities will face.
Of course, it is possible that our predictions will be proven wrong. However, in the same way that Canadians are glued to weather forecasts to prepare 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.
The political landscape
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 while facing a looming 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 became balanced. While such recommendations are generally ignored by sitting governments, the fact that the hearings were originally ordered by the government in previous budgets (keeping in mind that such hearings are not usual) and that the recommendations were contingent on balancing the budget, may mean that they will resurface—the fact that 2015 is an election year does not hurt.
The first-time donor’s credit
The first-time donor's credit (FTCD), first proposed in Budget 2013, may develop this year 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 FTDC is a test of some of the criticisms of the stretch tax credit. This being the FTCD’s first year of operation, it will be interesting to see the extent to which the sector makes use of the 'opportunity,' because we can rest assured that the Department of Finance is watching closely.
The CRA’s Charities Directorate
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 what is happening in the U.S. with partisan audits designed to make life difficult for the 'right wing,' one can expect the CRA's Charities Directorate to have taken steps to appear even-handed).
Finally, in an attempt to balance the budget by managing their expenditures, the CRA's budget for auditors has shrunk. 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 before the Directorate closes its file and may involve plans to conscript auditors from elsewhere in the CRA.
Incidentally, the same may be true of the Charities Redress Section, which is clearly understaffed as the delays before an officer is assigned a file is often more than 12 months.
There is an old saying, attributed as a 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 of Drache Aptowitzer LLP is a charity law lawyer with a national practice based in Ottawa. He has been published in Canadian Taxpayer, Canadian Fundraising & Philanthropy and the Not-for-Profit News. He has also published a widely distributed study on the regulation of Canadian charities with the C.D. Howe Institute.
For speaking engagements and consultations, contact him at 613-237-3300 or visit http://www.drache.ca.
