Sunday, May 3, 2015

2015 Budget Refinements for Gifts to Foreign Charities

With so many Canadians anxious to help with earthquake relief in Nepal, I hesitate to deal with the following very technical 2015 budget change for fear that confusion might result.
A very technical change announced in the 2015 federal budget will adjust the rules that apply for gifts to selected foreign charities.  However, this has nothing to do with donations to help those in Nepal.  Donations for earthquake relief can be made to the Red Cross and various other Canadian charities that have international arms providing disaster relief.  There is no need to give a gift to a foreign charity.  This budget change has nothing to do with disaster relief in Nepal.
Under current rules, Canadians can deduct a gift made to a foreign charitable organization if the foreign charitable organization has received a gift from the federal government within the past two years and is registered by the Canada Revenue Agency (CRA).  For example, Canadians can deduct gifts made before November 7, 2015 to the US-based Clinton Foundation (see  The time limit for making the donation is the second anniversary of the gift from the Canadian government.
The current rules allow for registration only if the foreign charity is a “charitable organization” – one that carries on its own charitable works.  Canadian tax law distinguishes a charitable organization from a charitable foundation.  Under Canadian tax nomenclature, a foundation exists primarily to fund charitable works carried on by charitable organizations.
The 2015 budget will extend the current rules to foreign charities in general so that foreign charitable foundations can also be registered in Canada if the Canadian government makes a donation to the foreign foundation.  This is a very technical change that will affect only a small number of selected foreign charities.
This budget change will cause some to ask how Canadians can make tax-deductible gifts to the Clinton Foundation if foreign charitable foundations are not covered by the current rules.  The answer is one of tax nomenclature.  The Clinton Foundation (despite its name) carries on charitable works in partnership with other charities and would be classified in Canada as a charitable organization.  The “Foundation” moniker was presumably chosen for reasons other than Canadian tax classifications.
As noted, most Canadian charities have international operations.  As a result, there is no need to donate to a foreign charity to assist with international aid relief.  Various Canadian charities are providing much-needed relief in the earthquake-ravaged areas of Nepal.  In order to assist in that effort, simply donate to one of those many Canadian charities.  I repeat that this budget change has nothing to do with earthquake relief efforts.

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The above article provides general commentary of an educational nature. It does not constitute advice for any specific person or any specific set of circumstances. Because circumstances vary, readers should consult professional advisers in order to obtain advice that is applicable to their specific circumstances.