News Headlines Unfair to Red Cross

Several newspapers have reported allegations that the International Committee of the Red Cross (the “ICRC”) was listed as the beneficiary of two Panamanian foundations used by clients of the infamous Panamanian law firm Mossack Fonseca.

These reports are unfair to the ICRC.

The ICRC has no control over whether it is named as beneficiary of a trust or foundation.  Any person setting up a trust or foundation can name any person in the world as a beneficiary.  If the ICRC was named as a beneficiary, the ICRC was likely named as an “ultimate” beneficiary who would receive something only if something was left over after distribution of the assets to the “real” beneficiaries.  While offshore trusts and beneficiaries frequently name the ICRC and other charities as “ultimate” beneficiaries, I suspect that the ICRC and those other charities never actually see any funds from those trusts and beneficiaries.  The charities are being used as an unwilling tool to satisfy requirements of trust and foundation law.

And really, if some of the funds actually went to the ICRC and other charities, would that be such a bad thing?

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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.

An Apple for the Teachers

Budget 2016 introduces a new tax credit in recognition of personal expenses incurred by teachers and early childhood educators who often end up buying supplies for their students. 

Effective for 2016, eligible employed educators will be able to claim a 15% tax credit for up to $1,000 in eligible expenditures made in a taxation year.

The tax credit will be refundable.  If an eligible educator has no tax to pay after claiming the basic personal exemption and any other available tax credits, the educator will receive a cheque from the government for any portion of this new credit that was not actually applied to reduce tax owing.

The new credit does not apply to an individual who is self-employed because self-employed individuals can deduct business expenses as a matter of course. 

As with any tax credit (and classroom setting), rules apply.

• To qualify as an eligible educator, a teacher must hold a valid teacher’s certificate and an early childhood educator must hold a valid certificate or diploma in early childhood education.  In each case, the certificate or diploma must be recognized by the province or territory in which the individual is employed.
•  Expenditures must be for the purchase of eligible supplies for use in a school or a regulated child care facility for the purpose of teaching.
• Eligible supplies will include the following durable goods.
• Games and puzzles.
• Supplementary books for classrooms.
• Educational support software.
• Containers (such as plastic boxes or banker boxes for themes and kits).
• Eligible supplies will also include consumable goods, such as the following.
• Construction paper for activities, flashcards or activity centres.
• Items for science experiments, such as seeds, potting soil, vinegar, baking soda and stir sticks.
• Art supplies, such as paper, glue and paint.
• Various stationery items, such as pens, pencils, posters and charts.

The employer must certify that the supplies were purchased for the purpose of teaching.  Eligible educators will have to retain all receipts for verification purposes. 

While teachers and early childhood educators will welcome this credit, it provides only partial relief for the out-of-pocket expenses incurred by teachers and early childhood educators.  I hope that cash-strapped school boards and other employers will not use the tax credit as an excuse for requiring teachers and early childhood educators to personally bear more of the costs of classroom supplies.

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for information about our services and lawyers' profiles.

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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.

Budget 2016 and Kids' Stuff

The 2016 federal budget consolidates the Canada Child Tax Benefit (the CCTB) and the Universal Child Care Benefit (the UCCB) into a single acronym with one less letter:  the CCB (which stands for Canada Child Benefit).

The CCB will be non-taxable and will provide a maximum benefit of up to $6,400 per year ($533.33 per month) per child under the age of 6 and $5,400 per year ($450 per month) per child aged 6 through 17.  An additional amount of $2,730 per year ($227.50 per month) is paid for a child who qualifies for the disability tax credit.  The CCB amounts depend on the family net income, however, and are gradually reduced if family income for the previous taxation year exceeds $30,000.

The new benefit system will start in July 2016.  To see how your family will fare under the new system, use the CCB calculator at http://www.budget.gc.ca/2016/tool-outil/ccb-ace-en.html.

When using the calculator, you will have to manually take into account the following forms of tax relief eliminated by the 2016 Budget.

• The budget eliminates the income-splitting tax credit for couples with a child under the age of 18.  This is effective for 2016.  The credit allowed a higher-income spouse or common-law partner to notionally transfer up to $50,000 of taxable income to the lower-income spouse or common-law partner for the purpose of reducing the couple’s total income tax liability by up to $2,000.
• The budget will phase out the children’s fitness and arts tax credit.  For 2016, the maximum eligible amount will be halved.  For the fitness tax credit, the eligible amount will be reduced to $500.  For the arts tax credit, the eligible amount will be reduced to $250.  The supplemental amount for a child who qualifies for the disability tax credit will remain at $500 for 2016.  However, the credits will be eliminated for the 2017 and subsequent taxation years. 
• The budget will eliminate education and textbook tax credits for the 2017 and subsequent taxation years.  As a result, unused portions of those credits will no longer be transferable to a supporting individual.  The tuition tax credit will remain in place.

Elimination of very specific tax credits (such as the fitness and arts tax credits) in favor of more generally-based financial assistance is generally preferable from a tax policy perspective.  Having said that, elimination of the fitness and arts tax credits may reduce the number of children participating in fitness and arts programs.  We will have to wait and see how this plays out.

Visit the Dwyer Tax Law web site
for information about our services and lawyers' profiles.

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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.