The Income Tax Act, Canada (the "Act") provides that only "qualified donees" can issue official tax receipts for gifts from individuals and corporations. Further, only qualified donees are eligible to receive grant funding from other Canadian registered charities.
Early in 2012 the Canada Revenue Agency (the "CRA") indicated that it would require all "municipal or public bodies performing a function of government in Canada" to register with the CRA to become, or to remain, a qualified donee. The CRA has finally announced details regarding the process for registration. The deadline for registration is January 1, 2014. Only municipalities (and other public bodies) and First Nations which register will be considered qualified donees after that date. Registered municipalities, public bodies and First Nations will be listed on the Charities Directorate's website and we anticipate that this list will become an important reference for grant-making entities.
If a municipality or public body is not registered, it will be unable to provide official tax receipts to donors.
Many First Nations currently receive funding from Canadian registered charities. Until now, grant-making charities were required to make their own assessment, based on certain criteria, with respect to whether a specific First Nation met the test of a public body performing a function of government. This state of affairs was confusing and unsatisfactory. The registration process will undoubtedly make the process simpler for grant-making charities which wish to grant to First Nations.
Details of the application process can be found here: http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/mncplpblcbds-eng.html#application.
We do not yet have a sense of how long the application process will take and to avoid timing issues that might arise in a future donation transaction, we strongly recommend that municipalities and First Nations register as soon as possible in anticipation of receiving future gifts or funding.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
