Budget 2024: Will a heightened recognition of nonprofits & charities clear a path toward foundational sector reforms?

In Budget 2024, nonprofit sector advocacy on issues ranging from the Disability Tax Credit, financial literacy, a National Volunteer Strategy, and the housing crisis are reflected in commitments that together reveal more intentional collaboration with - and recognition of - the nonprofit sector in policymaking for these complex challenges.

Structural supports for organizations to enhance capacity and remain sustainable as a sector are not emphasized, although some progress from sector advocacy is evident. Certain proposals made in the budget pose opportunities for organizations to influence federal decision-making to advance sector interests & priorities. 

A new advisory Council on Science and Innovation meant to guide federal investments in research in these areas will include representation from the nonprofit sector. As our sector seeks to work with government on digital adaptation and other innovation supports, there may be potential to integrate a pan-sectoral lens in goal-setting. The government’s housing plan involves philanthropic financing and co-investment alongside other sectors (of interest for proponents of charities in impact investing), and nonprofit housing providers as loan and grant recipients.  

Amid twin volunteer & labour shortages facing organizations, the House of Commons Finance Committee had asked as part of its budget consultations that the government “fund the creation and implementation of a workforce development strategy in collaboration with the charitable sector.” Budget 2024 overlooks sector-wide workforce issues but commits $400,000 to a National Volunteer Strategy in partnership with Volunteer Canada. Efforts will be made to ensure nonprofits and charities are included in the creation of a Sectoral Table on the Care Economy and a National Caregiving Strategy. 

This year’s budget makes further amendments to Budget 2023’s proposal to broaden the reach of the Alternative Minimum Tax (AMT) through the inclusion of two tax incentives for charitable donations. A measure meant to ensure tax filers benefitting from credits and deductions remain subject to a minimum amount of income tax, the AMT will include a recalculation of the value of the Charitable Donations Tax Credit (80% of its value), and a capital gains inclusion rate of 30% (up from 0%) for donations of public securities, such as stocks and mutual funds. Sector advocacy efforts over the last year to protect donations revenues led to a moderate increase in the value of the tax credit under the new calculation (from a proposed 50% of the CDTC to the 80% in Budget 2024), while the proposed capital gains inclusion rate remains unchanged at 30%. Broader tax policy changes announced may have an effect on decisions to donate public securities directly to charities, though research is needed to determine the effects of the new AMT and other proposed tax measures including overall increase to capital gains taxation on our sector’s revenues. 

The Steering Committee of the Funding Reform Working Group (FRWG) - a new coalition of 20+ organizations seeking to make federal funding more equitable and effective - is disappointed that systemic funding issues are unacknowledged, despite recommendations from the House of Commons Finance committee that called for core funding and organizational support for several areas of our sector. The renewal of funding to Indigenous Youth Roots - a youth-led organization working with Indigenous youth in communities nationally - is a small, limited step towards addressing Truth and Reconciliation Commission Call to Action #66, which calls for long-term funding for Indigenous youth organizations. Support for Canada Summer Jobs program continued its downward trend, despite vigorous advocacy by nonprofits promoting the program’s value for the capacity of nonprofit organizations. Members of the FRWG will continue to advocate on longstanding issues such as the lack of core funding, short funding terms, excessive administrative burden, and disproportionate risk aversion within federal funding policies and practices. 

The leadership of the Federal Nonprofit Data Coalition (FNDC) sees no action on the sector's data priorities in this year's budget. The Coalition's pre-budget submission, with its 33 signatories from across the sector, recommended common sense measures to provide necessary data in support of decision-making by organizations and government for labourforce planning, and program & policy design. The FNDC will continue to push for more and better data about the nonprofit sector this year.

Other notable foundational reforms, such as the creation of a home in government for the sector and capacity support for nonprofit digital adaptation, are absent. 

A number of administrative measures pertaining to charities are proposed:

• Foreign charities (those not registered as Canadian charities) doing urgent humanitarian or disaster relief work abroad can maintain qualified donee status and receive donations from Canadians for 36 months (up from 24 months, at which point they were required to renew status). 
• Funds are allocated for CRA’s Charities Directorate to administer new rules on the disbursement quota.
• Simplification measures to support easier donations receipting by registered charities, including the ability to issue them electronically. 
• Charities are invited to register online with a MyBA account to receive any compliance notices digitally instead of through registered mail. 
• The creation of a single sign-in portal for federal government services is announced, it is yet unknown whether this extends to organizations.

Imagine Canada will communicate with the sector on these changes as they come into effect over the coming year. 

Budget 2024 falls short of tackling the foundational issues affecting our sector as an industry. The sector will continue to advocate for structural changes to build a stronger charitable and nonprofit sector to serve communities.