The 2018 Ontario Budget: Impact on Charities and Not-for-Profits

By: Ryan M. Prendergast, Adriel N. Clayton and Terrance S. Carter, Carters Professional Corporation

On March 28, 2018, Ontario’s Minister of Finance Charles Sousa tabled the Ontario Liberal Government’s 2018 Budget. The 2018 Ontario Budget includes various provisions that will be
of interest to the charitable and not-for-profit sector, including tax measures to enhance support for charitable giving, to ensure the Employer Health Tax remains available to charities and not-for-profits, and to create a tax exemption for certain non-profit child care facilities.

In order to maintain and enhance support for charitable giving in Ontario, the 2018 Ontario Budget proposes to enhance the Ontario Charitable Donations Tax Credit (“OCDTC”), a tax credit that provides relief to taxpayers that make eligible donations. The current OCDTC rate is 5.05% for the first $200 of eligible donations and 11.16% for eligible donations exceeding $200. In this regard, the 2018 Ontario Budget proposes to increase the rate for eligible donations exceeding $200 from 11.16% to 17.5% in order to correspond with proposed changes to provincial personal income tax.

The 2017 Ontario Budget proposed measures to eliminate an exemption available to certain employers for Employer Health Tax (“EHT”), a payroll tax that partially funds the Ontario Health Insurance Plan, and to ensure that the EHT exemption would be available for other, smaller employers. The EHT exemption is currently available to employers that are not eligible for the Small Business Deduction under the Income Tax Act. The 2018 Ontario Budget proposes to base the EHT exemption on the Small Business Deduction eligibility criteria. The effect of this would be that the EHT exemption would remain available to charities, not‐for‐profit organizations, and private trusts, among other small employers.

The 2018 Ontario Budget also recognizes that many child care facilities are located in spaces that are property tax-exempt, such as public schools, places of worship, municipal town halls, and other community centres. In order to maintain the tax-exempt status of these facilities where a portion of their facility is rented to a non-profit child care centre, the 2018 Ontario Budget proposes to amend the Assessment Act in order to provide a tax exemption to non-profit child care centres within the meaning of the Child Care and Early Years Act, 2014 that lease property in these tax-exempt spaces.

Proposed amendments to the Assessment Act have already been introduced through Bill 31, Plan for Care and  Opportunity Act (Budget Measures), 2018 (“Bill 31”), which received first reading on March 28, 2018, the same day that the 2018 Ontario Budget was released. The proposed provisions of the 2018 Ontario Budget are welcome measures that, if passed, may provide relief to specific charities and not-for-profits, as well as to the sector as a whole. Charities and not-for-profits operating in Ontario should monitor the status of Bill 31, as well as any upcoming budget implementation bills to be introduced in the Ontario Parliament.