By: Adam Aptowitzer
In our review of Budget 2018, we made some comments related to the concept of prescribed universities. Readers may recall that the Income Tax Act has, for many years, contained an allowance that certain foreign universities would be considered as qualified donees in Canada (akin to registered charities) if they met certain requirements. Several years ago, Parliament effectively created a secondary registration mechanism for these types of foreign universities. And in the most recent budget Parliament effectively removed the designation of ‘prescribed universities’ so that there was only one process.
Our concern, as noted here, was that the technical wording of the new law effectively meant that prescribed universities were no longer qualified donees as of the date of the budget. This meant that donations to these entities were not eligible for the donation tax credit, nor could they receive direct transfers from registered charities. We surmise that this was an error in drafting but nevertheless, given that it was effective as of the date of the budget we advised that no transfers to these universities could take place as transfers to non-qualified donees can become the basis for revocation.
Many members of the Bar led by some leading tax authorities concurred and brought these concerns to the Department of Finance (the Department responsible for the drafting of the Income Tax Act). As of March 22, 2018, the Department of Finance has agreed that the previously proposed wording creates a problem and has provided remedial wording to correct the problem.
Effectively, all prescribed universities will continue to be qualified donees even after the changes in Budget 2018. This effectively resolves any concerns that we may have had and we believe that the problem has been resolved retroactively.
If you have any questions or concerns, please feel free to contact the author.