2009 an Interesting Year for Ontario Charities
Adam Aptowitzer, December 17, 2009
In two surprising announcements during the year, the Ontario government revealed important changes that had to all Ontario charities to varying degrees.
The first interesting change is the abolishment of the PST and the adoption of the HST. While the official government announcement indicated that the rebates available to charities under the HST effectively made charities revenue neutral between it and the PST. In fact, the fundamental difference between the HST and the PST was that the PST was applied unevenly, and affected charities operating in different areas in varying ways. Thus, the HST which attempts to levy one tax in a fairly uniform manner could not possibly make every charity indifferent between the PST and the HST but it did do a fairly decent job.
On the other hand, because the PST was applied unevenly and some organizations relied on administrative decrees to avoid the imposition of the tax (notably for concert venues with less than 3,200 seats) in the coming year charities are going to have to give serious thought to whether the HST will increase their costs (and decrease their budget). Perhaps the biggest area of concern will be charities involved in building projects. Charities which rely on paying for services will be affected on a long term basis as will not-for-profit organizations which do not receive a significant amount of government funding. Moreover, charities will have to account for the additional 8% HST on administrative services within their (already stretched) disbursement quota allotment for such things.
The other surprise for Ontario charities related to the abolishment of the Charitable Gifts Act (the “CGA”). Ontario was the only province with anything like the CGA which limited charities to owning a maximum of 10% of a for profit business. Those rules are now generally redundant because of the excess business holding rules within the Federal Income Tax Act. Thus, registered charities still cannot own large amounts of a for – profit business but the consequences are dictated by the Federal government and not the Provincial one.