2023 Federal Budget: Highlights for the Charitable and NPO Sector

On March 28, 2023, the Honourable Chrystia Freeland tabled a new federal budget (the “2023 Budget”). The 2023 Budget sets out the Government of Canada’s spending priorities for the years ahead. These priorities include making life more affordable, investing in health care and dental care, advancing Indigenous reconciliation, and supercharging Canada’s clean technology sector in response to the US Inflation Reduction Act.

The 2023 Budget also follows through on some previously proposed tax measures, such as raising the Alternative Minimum Tax (AMT) rate[1] and imposing new penalties on transactions that are subject to the General Anti-Avoidance Rule (GAAR).[2] These proposals, which our Tax Group discusses in a separate article, may be of relevance to high net worth donors planning to donate publicly-listed securities or to carry out large or complex tax-driven gift transactions.

After last year’s eventful federal budget (which changed the disbursement quota rules and introduced new rules governing qualifying disbursements), many sector observers had predicted a “quieter” budget this year for charities and not-for-profit organizations in terms of new tax proposals. That prediction was largely correct.

As with previous years, the Government of Canada made a number of funding announcements in the Budget that are of interest to the sector and its stakeholders. For your convenience, we have organized these funding proposals below by topic/group; however, please note that some organizations may be eligible for funding opportunities in more than one category below.

Addictions and Substance Use

• $73.9M over five years, starting in 2023-2024, with $4.6M ongoing, to Health Canada to streamline authorizations for supervised consumption sites and drug checking services, scale-up access to safer supply, and evaluate innovative approaches.
• $144M over five years, starting in 2023-2024, to Health Canada for the Substance Use and Addictions Program to fund community-based supports, including safer supply, supervised consumption sites, and other evidence-based interventions.
• $20.2M over five years, starting in 2023-2024, to the Public Health Agency of Canada for a new community-based program to prevent substance abuse among young people.

Arts and Culture

• $40M over two years, starting in 2023-24, to the Department of Canadian Heritage for the Canadian Media Fund to make funding open to traditionally underrepresented voices, and to increase funding for French-language screen content.
• $14M over two years, starting in 2024-2025, for the Department of Canadian Heritage to support the Building Communities Through Arts and Heritage Program.

Black Canadians

• $25M, in 2024-25, to Employment and Social Development Canada for the Supporting Black Canadian Communities Initiative, to continue empowering Black-led and Black-serving community organizations and their work of promoting inclusiveness.
• $45.9M over three years, starting in 2023-24, to the Treasury Board of Canada Secretariat to create a Mental Health Fund for Black public servants and establish dedicated career development programs, including to prepare Black public service leaders for executive positions.

Canadians with Disabilities

• $10M over two years, beginning in 2023-2024, to Employment and Social Development Canada to address the needs and barriers facing persons with disabilities through investing in capacity-building and community-level work of Canadian disability organizations.
• $21.5M to Employment and Social Development Canada to continue work on the future delivery of the Canada Disability Benefit, including engagement with the disability community and provinces and territories on the regulatory process.
• $922M to provinces and territories through the Workforce Development Agreements, and, of this, approximately 30% will be targeted towards helping persons with disabilities gain skills training and work experience.
• $105M to support the implementation of an employment strategy for persons with disabilities through an Opportunities Fund (this includes funding to the Ready, Willing and Able Program to support persons with Autism Spectrum Disorder or intellectual disabilities in finding employment).

Clean Technology

Industry associations may be interested in the Government of Canada’s proposed tax incentives, investments, and funds to help achieve Canada’s net-zero emissions goals. These announcements include:

• a 15% refundable tax credit for eligible investments in certain types of electricity generation systems and equipment.
• a 15-40% refundable tax credit for eligible project costs to produce clean hydrogen.
• a refundable tax credit equal to 30% of the cost of investments in new machinery and equipment used to manufacture and process clean technologies and extract, process, or recycle critical materials.
• a $15B Canada Growth Fund (PDF) to encourage private investment in low-carbon projects, technologies, businesses and supply chains.
• a 50% reduction in corporate income tax rates for zero emission technology manufacturers.
• $500M over 10 years to the Strategic Innovation Fund which provides funding for large projects across sectors that include emissions reduction, biomanufacturing and natural resources.
• expanding eligibility for the Clean Technology Investment Tax Credit to include geothermal energy systems.
• enhancing the Investment Tax Credit for Carbon Capture, Utilization, and Storage.

Climate Change, Conservation, and the Environment

• $3B over 13 years, starting in 2023-24, to Natural Resources Canada to recapitalize funding for the Smart Renewables and Electrification Pathways Program to support critical regional priorities and Indigenous-led projects, and to add transmission projects to the program.
• $650M over 10 years, starting in 2023-24, to support monitoring, assessment, and restoration work in the Great Lakes, Lake Winnipeg, Lake of the Woods, St. Lawrence River, Fraser River, Saint John River, Mackenzie River, and Lake Simcoe.
• $22.6M over three years, starting in 2023-24, to support better coordination of efforts to protect freshwater across Canada.
• $85.1M over five years, starting in 2023-24, with $0.4M in remaining amortization and $21M ongoing thereafter, to support the creation of the Canada Water Agency, which will be headquartered in Winnipeg.
• $151.9M over three years on a cash basis, starting in 2023-24, to Fisheries and Oceans Canada, Transport Canada, Environment and Climate Change Canada, and Parks Canada to continue to protect endangered whales and their habitats.
• $165.4M over seven years, starting in 2023-24, to Transport Canada to establish a Green Shipping Corridor Program to reduce the impact of marine shipping on surrounding communities and ecosystems.
• $184M over three years, starting in 2023-24, to Environment and Climate Change Canada, Parks Canada, Fisheries and Oceans Canada, and Natural Resources Canada to continue monitoring, protecting, and promoting the recovery of species at risk to help restore their populations.

Disaster Relief and Mitigation

• $31.7M over three years, starting in 2023-24, to Public Safety Canada and the Canada Mortgage and Housing Corporation to work with the Department of Finance Canada to stand-up a low-cost flood insurance program, aimed at protecting households at high risk of flooding and without access to adequate insurance.
• $15.3M over three years, starting in 2023-24, to Public Safety Canada to create a publicly accessible online portal where Canadians can access information on their exposure to flooding.
• $48.1M over five years, starting in 2023-24, and $3.1M ongoing to Public Safety Canada to identify high-risk flood areas and implement a modernized Disaster Financial Assistance Arrangements program

Education and Bilingualism

• $813.6M in 2023-24 to enhance student financial assistance for the school year starting August 1, 2023.
• $197.7M in 2024-25 to the Student Work Placement Program.
• $679.2M over five years, starting in 2023-24, for the Department of Canadian Heritage to support equal access to services of equal quality in education by working with provinces and territories to make high-quality minority-language education, opportunities for second-language learning, and bilingual government services more readily available.
• $373.7M over five years, starting in 2023-24, in additional funding to support new and enhanced federal initiatives under the Action Plan for Official Languages, 2023-28.

Equity, Diversity, and Inclusion

• $160M over three years, starting in 2023-24, for the Women’s Program to provide funding to organizations in Canada that serve women.
• $25.4M over five years, starting in 2023-24, and $0.6M ongoing, to the Department of Canadian Heritage to continue to support Canada’s Anti-Racism Strategy and fight all forms of racism, including but not limited to anti-Indigenous racism, anti-Black racism, anti-Asian racism, antisemitism, and Islamophobia.
• $1.5M over two years, starting in 2023-24, to the Privy Council Office to create a new Anti-Racism, Equity and Inclusion Secretariat to ensure that considerations of anti-racism, equity and inclusion are applied in the development of federal government policies.

Health

• $2B over 10 years to be distributed on a distinctions basis through the Indigenous Health Equity Fund.
• $25B over 10 years through a new set of bilateral agreements to address individual provincial and territorial health system needs, such as expanding access to family health services, supporting health workers and reducing backlogs, increasing mental health and substance use support, and modernizing health systems.
• $2B in 2022-23 to address urgent pressures in emergency rooms, operating rooms, and pediatric hospitals.
• $350M over 10 years in recognition of medical travel and the higher cost of delivering health care in the territories.
• $505M over five years, starting in 2023-24, to the Canadian Institute for Health Information, Canada Health Infoway, and other federal data partners.
• $359.2M over five years, starting in 2023-24, to support a renewed Canadian Drugs and Substances Strategy.
• $158.4M over three years, starting in 2023-24, to the Public Health Agency of Canada to support the implementation and operation of the 988 Suicide Prevention Line.
• $36M over three years, starting in 2024-25, to Health Canada to renew the Sexual and Reproductive Health Fund.
• $13B over five years, starting in 2023-24, and $4.4B ongoing to Health Canada to implement the Canadian Dental Care Plan.
• $250M over three years, starting in 2025-26, and $75M ongoing to Health Canada to establish an Oral Health Access Fund.
• $23.1M over two years, starting in 2023-24, to Statistics Canada to collect data on oral health and access to dental care in Canada, to inform the rollout of the Canadian Dental Care Plan.

Immigration and Settlement

• $123.2M to boost Francophone immigration in Canada, including support for Canadian employers to recruit French-speaking foreign workers, and increased support for these immigrants once they arrive in Canada.

Indigenous Canadians

• $4B over seven years, starting in 2024-25 to implement a co-developed Urban, Rural and Northern Indigenous Housing Strategy.
• $2B over 10 years to provide additional support for Indigenous health priorities which will be distributed on a distinctions basis through the Indigenous Health Equity Fund.
• $11.4M over three years, starting in 2023-24, to Crown-Indigenous Relations and Northern Affairs Canada to engage with Indigenous communities and to update the federal guidelines for federal officials to fulfill the Crown’s duty to consult Indigenous peoples and accommodate impacts on their rights.
• $76.3M in 2023-2024 to Indigenous Services Canada to continue to support the administrative capacity of First Nations governments and tribal councils delivering critical programs and services to their members.
• $19.4M over five years, starting in 2023-2024, to Crown-Indigenous Relations and Northern Affairs Canada for the Northern Participant Funding Program to increase the participation of Indigenous Peoples and other Northerners in environmental and regulatory assessments of major projects.
• $1.6M over two years, starting in 2023-2024, to the Canadian Northern Economic Development Agency for the Northern Projects Management Office to increase capacity for federal participation in environmental assessments and consultation with Indigenous communities on major projects in the territories.
• $5M in 2023-2024 to Indigenous Services Canada to support the co-development of an Economic Reconciliation Framework with Indigenous partners that will increase economic opportunities for Indigenous Peoples, communities, and businesses.
• $8.7M in 2023-2024 to Natural Resources Canada to support deeper engagements with Indigenous partners, including Indigenous rights-holders, towards the development of the National Benefits-Sharing Framework.
• $30M over five years, starting in 2023-24, to Indigenous Services Canada to enhance the Reserve Land and Environment Management Program, ensuring First Nations can develop capacity to exercise increased responsibility over their lands, resources, and environment.
• $35.3M over three years, starting in 2023-24, to Crown-Indigenous Relations and Northern Affairs Canada and Natural Resources Canada to co-develop, with the Lands Advisory Board, a new First Nations-led National Land Registry that will provide communities in First Nation Land Management with more opportunities to realize the economic benefits arising from local control over their lands.
• $810.6M over five years, beginning in 2023-24, to support medical travel and to maintain medically necessary services through the Non-insured Health Benefits Program, including mental health services, dental and vision care, and medications to support Indigenous health priorities.
• $16.2M over three years, beginning in 2023-24, for interventions to reduce rates of tuberculosis in Inuit communities.
• $20M over four years, starting in 2022-23, to support Indigenous-led projects for safer communities through the Pathways to Safe Indigenous Communities Initiative.
• $95.8M over five years, starting in 2023-24, and $20.4M ongoing to help Indigenous families access information about their missing and murdered loved ones, and to enhance victim services to support their healing journeys. This funding would renew existing programming and expand it to include support for families of 2SLGBTQI+ Indigenous victims who are men.
• $2.6M over three years, starting in 2023-24, to support the National Family and Survivors Circle in keeping families and survivors at the center of the implementation of the National Action Plan and the Federal Pathway.
• $2.2M over five years, starting in 2023-24, to establish an oversight mechanism to monitor and report on the progress of implementation.
• $1.6M over two years, starting in 202324, to support the Ministerial Special Representative appointed to provide advice and recommendations on the creation of an Indigenous and Human Rights Ombudsperson.
• $2.5M over five years, starting in 2023-24, to facilitate and coordinate work on advancing the National Action Plan by establishing a standing Federal-Provincial-Territorial-Indigenous table on Missing and Murdered Indigenous Women, Girls and 2SLGBTQI+ People. This table will provide a specific forum to take action on areas of shared roles and responsibilities regarding Missing and Murdered Indigenous, Women, Girls, and 2SLGBTQI+ People, including prioritizing discussion on how to launch a “Red Dress Alert” to notify the public when an Indigenous woman or two-spirit person goes missing.
• $171M in 2022-23 to Indigenous Services Canada to ensure First Nations children continue to receive the support they need through Jordan’s Principle.
• $444.2M over three years, starting in 2022-23, to support Peguis First Nation in Manitoba and Louis Bull Tribe First Nation in Alberta to exercise jurisdiction over their child welfare systems and make decisions about what is best for their children and families.
• $2.8B as part of the Band Class settlement, to establish a trust to support healing, wellness, education, heritage, language, and commemoration activities. The Government of Canada will also propose legislative amendments to exclude the income and gains of the trust from taxation.
• $10M in 2023-24 to top up the Local Food Infrastructure Fund to strengthen food security in Northern, rural, and Indigenous communities across Canada.

Legal Aid, Refugees, and Human Rights

• $43.5M in 2023-24 to Justice Canada to maintain federal support for immigration and refugee legal aid services.
• $24.5M over five years, starting in 2023-24, for the Department of Canadian Heritage to double funding for the Court Challenges Program.

Research, Development, Science, and Industry

• $108.6M over three years, starting in 2023-24, to expand the College and Community Innovation Program, administered by the Natural Sciences and Engineering Research Council, to help Canadian businesses access research and development facilities.
• $368.4M over three years, starting in 2023-24 to Natural Resources Canada to renew and update forest sector support, including for research and development, Indigenous and international leadership, and data.
• $333M over 10 years, starting in 2023-24, for Agriculture and Agri-Food Canada to support investments in research and development of new products based on solids non-fat.
• $16.7M over five years, starting in 2023-24, to Public Safety Canada to continue to support their work through the Canadian Institute for Public Safety Research and Treatment.
• $1.1B over 14 years, starting in 2023-24, to the Canadian Space Agency to continue Canada’s participation in the International Space Station until 2030.
• $1.2B over 13 years, starting in 2024-25, to the Canadian Space Agency to develop and contribute a lunar utility vehicle to assist astronauts on the moon.
• $150M over five years, starting in 2023-24, to the Canadian Space Agency for the next phase of the Lunar Exploration Accelerator Program to support Canada’s space industry and help accelerate the development of new technologies.
• $76.5M over eight years, starting in 2023-24, on a cash basis, to the Canadian Space Agency in support of Canadian science on the Lunar Gateway station.

Have questions? Please contact a member of Miller Thomson’s Social Impact Group. Robert Hayhoe, Nicole D’Aoust, Caitlin Lee, Hillary Linden, Stephen Hsia, Adelaide Earl-Kinley, Michelle Eng, and Rebekah Timm helped contribute to this article.

[1] Specifically, the Government of Canada proposes to increase the AMT rate from 15% currently to 20.5%. The Government also plans to increase the AMT base, in part, by including 30% of the capital gains on donations of publicly listed securities.

[2] Among other proposed changes, the Government of Canada proposes to introduce a penalty equal to 25% of the amount of the tax benefit. Additionally, where the tax benefit involves a tax attribute that has not yet been used to reduce tax, the amount of the tax benefit would be deemed to be nil. Draft GAAR legislation will not be released until after May 31, 2023 when the public consultation period has ended.