A.
Introduction
In light of the many regulatory obligations
that registered charities are required to meet, Canada Revenue
Agency’s (“CRA”) Charities Directorate has recently released
a publication entitled “What’s the Scoop? – Important Changes
for Registered Charities”,
which highlights a number of important changes that registered
charities need to be aware of. In this regard, over the
past two years, CRA has engaged in consultations with the
charitable sector and developed new tools and resources
to provide registered charities with enhanced support services,
and promises a number of new products for 2009, which are
also briefly described in this Charity Law Bulletin.
B.
Important Changes for Registered Charities
1.
New Form T3010B, Registered
Charity Information Return for fiscal periods ending on
or after January 1, 2009 only
CRA reminds charities
that in January 2009, it is releasing the new Form T3010B(09),
Registered Charity Information Return (“the new Form”).
CRA anticipates that the new Form will reduce the filing
burden for smaller charities and help the public make informed
donor decisions by providing them with more information
about registered charities. CRA indicates that these changes
reflect its commitment to the successful execution of the
Small and Rural Charities Initiative, which will be discussed
in more detail later in this Charity Law Bulletin.
In addition to the
new Form, CRA lists the following forms to be used by charities
for fiscal periods ending on or after January 1, 2009 only:
¨
T1235(09), Directors/Trustees
and Like Officials Worksheet
¨
T1236(09), Qualified Donees
Worksheet / Amounts Provided to Other Organizations
CRA explains that for
fiscal periods ending on or before December 31, 2008, Form
T3010A(05), with accompanying worksheets T1235 and T1236
must be used.
The new Form was developed
as a result of the many requests from charities to simplify
the return. CRA indicates that there was a sense that the
filing burden on smaller organizations, in particular, was
excessive in light of their limited volunteer base and resources
for administrative activities. In this regard, the new Form
eliminates detailed financial information for many smaller
charities. In addition, the new Form has been divided into
a simple core form and topic-related schedules. On the other
hand, larger charities will be required to provide additional
information to CRA and the public. Therefore, while CRA
anticipates that small charities will have less paperwork
to complete, other charities may have to provide more information
than was required on previous returns.
The new return package
will be mailed at the end of the charity’s first fiscal
period ending on or after January 1, 2009. Along with the
new Form, CRA states that (for most charities) the new Registered
Charity Information Return package
will consist of the following forms:
¨
TF725, Registered Charity
Basic Information sheet
¨
T1235(09), Directors/Trustees
and Like Officials Worksheet
¨
T1236(09), Qualified Donees
Worksheet / Amounts Provided to Other Organizations
Private foundations will also receive Form
T2081, Excess Corporate Holdings Worksheet for Private
Foundations. Private foundations that hold more than
2% of the issued and outstanding shares of any class of
shares of a corporation at any time during their first fiscal
periods beginning after March 18, 2007, must complete the
worksheet.
Registered charities incorporated, continued
or amalgamated in Ontario and subject to the Corporation
Act (Ontario)
will also receive Form RC232—WS, Director/Officer Worksheet
and Ontario Corporations Information Act Annual Return.
2.
Where to Find Guide T4033
Although in previous
years, CRA mailed Guide T4033 (“the Guide”) to registered
charities as part of their Registered Charity Information
Return packages (including the T3010A), it will no longer
be doing so. The Guide is available online at: www.cra.gc.ca/tx/chrts/formspubs/menu-eng.html
or by request to the Charities Directorate, Client Service
Section at 1-800-267-2384. CRA indicates that the Registered
Charity Information Return (Form T3010A(05) or Form
T3010B(09)) and related schedules will, however, continue
to be printed and mailed to all charities.
3.
Disbursement Quota – registered
charities designated as charitable organizations
On November 28, 2008, CRA published
a reminder indicating that the 3.5% disbursement quota will
apply to charitable organizations registered before March
23, 2004, for their fiscal period beginning on or after
January 1, 2009.
All registered charities are required
to expend a portion of its assets annually in accordance
with a disbursement quota, which is a prescribed amount
that registered charities must disburse each year in order
to maintain their charitable registration. The purpose of
the disbursement quota is “to ensure that most of a charity’s
funds are used to further its charitable purposes and activities;
to discourage charities from accumulating excessive funds;
and to keep other expenses at a reasonable level.” Having
a good understanding of the disbursement quota rules is
important not only for charities, but also for donors and
their advisors. The source of the gift, the nature of the
proposed recipient charity, the nature of the property gifted,
and restrictions that may be imposed on the gift by the
donor will all have a bearing on the disbursement quota
consequences of the gift.
For more information on the 3.5% disbursement
quota and how it is calculated, see Theresa L.M. Man, “Calculation
of 3.5% Disbursement Quota”, in Charity Law Bulletin
No. 150 (December 18, 2008), online: http://www.carters.ca/pub/bulletin/charity/2008/chylb150.pdf.
4.
Registered Charities Incorporated
in Ontario and Subject to the Corporations Act (Ontario)
CRA reports that, on behalf of the Province,
it will collect Ontario Corporations Information Act
Annual Return information from registered charities
incorporated, continued or amalgamated in Ontario and subject
to the Corporations Act (Ontario) (“OCA”).
In addition to federal filing obligations
with CRA, currently, charities that are subject to the OCA
are required to file an Ontario Corporations Information
Act Annual Return with the Province of Ontario.
CRA indicates that beginning in 2009,
those charities incorporated, continued or amalgamated in
Ontario and subject to the OCA will receive and have the
option to file Form RC232-WS, Director/Officer Worksheet
and Ontario Corporations Information Act Annual Return,
with their Form T3010, Registered Charity Information
Return. All information collected on behalf of the Province
will be transmitted to the Government of Ontario, for the
purpose of recording the information on the public record
maintained by the Province.
5.
New Fundraising Policy Guidelines
CRA reminds that charities
that engage in fundraising should watch for CRA’s policy
on fundraising, which it expects to have posted on its Web
site within the next month or so. CRA clarifies that the policy
will explain CRA’s approach to assessing whether a charity’s
fundraising is in compliance with the requirements of the
Income Tax Act (Canada). In addition, the policy will
provide suggestions for best practices in managing compliance
related fundraising issues.
6.
Update on Small and Rural
Charities Initiative
CRA recognizes the
challenges that small and rural charities face as a result
of their limitations with respect to resources and volunteers.
In order to assist such charities, CRA launched the small
and rural charities initiative that began with a series
of consultations between CRA and small and rural charities
in October 2007, which ultimately led to the development
of a joint action plan.
CRA updates that it is currently acting on the priority
of recommendations of the joint action plan.
CRA indicates that as some of the recommendations are broad
or may require additional study and effort over a number
of years, it may only accomplish some aspects of the recommendations
in the particular year indicated on the joint action plan.
In addition, CRA is developing a new Web page to let charities
follow its progress on its implementation of recommendations.
C.
Concluding Comments
In light of the complex
and evolving nature of the obligations and entitlements
that charities need to be aware of, CRA has provided some
helpful information and reminders concerning important changes
for registered charities in its “What’s the Scoop? – Important
Changes for Registered Charities”. However, keeping abreast
of all these initiatives and changes in regulatory requirements
from CRA is becoming an ever challenging task, particularly
for sector volunteers.
