A.
INTRODUCTION
Canada Revenue Agency (“CRA”) has recently
released online the new form T3010B, which is the new annual
information return for registered charities that is to be
used for fiscal periods ending on or after January 1, 2009.
For fiscal periods ending on December 31, 2008 and earlier,
the old T3010A is still to be used. Accompanying the new
T3010B form are three slightly-revised attachments: T1235(09)
– Directors/Trustees and Like Officials Worksheet;
T1236(09) – Qualified Donees Worksheet / Amounts Provided
to Other Organizations; and T1259(09) – Capital Gains
and Disbursement Quota Worksheet. The CRA has also released
T4033B – Completing the Registered Charity Information
Return, which will assist charities in filling out and
filing the new information return. These forms and publications
are all available online on the CRA’s website.
The T3010B will also be available in print as of February
25, 2009.
This Charity Law Bulletin summarizes
the various changes that have been made to the annual information
return.
B.
BACKGROUND
Over the last two years,
the CRA has consulted the charitable sector with the goal
of providing better resources and support for charities
to meet their legal requirements. The new T3010B form was part of
this initiative, and the CRA anticipates that the new form
will assist smaller charities by reducing their filing burdens,
while also assisting the general public to make better-informed
decisions about donations by providing more information
about registered charities. The T3010B form is also the
CRA’s response to many requests from registered charities
to simplify the information return and reduce the filing
burden for small charities that may have limited resources
for addressing administrative requirements.
While the new form is
anticipated to generally benefit smaller charities, the
form is also designed to include additional information.
In this regard, larger charities with broad operations will
likely be filling in more information than they did in the
previous form. This is quite apparent in the increased reporting
requirements for charities engaged in foreign activities
or receiving large foreign donations as discussed further
below.
C.
COMPARISON OF THE OLD AND NEW FORMS
1.
Overall Structure of the
Forms
With the old T3010A
form, certain portions of the form were not required to
be filled out if the question did not apply to the charity.
These portions were scattered throughout the form and therefore
it would not be unusual for numerous parts of the T3010A
to be left blank.
The new T3010B has
been restructured and is more streamlined than before. The
nine sections found in the old T3010A have been converted
into six sections, along with six schedules. On a practical
level, this means that the new form actually consists of
two parts. Sections A to F comprise the primary portion
that must always be completed, while Schedules 1 to 6 relate
to particular matters and only need to be completed if triggered
by specific answers provided in the primary portion. Similarly,
Form T1236(09) – Qualified Donees Worksheet /
Amounts Provided to Other Organizations
functions in the same way as these schedules, in that it
is completed and attached only if triggered by a specific
answer in the primary portion. However, Form T1235(09)
– Directors/Trustees and Like Officials Worksheet
or a sheet with equivalent information must be attached.
The new T3010B form
also includes a checklist that provides a clear indication
of which portions of the information return are mandatory
and which portions are not. In this regard, the checklist
will act as a helpful safeguard to ensure that a charity’s
information return is not missing any necessary documentation.
For ease of reference, this checklist is reproduced below:
2.
Identification
The previous multiple
questions regarding identification of the charity in Section
A, such as whether the charity was an internal division
of another charity, has been reduced in the new form. The
question about changes to governing documents has been moved
to the checklist, and the CRA only asks whether or not the
charity was “in a subordinate position to a parent organization”,
and if so, it asks for the BN/registration number of the
other charity. The CRA no longer asks if the charity amalgamated,
merged or consolidated with another organization.
3.
Directors/Trustees and Like
Officials
Section B – Directors/Trustees
and Like Officials remains essentially the same in the new
form, but now expressly states that the CRA may share confidential
information as permitted by law, such as sharing with certain
other government departments and agencies. This is in accordance
with Bill C-25, which amended the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act.
Bill C-25 permits the CRA to share information about directors
and officers with the Canadian Security Intelligence Service
(“CSIS”), the Royal Canadian Mounted Police (“RCMP”), as
well as foreign governments and agencies. This new fact should be of concern
to directors and officers of all charities, but particularly
to charities that carry on activities outside of Canada.
Form T1235(09) – Directors/Trustees
and Like Officials Worksheet or a sheet with equivalent
information, which is a mandatory attachment, has been revised
and is more informative and user-friendly. The form is now
presented in a “landscape” layout, which provides more space
to input data. Additional information on filling out the
worksheet is now included in the T1235(09), such as an explanation
and diagram of which related persons would be considered
“non-arm’s length”. This diagram is reproduced below for
ease of reference:
4.
Programs and General Information
Section C – Programs
and General Information has been totally reworked and includes
a number of questions that will trigger the requirement
to complete a schedule or worksheet attachment. For example,
additional information is required for charities that operate
outside of Canada (Schedule 2), pay external fundraisers
(Schedule 4 – which is confidential), pay compensation to
employees (Schedule 3), or receive non-cash gifts (Schedule
5). The new form specifies clearly that charities must complete
and attach T1236(09) – Qualified Donees Worksheet
/ Amounts Provided to Other Organizations if they have
given gifts or transferred funds to qualified donees or
other organizations.
For charities that carry on activities
outside Canada, they will need to complete Schedule 2 –
Activities Outside Canada. In this regard, Schedule 2 requires
that the charity will need to indicate the name of the individuals
or organizations that have received resources of the charity
under an arrangement with the charity (such as a contract
for services, an agency agreement, or joint venture agreement),
the country where the activities were carried out and the
dollar amount of the resources that were expended. This
information about individuals or organizations carrying
on activities outside of Canada is not confidential, and
therefore might put those individuals or organizations at
risk in some situations. As such, it may now be necessary
in certain high-risk situations to disclose to recipient
individuals or organizations carrying on activities outside
of Canada that their identity will be disclosed in the public
portion of the annual return of the charity.
As well, in order to address other provisions
concerning donors under the Income Tax Act,
as amended by Bill C-25, an important addition to the new
form includes a question to determine if the charity received
a donation valued at $10,000 or more from a donor who was
not a resident in Canada and was not any of the following:
·
a
Canadian citizen;
·
employed
in Canada;
·
carrying
on business in Canada; or
·
a
person having disposed of taxable Canadian property.
If a donation was received in this regard,
then the charity must provide information in Schedule 4
(which the CRA classifies as confidential data) concerning
the donor as well as the amount donated. Charities will
need to ensure that they have the requisite information
from non-resident donors to satisfy the reporting requirements
in Schedule 4. Obtaining this information from donors though,
may be easier said than done, given the fact that in accordance
with Bill C-25, the information can be shared with CSIS,
the RCMP, as well as foreign governments and agencies.
5.
Financial Information
Perhaps the most substantial
difference between the old T3010A and the new T3010B form
is Section D, which is a simplified and shorter section
regarding the charity’s financial information. In accordance
with the CRA Report on Small and Rural Charities, one of the CRA’s goals for the
new T3010B was to reduce the filing burden for smaller charities.
In order to benefit from these reduced filing requirements
for financial information, the charity cannot have any of
the following apply to it:
·
The
charity’s revenue exceeds $100,000.
·
The
amount of all assets (e.g., investments, rental properties)
not used in charitable programs exceeds $25,000.
·
The
charity has permission to accumulate funds during this fiscal
period.
·
The
charity has spent or transferred enduring property during
this fiscal period.
Permission to accumulate funds typically
occurs when a charity wants to save funds for a major purchase,
such as a building. Because it may be difficult for the
charity to save these funds, as well as to meet its disbursement
quota for charitable programs, the charity may apply to
the CRA for permission to accumulate funds. Enduring property
of a charity generally include ten-year gifts and gifts
received by bequest or inheritance. For more information
on these terms and their application to charities, charities
are advised to refer to T4033B – Completing the Registered
Charity Information Return and to seek further advice.
Charities that do not satisfy all the
criteria listed above must instead complete Schedule 6,
which is a much lengthier and more detailed financial information
section similar to that of the old T3010A form.
6.
Certification and Confidential
Data
Section E and Section
F dealing with Certification and Confidential Data remain
essentially unchanged. The charity must provide its physical
address and the address where its books and records are
kept, as well as information about the individual who completed
the form. The form must be signed by a director/trustee
or like official of the charity who has authority to sign
on behalf of the charity, which would normally require board
authorization. As a result, it is generally recommended
that the T3010B form be reviewed and approved by the board
of the charity, particularly considering that some of the
annual information return will contain information that
CRA auditors will likely use in the future to determine
whether the charity has been in compliance with CRA requirements.
7.
Removed or Relocated Sections
Several sections in
the T3010A form have either been converted into a schedule,
or removed altogether. Questions relating to compensation
of employees (Section D of the old form) have been relocated
to the back of the new form as Schedule 3. A number of questions
have also been revised, such as the requirement that charities
now report the top ten (as opposed to top five) highest-compensated
positions and their respective income amounts. The section
regarding foundations in the old form (Section G) has also
been converted into a schedule (Schedule 1).
The old form also included
in Section F “Other Required Information”, which consisted
of various miscellaneous financial questions. This section
no longer exists in the new form, and the individual questions
have generally been transferred to other parts. For example,
a number of questions now appear under Schedule 6 of the
new form (the financial information section for larger charities).
This is indicative of further relief for smaller charities
who are eligible to use the abbreviated financial information
section in the new form.
D.
CONCLUDING COMMENTS
With the exception of
the question pertaining to donors of gifts over $10,000
who are not resident in Canada and the requirement to name
third party recipients of funds received outside Canada
in accordance with the requirements of Bill C-25, the substance
of the questions in the new T3010B form is not radically
different from that of the old T3010A form. However, the
reorganization and rewording of the form is more streamlined
and therefore more user-friendly for charities. Most importantly,
the simplified financial information sections will be a
welcome development for eligible smaller charities.
Charities are advised to carefully review the new form, and in the course
of doing so, to utilize T4033B – Completing the Registered
Charity Information Return when preparing to file their
information return. Charities are also reminded that the
new form must be used by registered charities that have
a fiscal period ending on or after January 1, 2009. Again,
if the charity has a fiscal period ending prior to January
1, 2009, it is still required to use the old T3010A form.
