By Terrance S. Carter, Theresa L.M. Man, Jacqueline M. Demczur & Lynne M. Westerhof

It had been previously reported that changes to the new trust reporting provisions in the Income Tax Act (“ITA”) introduced in late 2022 may affect charities, such that charities that hold internal trusts that are set up as express trusts (such as internal endowments) might be required to file an annual return of income for each trust. It was not clear at that time whether the legislation was intended to apply to internal trusts held by charities, and, if not, whether subsequent changes to the ITA might be made to clarify that intention.

However, following recent discussions and correspondence that two of the authors had with senior officials at the Department of Finance (“Finance”) and the Canada Revenue Agency (“CRA”), it is now clear that the legislative intent of the new trust reporting requirements is to include express internal trusts held by charities. This is a significant development for the charitable sector. In response, this Bulletin reviews the new trust reporting requirements, how charities will be impacted, and the urgency for the CRA to provide clarity to the charitable sector before these rules come into force for trusts with taxation years that end after December 30, 2023. For the balance of this Bulletin, please see Charity and NFP Law Bulletin No. 522.

​Read the June 2023 Charity & NFP Law Update