By Terrance S. Carter, Theresa L.M. Man and Jacqueline M. Demczur

Our Charity & NFP Law Bulletin No. 522 (June 2023) and Charity & NFP Law Update (August 2023) raised  serious concerns relating to the new trust reporting requirement in recent amendments to the Income Tax Act (“ITA”) that require T3 returns be filed for express trusts within 90 days from the trust’s year end. Although there are exemptions from these filing requirements for registered charities and non-profit organizations, there is no exemption for internal express trusts held by charities (such as endowment funds, scholarship funds, or restricted building funds that are established as internal express trusts). Charities that fail to file the required T3 returns could face serious penalties for each express trust, being the greater of $2,500 or 5% of the value of the trust property.

As reported in our August Update, it is hoped that the Department of Finance (“Finance”) or the Canada Revenue Agency (“CRA”) would provide a solution to the onerous new trust reporting requirement for internal express trusts held by charities, such as an administrative exemption or an amendment to the ITA. However, to date there has been no official indication of a solution forthcoming from either Finance or the CRA. The lack of any type of announcement is concerning because the clock is starting to run down on the time that charities have to do the necessary and extensive due diligence that will be required to complete and file T3 returns within 90 days of December 31, 2023. Hopefully, a solution will be announced soon by Finance or by the CRA. If not, the charitable sector may want to start advocating for a solution before it is too late.

​Read the Sept 2023 Charity & NFP Law Update