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

A new T3 Trust Income Tax and Information Return (“T3”) was released by the Canada Revenue Agency (CRA) in December 2023. The updated T3 reflects the expanded trust reporting requirements under the Income Tax Act, introduced as a result of Bill C-32, the Fall Economic Statement Implementation Act, 2022 (“Bill C-32”), and earlier reported on in Charity & NFP Law Bulletin No. 522. Under the amended trust reporting rules, certain express trusts and bare trusts that were previously exempt from filing T3s must now file T3s for taxation years ending on December 31, 2023. Further to this, the CRA has provided further details on the new trust reporting requirements on its webpage, New trust reporting requirements for T3 returns filed for tax years ending after December 30, 2023.

In response to uncertainty about the applicability of the new trust reporting requirements to charities that hold internal trusts set up as express trusts (e.g. endowments and scholarships), the CRA announced on November 10, 2023 that it would not be requiring registered charities to file T3s for their internal trusts, as reported in Charity & NFP Law Bulletin No. 523.

Notwithstanding the CRA’s announcement regarding charities holding internal trusts, charities and non-profit organizations (NPOs) may still be required to file T3s in certain other situations. As referred to in our November 2023 Charity & NFP Law Update, these situations could include:

• internal express trusts held by NPOs;
• express trusts or bare trusts held by charities or NPOs for beneficiaries other than the charity or NPO itself; and
• express trusts or bare trusts held by third parties for the benefit of a charity or an NPO.

T3s must be filed within 90 days of the trust’s year-end. For trusts whose year-end is December 31, 2023, the filing deadline of March 30, 2024 has been extended by the CRA to April 2, 2024, which is the first business day following that deadline. Where T3s for bare trusts are filed after this deadline, the CRA has indicated that it will waive the late filing penalty for the 2023 tax year where “the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.” However, if the failure to file the T3 for the 2023 tax year was made either “knowingly or due to gross negligence”, then “a different penalty may apply [being] equal to the greater of $2,500 and 5% of the highest amount at any time in the year of the fair market value of all the property held by the trust.”

Given the looming deadline and the fact that it is not always clear whether a trust is a bare trust (and therefore whether or not the CRA’s relief for late filing will apply), it would be prudent for charities and NPOs that have trust arrangements with year-ends on or after December 31, 2023, to consult with their legal and accounting professionals to determine whether they may now be required to file T3 trust returns.

​Read the February 2024 Charity & NFP Law Update