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The Canada Revenue Agency (CRA) recently issued a first-of-a-kind comprehensive report on Canadian charities for 2015-2016. It has provided some statistics annually in the past, but not to the extent of this 27-page report. The end of this article lists some of the more interesting statistical information contained in the report.
It was startling to note that half of the charitable registrations revoked were due to non-filing of T3010 Registered Charity Information Returns. In addition, the majority of charity revocations did not stem from audits.
Two Cases in 2016
Case #1 - In a 2016 Federal Court of Appeal case, Opportunities for the Disabled Foundation v. Minister of National Revenue, the appellant was not successful in preventing the revocation of its charitable status. The judge stated that there were a significant number of inaccuracies in the charity’s T3010 charity return sufficient to conclude that it was not filed “as and when required.”
Case #2 - The Supreme Court of Canada dismissed another case in 2016, Jaamiah Al Uloom Al Islamiyyah Ontario v. Minister of National Revenue. The CRA argued that it could revoke a charity’s registration for not issuing T4s and T4As properly, on the basis that the information returns were not filed “as and when required.” Unfortunately, the Court did not address this as it found revocation on the grounds that proper books and records were absent.
These two cases may reveal a pattern that CRA is moving towards considering returns filed with errors, as not being “filed as required.”
Private Schools Registered As Charities
One T4A that is easily missed relates to private schools registered as charities that provide discounted or free tuition to children of employees attending the same school. If certain conditions are met, the waived tuition is not a taxable benefit to the parent. In that case, it is considered a bursary to the student. Although there are many circumstances in which the bursary is exempted from taxation, the school is still required to issue a T4A slip to the student for the full bursary amount.
The above present significant concerns and charities should pay close attention to the accuracy of their T3010s and T4/T4As.
Information from 2014 T3010 Annual Returns
Of 86,193 registered charities in Canada:
- 75,700 are charitable organizations (not public and private foundations)
- 40,000 charities use only volunteers
- 5,395 charities are engaged in foreign activities
Of donation receipts totaling $15.7 billion, $2.4 billion were non-cash receipts.
Information from 2015-2016 Fiscal Year
- 3,484 new charity registrations were received
- 1,670 charities were registered
- 1,916 registrations were either incomplete, abandoned or withdrawn
- 45 of 84 of charity registrations that were turned down, were due to lack of information
- 726 charities audited (less than 1% of all charities)
- CRA Charity Audits were selected randomly and from complaints from public, media articles (or other public sources), information from T3010 annual returns, and past non-compliance
- Charity Audit outcomes by concern levels:
- Serious (sanctions, revocation, annulment) 131 (18%)
- Moderate (compliance agreement) 111 (15%)
- Minor (education letter) 444 (61%)
- None (no action) 40 (6%)
- Most common issues identified from the charity audits:
- Incorrect donation receipts
- Errors on T3010 annual returns
- Inadequate records
- Non-charitable purpose or activities
- Not filing T4/T4A slips
- 1,429 charity registrations were revoked - only 1.4% resulted from an audit, the remainder was split almost equally between voluntary revocations (701) and the failure to file T3010 annual returns (708)
Wendy Seet, CPA, CA is a Senior Tax Manager at Manning Elliott LLP. For more information about this topic, please contact the Manning Elliott tax team at 604-714-3600.
The above content is believed to be accurate as of the date of posting. Canadian Tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.