Webinar – What you need to know about maintaining charitable registration
Please note: The content of this presentation is accurate as of the date it was aired on September 12, 2024.
Webinar Transcript
Slide 3 – What you need to know about maintaining charitable registration
Nicolas: Let me welcome you to the Canada Revenue Agency’s webinar on What you need to know about maintaining charitable registration.
Thank you for taking the time to join us today.
My name is Nicolas and I’ll be your host for today’s talk.
Slide 4 - Objective
Nicolas: The purpose of today’s presentation is to provide charities information and resources on what they need to know to maintain charitable registration.
[Person writing on a tablet with a stylus.]
Slide 5 - Overview
Nicolas: The presentation is split into 5 parts.
We’ll start Part 1 with a brief introduction. In Part 2, we’ll discuss charity registration in Canada. In Part 3, we will go into more details about requirements of registration. Then, we’ll talk about how to maintain charitable registration in Part 4. And finally, in Part 5, we’ll provide you with some resources to support your work, as well as links to find more information about the topics covered today.
[Person typing on a laptop.]
Slide 6 - Introduction
Nicolas: This brings us to Part 1 of the presentation.
Slide 7 - Introduction
Nicolas: The Charities Directorate is the area of the Canada Revenue Agency that administers the sections of the Income Tax Act, or ITA, related to the regulation of charities.
You’ll see here a summary of what we do at the Charities Directorate:
- We register charities under the ITA
- We educate the public and charities on the requirements for registration
- We protect the sector from terrorist financing abuse
- We monitor the sector for compliance
- We carry out compliance actions
Slide 8 – Charity registration in Canada
Nicolas: We’ll now discuss charity registration in Canada.
Slide 9 – Charity registration in Canada (1/2)
Nicolas: Let’s have a look at the eligibility requirements.
A registered charity must be established and operated for exclusively charitable purposes, and devote its resources (funds, personnel and property) to its charitable activities.
The ITA allows a registered charity to use its resources, inside or outside Canada, in one of three ways:
- On its own charitable activities;
- On making gifts to qualified donees; or
- On making grants to non-qualified donees.
Slide 10 – Charity registration in Canada (2/2)
Nicolas: There are a number of benefits of registration.
Registered charities:
- can issue official donation receipts for gifts
- are exempt from paying income tax
- are eligible to receive gifts from registered charities
- have some exemptions from goods and services tax/harmonized sales tax (GST/HST)
Slide 11 – Requirements of registration
Nicolas: This now brings us to Part 3 of the presentation where we’ll examine the requirements of registration.
Slide 12 – Requirements of registration (1/8)
Nicolas: To maintain charitable registration, charities must:
- Engage only in allowable activities
- Keep adequate books and records
- Issue complete and accurate donation receipts
- Meet annual spending requirement (disbursement quota or DQ)
- File annual T3010 information return
- Maintain status as a legal entity
- Inform the Charities Directorate of any changes to the mode of operation or legal structure
Slide 13 – Requirements of registration (2/8)
Nicolas: A registered charity must be created for charitable purposes and must devote its resources (funds, personnel, and property) to charitable activities. A registered charity is allowed to carry out its charitable purposes both inside and outside Canada in the following ways:
- carrying on its own charitable activities through
- its staff and volunteers
- an intermediary (over which a charity must exercise direction and control)
- making qualifying disbursements through
- gifts to qualified donees
- grants to non-qualified donees that meet accountability requirements under the Income Tax Act
Regardless of how it operates, a registered charity must not engage in activities that directly or indirectly support or oppose a political party or candidate for public office or unrelated business activities.
Slide 14 – Requirements of registration (3/8)
Nicolas: A registered charity must keep adequate books and records for the prescribed time period at an address in Canada that is on file with the CRA.
So, what do we mean by adequate books and records?
The first point to note is that books and records must be kept in Canada.
They must be kept at the Canadian address that the charity has on file with the CRA. This cannot be a PO BOX. This includes all books and records related to activities carried on outside Canada. The books and records of the Canadian charity cannot be kept at a foreign address, so you should ensure that any overseas records are sent to and maintained in Canada.
In order to be considered adequate, books and records need to allow the CRA to verify:
- the charity’s revenue, including all charitable donations received;
- that the resources are spent on charitable programs; and
- that the activities themselves continue to be charitable
We recommend that you keep all supporting documentation that relates to your revenue and expenses, and charitable activities. These supporting documents will help the CRA verify what we just mentioned.
It is also important to note that your books and records must be maintained in one of Canada’s official languages. They can be written in French, English, or in both languages. If they are not, you must have them translated into one of the official languages.
Slide 15 – Requirements of registration (4/8)
Nicolas: A registered charity may only issue official receipts for donations that legally qualify as gifts. An official receipt must contain all the information specified in Section 3501 of the Income Tax Regulation.
This is an example of a donation receipt issued for a cash gift.
These receipts must include the following information:
- a statement that it is an official receipt for income tax purposes
- the name and address of the charity as on file with the Canada Revenue Agency
- a unique serial number
- the registration number issued by the CRA
- the location where the receipt was issued — city, town, or municipality
- the date or year the gift was received
- the date the receipt was issued
- the full name, including middle initial, and address of the donor
- the amount of the gift
- the amount and description of any advantage received by the donor
- the eligible amount of the gift
- the signature of an individual authorized by the charity to acknowledge gifts
- the name and website address of the CRA
Receipts for non-cash gifts must also include:
- the date the gift was received, if not already included
- a brief description of the gift received by the charity
- the name and address of the appraiser, if the gift was appraised
Sample official donation receipts are available on the Charities and Giving webpages on Canada.ca.
You should note that effective on Royal Assent, Budget 2024 proposed changes to simplify the issuance of official donation receipts and to align the process for issuing receipts with the modern practices of charities. The changes would be communicated on our website once they are implemented. The best way to stay up to date is to register for our electronic mailing list.
[Donation receipt]
Slide 16 – Requirements of registration (5/8)
Nicolas: The disbursement quota is the minimum amount that your registered charity is required to spend each year on either:
- its own charitable activities
- its qualifying disbursements through gifts to qualified donees or grants to non-qualified donees
The disbursement quota calculation is based on the value of your property not used for charitable activities or administration.
As of January 1, 2023, we no longer review or grant accumulation requests. Charities must now include all assets not used in charitable programs or administration in their disbursement quota calculation which is done in schedule 8 of the T3010 information return.
Slide 17 – Requirements of registration (6/8)
Nicolas: A registered charity must file an annual T3010 information return (together with financial statements and required attachments) no later than six months after the end of the charity's fiscal period.
The best way to complete your T3010 information return is online using My Business Account (MyBA). You can complete your return online using the new digital services for charities available on MyBA. Any director registered with MyBA, or an authorized representative registered with Represent a Client, can complete your charity return entirely online.
You can also file your charity return on paper by completing it by hand or by using the PDF fillable/saveable version. If you must fill out your Form T3010 on paper, always go to our website to download the latest version of the form based on the end of your fiscal period end. When you mail your T3010 information return, the postmarked date indicated on the envelope is used as the received date.
Here are a few useful tips and tricks for filing your T3010 information return:
- file a complete return
- file your return within six months from the end of your charity’s fiscal year
- make sure your financial statements are included with your return and have the same fiscal year-end
- file your return even if your charity was inactive during its fiscal year
- describe your charitable activities, not your fundraising activities, in Section C2
- make sure there is a signature of a director/trustee or like official in Section E
- include the dates of birth, arm’s length status, and postal codes for all directors, trustees, and like officials on Form T1235
- include the registration numbers for all qualified donees on Form T1236
Slide 18 – Requirements of registration (7/8)
Nicolas: A registered charity that is constituted federally, provincially, or territorially must meet other specific requirements (in addition to the requirements of CRA) in order to maintain its status as a legal entity.
This may include annual filing and/or annual fees.
A registered charity should check with the relevant authorities to verify these additional requirements. Failure to maintain its status as a legal entity could result in the revocation of its registration as a charity.
Slide 19 – Requirements of registration (8/8)
Nicolas: It is important that the Charities Directorate has accurate information about all registered charities in Canada. A registered charity should get confirmation from the Directorate before changing its stated objects and/or activities to make sure they qualify as charitable.
A registered charity should inform the Directorate if it changes the following:
- name
- telephone number
- address
- contact person
- governing documents (constitution, letters patent, etc.)
A registered charity must also obtain prior approval from the Directorate before changing its fiscal year-end.
A lot of this information can be updated online using MyBA.
If you’d like to speak with a client service representative dedicated to Charities, you can call 1-800-267-2384 and they will be able to assist you. You can find this phone number in the last slide of the presentation.
Slide 20 – Maintaining charitable registration
Nicolas: We’ll now talk about how to maintain charitable registration.
Slide 21 – Maintaining charitable registration (1/2)
Nicolas: Incomplete/ inaccurate T3010 - Unfortunately, charities often fail to file correct and/or complete T3010 information returns, or file in time. The most common issues include: missing or incorrect amounts reported; the date of birth and start or end dates of the term for all directors are not reported on Form T1235, Directors/Trustees and Like Officials Worksheet; and financial statements not filed with the T3010.
Books and records – Keeping adequate books and records is essential to the sound financial management of a charity, builds trust with the donor community, and is necessary to maintain registered status. Adequate books and records allow the Canada Revenue Agency (CRA) to verify donations made to a charity and to ensure proper use of charitable resources. Inadequate books and records can range from minor oversights on the part of a charity, to very serious infractions, including records that are deliberately altered, destroyed, hidden, or not collected in order to conceal non-compliance.
Donation receipts - Charities often issue receipts with inaccurate or missing required elements. For example, a charity may issue a receipt that fails to show the donor’s address, the name of Canada Revenue Agency and CRA website or a statement that it is an “official receipt for income tax purposes”. Failure to issue receipts properly could lead to consequences for the charity (such as penalties or even revocation) and for the charity’s donors (where receipts can be disallowed).
Non-charitable purposes/ activities - A registered charity must be established and operated for exclusively charitable purposes and devote its resources (funds, staff and property) to its charitable activities.
Charitable activities are those that directly further the charitable purposes for which the charity was registered.
Gifting to non-qualified donees - The Income Tax Act allows a registered charity to use its resources, inside or outside Canada, in one of three ways:
- On its own charitable activities;
- On making gifts to qualified donees; or
- On making grants to non-qualified donees
A charity that merely transfers funds to a non-qualified donee without meeting the definition of a qualifying disbursement, is in violation of the Income Tax Act and may be subject to penalties or revocation.
Slide 22 – Maintaining charitable registration (2/2)
Nicolas: Abusing/misusing tax-receipting privileges
- Lending registration numbers
A charity is responsible for all receipts issued under its name and registration number. It must account for the corresponding donations on its annual T3010 information return and in its books and records. Under no circumstances should a registered charity issue donation receipts on behalf of another organization or lend its registration number to another organization for receipting purposes. A charity that lends its registration number may have its receipting privileges suspended and/or lose its registered status.
- Inflated donation receipt amounts
Issuing a donation receipt with a dollar amount that is in excess of what the charity has actually received as a gift may constitute an abuse of the tax system. However, issuing a donation receipt for an inflated amount is not always deliberate. For example, it can be difficult for a charity to establish the fair market value (FMV) of a non-cash gift. Charities should not rely solely on the donor to estimate the value of a donated item. The amount on the receipt should be the item’s FMV, and if the FMV cannot be determined, the charity should not issue a receipt.
- Conferring private and/or undue benefits
Under the Income Tax Act, a registered charity cannot confer on a person an undue benefit (for example, a transfer of property or other resources of the charity to a person who does not deal with the charity at arm's length or who is the beneficiary of a transfer because of a special relationship with a donor or charity.) . A charity that provides an undue benefit may incur a monetary penalty, have its receipting privileges suspended and/or lose its registered status.
- Tax Shelters
An abusive tax shelter gifting arrangement typically promises individuals that are being asked to participate, tax savings greater than their cost to participate in the scheme, thus allowing them to profit from “donating” to a charity. Charities that knowingly exploit their tax-receipting privileges by participating in schemes that are abusive or fraudulent, or that fail to devote their resources to legitimate charitable activity, will be subject to revocation and/or significant monetary penalties. In addition to penalizing charities involved in these arrangements, the CRA may also apply penalties against those persons who promote such arrangements or who participate in the making of false statements to the CRA.
Slide 23 – Support for charities
Nicolas: And finally, here are some resources to support charities.
Slide 24 – Support for charities
Nicolas: The Charities Directorate offers a number of different tools and services to support charities.
Client service representatives
- Provide guidance to charities on changing their legal name, purposes, activities, and more
- Provide interpretation and technical advice
Digital services
My MyBA is a secure online portal that allows charities to do the following tasks:
- apply to become a registered charity and view application status
- complete and file the annual return and make adjustments
- update information about an organization, including addresses, list of directors, representatives, and other post-registration amendments
- upload supporting documents and correspond with the Charities Directorate
- access payroll and GST/HST accounts, file T4 slips, GST/HST returns, and view the organization's account balance, transactions, and remitting requirements
Tools and resources
- Charities and giving webpages
- Registering for charitable or other qualified donee status
- Operating a registered charity
- Resources for maintaining charitable registration
- Educational videos and other communications products like infographics
- Charities information webinars
- The recently posted 2022-2023 Annual Report where you will find a lot of statistics and information about the program
Electronic mailing list
Subscribers receive updates when new information is added to the website, such as:
- webpages
- guidance or advice on maintaining registered status
- general information for the charitable sector
Thank you so much for attending today’s webinar. We hope we were able to answer your questions.
We will be sending you a link to an online survey about today’s webinar. Please take a few minutes to complete the survey.
Your feedback is really important to us. It helps us evaluate the effectiveness of our webinars and plan for our future outreach activities.
If you would like to receive recent news and updates from the CRA, we recommend you sign up for our electronic mailing list at canada.ca/charities-whats-new.
Thank you.
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