The T3010 requires charities to report grants made to non-qualified donees. The T1441 requires charities to report detailed information about grants made to non-qualified donees. You must use the updated version of the T3010 unless you have already filed a return for your charity’s fiscal period end. If you have already filed, you don’t have to refile.

*UPDATED* T3010 Registered Charity Information Return

Section C relates to your charity’s programs and general information. New section C16 addresses qualifying disbursements.

You must answer:

• Whether your charity made qualifying disbursements by way of grants to non-qualified donees (grantees) in the fiscal period (line 5840);
• Whether the grants your charity made to any grantees totaled more than $5,000 in the fiscal period (line 5841);
• The number of grantees that received grants less than $5,000 in the fiscal period (line 5842); and,
• The total amount paid to grantees that received grants totaling less than $5,000 in the fiscal period (line 5843).

If your charity made grants to any grantees totalling more than $5,000 in the fiscal period, you have to complete Form T1441.

*NEW* T1441 Qualifying Disbursements: Grants to Non-Qualified Donees

The new T1441 Form requires charities to provide more detailed information about grants made to non-qualified donees, and the grant recipients (grantees), including:

• Name of grantee
• Purpose of the grant
• Amount of non-cash disbursements
• Amount of cash disbursements
• If outside of Canada, the country where the activities were carried on

Each grant must be reported individually, and all grants disbursed in the fiscal period must be reported even if the grant activities aren’t complete.

What about the guides?

CRA’s Guide T4033, Complete Form T3010 Registered Charity Information Return has not yet been updated, but CRA has noted it will “in the near future” and it “will provide instructions on how to complete the [revised] T3010 and T1441.”

We are also waiting for CRA to release its updated guidance, CG-032, Registered charities making grants to non-qualified donees which is currently still in draft form. We understand that the revised CG-032 is a high priority for CRA, but we do not yet have a release date. In terms of reporting, the draft guidance (para 80) explains that:

A charity can apply to the CRA to make a special request that certain information not be made available to the public if its release would place the charity, grantee, their staff, or volunteers in danger.

This has been one significant concern for charities that want to make grants. We will have to wait for the final guidance to see whether there is additional clarity and certainty on this application, how they will be assessed, how application is made, etc.

CCCC Fillable T3010 – Updated & Ready!

Did you know that CCCC has a CRA-approved fillable, saveable T3010 to help you with your filing?

We’ve already made updates to Section C, added the new Form T1441, and received approval from CRA, so it is updated and ready for you to use!

Want More Info?

If you’re looking for more information on qualifying disbursements (and the developments that led up to this change), check out these resources…

Blog Posts

CRA Draft Guidance on Making Grants to Non-Qualified Donees

Bill C-19 Has Passed – Impact on Direction and Control (27 June 2022)

Direction and Control – Advocacy Update, Bill C-19 Amendments (6 June 2022)

Direction and Control – Advocacy Opportunity (26 May 2022)

Budget Implementation Act, Bill S-216 and Direction & Control (6 May 2022)

Update: Bill S-216 on Direction and Control (3 March 2022)

Bill S-216 on Direction and Control – Different Name, Same Aim (9 December 2021)

What’s Happening with Bill S-222? (30 June 2021)

Bill S-222: From Direction and Control to Reasonable Steps (10 February 2021)

Knowledge Base & Webinars

For more information on direction and control, see our Resource Page in CCCC Knowledge Base and our webinars Making Grants and the New Rules for Charities and our Fireside Chat where we provide an overview and assessment of qualifying disbursements along with answers to many of your questions.

The post CRA Updates T3010, Adds New Form T1441, for Qualifying Disbursements appeared first on CCCC Blogs.

Making Grants to Non-Qualified Donees – New Rules

Since June 23, 2022, charities have been legally allowed to make grants to non-qualified donees. This is due to legislative changes that, among other things, added the term “qualifying disbursements” to the Income Tax Act (ITA). For more details, see our post Bill C-19 Has Passed.

The ITA requires that for every grant over $5,000, the granting charity must report the name of the grantee, the purpose of the grant, and the total yearly amount granted to the grantee.

Reporting Grants to Non-Qualified Donees – Not Yet Required

Until the T3010, Registered Charity Information Return and the accompany guide T4033, Completing the Registered Charity Information Return are updated, you are not required to report your granting activities.

The T3010 and T4033 are being updated now. The CRA anticipates a spring 2023 release date.

Books and Records  – Still Required!

Even though CRA has clarified that you don’t have to report your granting activities (yet!), the CRA is also very clear that charities must keep adequate books and records to support all granting activities:

“Your books and records must contain enough information to allow the CRA to assess whether your charity is operating in accordance with the Income Tax Act.”

Of course, the books and records requirement applies all the time, to all of your charity’s operations. They must be sufficient to show your charity complies with applicable legislation.

Guidance CG-032, Registered charities making grants to non-qualified donees (DRAFT)

As we discussed in an earlier blog post, the CRA released draft guidance on making grants to non-qualified donees (November 2022). The formal deadline to submit your feedback is January 31, 2023.

Grants in The Green

We’ve got a space in The Green where you can chat with other charities about grants and working with non-qualified donees.

The post Making Grants to Non-Qualified Donees? CRA Clarifies Reporting Obligations appeared first on CCCC Blogs.

S-222 would allow charities to transfer resources to non-qualified donees, eliminate all references to “own activities” and instead require charities to take reasonable steps to ensure the resources will be used exclusively for charitable purposes

On February 8, Bill S-222 An Act to Amend the Income Tax Act (use of resources) was introduced in the Senate. It proposes to significantly change how charities are allowed to use their resources by allowing transfers to non-qualified donees.

It would accomplish this through a few key changes.

1.Permit resource transfers by redefining charitable activities

“Charitable activities” would be redefined to include making resources available to non-qualified donees. Resources could be made available through grants, gifts or transfers through any form of collaboration so long as it furthers a charitable purpose and reasonable steps are taken to ensure the resource are used exclusively for that charitable purpose.

Right now, the definition of “charitable activities” simply clarifies that public policy dialogue and development activities are considered charitable activities when they further a charitable purpose.

2.Remove the “own activities” test

The Income Tax Act (ITA) currently requires that charitable organizations devote all of their resources to charitable activities carried out by the organization itself. The “own activities” test is how the Canada Revenue Agency (CRA) determines whether or not a charity is doing that. To meet the own activities test, a charity has to either directly carry out its own activities or exercise sufficient direction and control when working with an intermediary (non-qualified donee).

The Bill would remove the own activities test by deleting all references to charitable activities being “carried on by the organization itself,” “carried on by it,” and other similar phrasing. The definition of “charitable organization” is a good example.

Another example comes from one of the grounds the Minister can use to revoke an organization’s charitable registration:

3.Require reasonable steps

If a charity doesn’t have to carry out its own charitable activities and doesn’t have to exercise direction and control over an intermediary, what does a charity have to do?

A charity would have to take “reasonable steps to ensure its resources are used exclusively for charitable purposes.” This standard would be met if

• Before providing resources to a non-qualified donee, the charity collects information, including information about:
  • the identity of the recipient
  • the experience of the recipient
  • the activities of the recipient
• When providing resources to a non-qualified done, the charity
  • Establishes measures, or
  • Imposes restrictions or
  • Conditions, or
  • Otherwise takes actions

Both categories of information must be sufficient to satisfy a reasonable person that the resources will be used for a charitable purpose.

It is proposed that the Bill would come into force two years after it receives royal assent (i.e. is passed by the House of Commons and the Senate). It is also proposed that the Minister of National Revenue would have to undertake a review of the changes within 5 years of its coming into force, with one year to complete and present the report to Parliament.

Discussion

This Bill has the potential to massively change how charities function. Of course, with any significant change, there will also be a lot of questions.

For example, one big question that the legislation does not answer is how the proposed reasonable person standard will be applied and interpreted by CRA in its administrative guidance. We have seen that “carried on by the organization itself” led to “own activities” and “direction and control.”

While the categories of information needed to satisfy the reasonable person are set out in the proposed legislation, these will need to be fleshed out into tangible, practical guidance for charities. To that end, we’d love to hear from you. Does this change help you? In what ways? Does this change challenge you? In what ways? What guidance do you think would be helpful to understanding the reasonable person standard? What parameters should or could be built on the framework set out in the Bill? And taking a step back, are there amendments that should be considered in the Bill?

For an overview and background of the Bill, and an outline of support for the changes, you can check out Carters Charity & NFP Law Bulletin (24 February 2021). And for a different take on the Bill and the current direction and control framework, you can check out this post from Blumberg’s Canadian Charity Law blog.

We’ve created a space for member discussion in our online community, The Green. It’s open and ready for visits and conversation – we look forward to hearing from you!

The post Bill S-222: From Direction and Control to Reasonable Steps appeared first on CCCC Blogs.