On January 8, 2024 the Canada Revenue Agency (“CRA”) released its latest version—the 24th version—of Form T3010 (Registered Charity Information Return).
Registered charities do not pay federal income tax but they must all complete Form T3010 annually and submit it within six months of the end of their fiscal period.
The latest version of Form T3010 reflects some new rule changes. It also contains new reporting requirements that Parliament had earlier promised to implement.
Small updates: qualifying disbursements and 10 year gifts
There are several small updates in the new T3010.
First, the latest T3010 takes into account the new qualifying disbursement rules introduced in the Income Tax Act and the CRA’s recently released administrative guidance on those rules (you can read our initial summary of the guidance). For instance, the definition of “Programs” in Section C has been updated to include qualifying disbursements that the charity makes through gifts to qualified donees or grants to non-qualified donees.
Second, the newest T3010 also removes the references to 10-year gifts. Previously, the T3010 required charities to state the value of all 10-year gifts that it had included under lines 4100 to 4170 (namely, the charity’s assets from sources such as cash, amounts receivable, investments, land, etc.), as well as under lines 4500, 4510 to 4575, 4630, and 4650 (namely, the revenue that the charity received from sources such as other charities, governmental bodies, etc.). Charities will no longer have to list the value of all 10-year gifts included under its assets or revenue.
Charities must report on disbursement quotas
The latest version of Form T3010 introduces some new reporting requirements. Parliament had signaled in 2022 that the CRA would be increasing its collection of data from charities (read our article for more information). Specifically, it is seeking information about whether charities are meeting their disbursement quota obligations and information related to investments and donor advised funds held by charities.
All charities are subject to the disbursement quota. A disbursement quota is the minimum amount that a registered charity is required to spend each year on its own charitable activities and/or on qualifying disbursements through gifts to qualified donees or grants to non-qualified donees.
Under the new T3010, charities must complete a new Schedule 8 and provide information on their disbursement quotas if, in the 24 months before the start of the fiscal period, the average value of the charity’s property (including cash, investments, capital property, or other assets) that it did not use on charitable activities or administration:
(a) exceeded $100,000 (if the charity is designated as a charitable organization); or
(b) exceeded $25,000 (if the charity is designated as a public or private foundation).
To complete Schedule 8, the charity must first determine its disbursement quota obligation for the current fiscal period, and then estimate its disbursement quota obligation for the next fiscal period, using the Form’s calculations.
To perform this calculation, charities will need to provide:
- the average value of property that the charity did not use on charitable activities or administration;
- the amount of any accumulated property (if permission to accumulate property has been granted) less all disbursements made for the specified purpose;
- the total expenditures on charitable activities;
- the total amount of grants made to non-qualified donees; and
- the total amount of gifts made to qualified donees in the fiscal period.
If, after crunching the numbers, a disbursement quota shortfall exists, the charity can draw on disbursement excesses from the five previous fiscal periods to help cover this shortfall. If there are no excesses available to draw on, the charity can try to spend enough in the next fiscal period to create an excess that it can carry back to cover the shortfall.
The amount shown at the end of the calculation under Step 2 of the Form is the charity’s estimated disbursement quota obligation for its next fiscal year.
Charities must report on donor advised funds
A donor advised fund (“DAF”) generally refers to a fund segregated into donors accounts, owned and controlled by the charity. Each account is comprised of contributions made by individual donors. Donors may provide ongoing non-binding suggestions on payouts from DAFs, but it is the charity’s sole responsibility to make such decisions.
In the new T3010, charities must provide details about any DAFs they held during the fiscal period, specifically:
- the total number of accounts held at the end of the fiscal period;
- the total value of accounts held at the end of the fiscal period;
- the total value of donations to DAF accounts received during the fiscal period; and
- the total value of qualifying disbursements from DAFs during the fiscal period.
Foundations must report on restricted funds
Restricted funds are funds tied to a specific use and not available for the general purposes of the organization.
Under Schedule 1 of the new T3010, a foundation must indicate the total value of all restricted funds that it held at the end of the fiscal period, and the amount of the restricted funds that the foundation was not allowed to spend due to a funder’s written trust or direction.
Which version of the T3010 should you file?
Charities must complete and file the correct version of Form T3010 because the CRA will not accept older or incorrect versions of the T3010. If the CRA does not receive a correct return, it may revoke the charity’s registered status.
That said, introducing a new T3010 can potentially confuse many charities. For this reason, the CRA has gotten ahead of the issue and clarified which versions of the T3010 charities should complete:
- Charities with fiscal periods ending on or before December 30, 2023 should file their T3010 using version 23 (the previous version).
- Charities with fiscal periods ending on or after December 31, 2023 should file their T3010 using the new version 24.
It is critical for charities to familiarize themselves with the latest version of Form T3010 and its new reporting requirements to remain in compliance. Should you have any questions about the new T3010 and its new requirements, we invite you to speak with a member of Miller Thomson’s Social Impact Group.