What did the Department of Finance release in early 2026?

In January 2026, the Federal Department of Finance (the “Department”) released draft legislation (the “2026 Draft Legislation”) proposing changes to the reporting requirements for non-profit organizations (“NPOs”) under the Income Tax Act (Canada) and delaying the implementation of these changes to 2027.

The 2026 Draft Legislation increases the revenue thresholds that trigger annual filing obligations and delays the application date of the new rules. The Department has invited public comment on the 2026 Draft Legislation until this Friday, February 27, 2026.

As we reported in our August 28, 2025 article, the Federal Government previously introduced draft amendments (the “2025 Draft Legislation”) to expand NPO reporting obligations. The 2026 Draft Legislation now revises those earlier proposals.

When is an NPO currently required to file the T1044 Return?

Under the current rules, an NPO must file an annual information return known as the T1044 Non-Profit Organization (NPO) Information Return (the “T1044 Return”) if any of the following applies:

  • The NPO’s total passive income in its last fiscal period exceeds $10,000;
  • The NPO’s total assets at the end of the preceding fiscal period exceed $200,000; or
  • The NPO is required to file a T1044 Return for a preceding fiscal period.

The T1044 Return is in addition to the T2 Corporation Income Tax Return that incorporated an NPOs must file.

If an NPO fails to file the T1044 Return when required, penalties may apply.

What changes were proposed in the 2025 Draft Legislation?

The 2025 Draft Legislation proposed that, for fiscal periods beginning on or after January 1, 2026:

  1. NPOs with total gross revenues over $50,000 would be required to file the annual T1044 Return, even if they did not otherwise meet the existing thresholds; and
  2. NPOs that did not meet the thresholds for filing the T1044 Return would be required to file a new, short-form return containing basic organizational information.

In the 2025 Federal Budget, the Government of Canada indicated that it would revisit the proposed changes to the NPO reporting rules, including their scope and timing.

How does the 2026 Draft Legislation change the NPO reporting rules?

The 2026 Draft Legislation introduces two (2) key revisions:

  1. NPOs with total gross revenues over $100,000 (rather than $50,000) would be required to file the annual T1044 Return; and
  2. NPOs that do not meet the thresholds for filing the T1044 Return will be required to file a new, short-form return only if their total gross revenues exceed $10,000 and if they are an “organization”.

These changes are welcome revisions to the 2025 Draft Legislation which would have imposed an administrative burden on all NPOs regardless of size and budget.

Why is this significant to NPOs?

The 2026 Draft Legislation:

  • Doubles the gross revenue threshold for mandatory T1044 Return filing (from $50,000 to $100,000);
  • Introduces a new minimum revenue threshold for filing a short-form return (NPOs with total gross revenues of $10,000 or less would be exempt from filing);
  • Clarifies that for the rules to apply, an association must be an “organization”; and
  • Delays the implementation of the new reporting regime to fiscal periods beginning on or after January 1, 2027, giving further time for NPOs to prepare.

Will small, informal groups be caught by the 2026 Draft Legislation?

The Explanatory Notes to the 2026 Draft Legislation provide commentary on what types of organizations will be required to file the short-form return.

An NPO for the purposes of the Income Tax Act (Canada) includes both incorporated and unincorporated associations. This has raised public concern that small informal groups (such as knitting clubs or recreational associations) could inadvertently be captured by the new reporting regime.

The 2026 Draft Legislation states that an entity must be an “organization” to be subject to the new short-form reporting requirements. The Explanatory Notes state that the filing requirement will not apply to “loosely organized recreational activities” that generally do not constitute a person for tax purposes.

Whether an organization must file the short-form report will depend on whether it demonstrates sufficient organizational structure. Relevant factors may include:

  • A defined purpose;
  • A constitution or by-laws;
  • A particular organizational structure or hierarchy; and
  • Defined governance roles (such as members, directors and officers).

While this commentary is helpful, there may now be confusion over not only when an association is not sufficiently organized to be an “organization” for the short-form reporting requirements but also whether they are sufficiently organized to be an NPO for the purposes of the Income Tax Act (Canada) and caught by the T1044 Return requirements. For example, parent advisory councils, alumni associations or organizations that are branches of larger entities that are unincorporated associations may now need legal advice to determine whether they are subject to the proposed reporting requirements.

Our Social Impact Group will continue to monitor developments and provide updates as the legislation progresses, including whether there are any further revisions prior to implementation of the 2026 Draft Legislation.

If you have questions about how the 2026 Draft Legislation may affect your organization, please contact a member of Miller Thomson’s Charities and Not-For-Profit Group. We would be pleased to assist.