The Report on the Charities Program provides a snapshot of the Canadian charitable sector and an update on the Canada Revenue Agency’s (“CRA”) Charities Directorate’s activities during fiscal year 2020 to 2021. According to the Charities Directorate’s administrative data for 2020, the number of registered charities by designation were as follows: (i) 74,756 charitable organizations; (ii) 6,118 private foundations; and (iii) 4,964 public foundations, amounting to a total of 85,838 registered charities.
In January 2021, the Advisory Committee on the Charitable Sector (the “Advisory Committee”) published its first report which proposed the following three recommendations to the Minister of National Revenue (the “Minister”):
- that the Minister work with the Minister of Finance to remove the “own activities” test for charities from the Income Tax Act (Canada) (the “ITA”), and instead require a focus on resource accountability;
- that the Minister formally request the ITA be amended such that all appeals from decisions by the Directorate shall proceed to the Tax Court of Canada for a de novo hearing, following consideration by the CRA’s Tax and Charities Appeals Branch; and
- that the Minister in collaboration with her Cabinet colleagues, work to create a permanent “home in government” for Canada’s charities and non-profit organizations outside of the CRA.
The Advisory Committee is a consultative forum comprised of representatives from the CRA, the Department of Finance Canada and the charitable sector. The CRA has committed to reviewing the above-noted recommendations which fall within its mandate, and will advise the Minister accordingly.
Registered Journalism Organizations
On January 1, 2020, legislation came into effect extending eligibility for registration as a qualified donee to registered journalism organizations (“RJOs”). Subsequently, on April 17, 2020, the Department of Finance Canada proposed amendments to the journalism tax measures, which were confirmed by the federal government’s Budget 2021. Accordingly, the Directorate has focused on administering and educating potential registrants on the proposed changes to the RJO eligibility criteria.
By way of update, the Charities Directorate registered two journalism organizations for the fiscal year of 2020 to 2021.
Outreach and Education
To assist charities and the public with locating specific information and answers to frequently-asked questions, the Directorate added charities information to the existing CRA “Charlie” Chatbot aid, and incorporated that service on its more regularly visited web pages. The Charlie Chatbot is essentially a computer program which simulates a human conversation through text on the Directorate’s web page. This service offers users a simple and streamlined option to find information pertaining to charitable registration, filing obligations and other resources.
Like many, the Charities Directorate was initially impacted by the pandemic and encountered difficulty in meeting its service standard, which is the Directorate’s commitment to provide an initial meaningful response within six months of receiving an application for charitable registration. However, the Directorate adapted to the challenges imposed by the pandemic, and improved on satisfying its service standard for 13% of its cases in the first quarter of its fiscal year (April to June 2020) to 97% in the fourth quarter (January to March 2021).
Further, the Directorate undertook to conduct a comprehensive review of a sample of applications for charitable registration made between 2009 and 2018 to determine whether the Directorate was correct to request that the applicants make pre-registration amendments to their purposes, dissolution clauses, remuneration clauses, and other provisions in order to qualify for charitable registration.
The review found that the Directorate had often mislabeled acceptable purposes as broad and vague, and accordingly, approximately 34% of amendment requests were not required by the common law. To remedy this shortcoming, the Directorate developed a new training course on charitable purposes and activities for its employees in 2018. This program enabled the Directorate to reduce the number of requests for amendments by 14% from 49% in 2017 to 2018 to 35% in 2020 to 2021.
The Directorate reported the resumption of its compliance program in the fiscal year 2020 to 2021 with an initial focus on resolving open audits and voluntary revocations. In its report, the Directorate affirmed that these efforts represented a temporary shift from its preference for promoting voluntary compliance—through the use of education letters, compliance agreements, and other arrangements—before resorting to audit activity. Going forward, the Directorate has signaled that it will return to its multi-stream approach to promoting voluntary compliance.
Further, commencing in January 2022, the Directorate began to consider methods of improving T3010 reporting to ensure the complete, timely and accurate filing of T3010 as recommended by the Advisory Committee. The Directorate submits that improved T3010 reporting will promote greater accuracy when capturing and sharing charity data through electronic filing, and educate charities about their T3010 filing obligations.
For assistance with charitable registration, contact a member of Miller Thomson’s Social Impact Group.