COVID-19 pandemic economic and tax measures for charities and not-for-profits

April 7, 2020 | Robert B. Hayhoe, Gwenyth Stadig

Canada’s federal government continues to announce new economic measures to help stabilize the economy during the COVID-19 pandemic. Outlined below are the measures announced thus far by the federal government, along with expansions to existing programs, that are available to assist Canadian charities and non-profit organizations (“NPOs”) facing financial challenges during the pandemic.

Deferred tax filings

The Canada Revenue Agency (“CRA”) has extended the deadline to December 31, 2020 for all registered charities to file any Form T3010 that is due between March 18, 2020 and December 31, 2020 in order to give charities more time to complete and submit their annual Registered Charity Information Return.

CRA has also extended the filing deadline for NPOs that are not also charities. The deadline has specifically been extended to June 1, 2020 for NPOs for the filing of their T2 Corporate Income Tax Return and their Form T1044 information return.

However, in light of the need to maintain certain administrative requirements ahead of the June 1, 2020 extended deadline for the filing of individual income tax and benefit returns, the filing deadline for non-charitable trusts has only been extended to May 1, 2020. The deadline to submit any required objections (including ones dealing with charities compliance issues) to the CRA has also been extended from March 18, 2020 to June 30, 2020.

Deferral of sales tax remittance and customs duty payments

Furthermore, the Government of Canada has deferred payment for any sales tax remittance and customs payments to CRA and the Canada Border Services Agency, as is applicable, until June 30, 2020.

What this means is that eligible payments of the Goods and Services Tax/Harmonized Sales Tax (“GST/HST”), as well as customs duties owing on their imports are suspended until June 30, 2020. The deferral will apply to GST/HST remittances for:

  1. the February, March and April 2020 reporting periods for monthly filers;
  2. the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and
  3. for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

Further, there is a suspension on the requirement for GST and customs duty payments for imported goods for amounts owing for March, April and May.

Suspension of audits

The CRA has also announced that the Charities Directorate has suspended all activities until further notice. Consequently, all audits involving charities have been suspended until the Charities Directorate resumes operations. Likewise, post assessment GST/HST audits involving small and medium-sized businesses (which may include NPOs) and audits involving individual taxpayers have been suspended by the CRA for at least the next four weeks, subject to certain exceptions for high risk or exceptional cases.

Charities and NPOs as employers

Charities and NPOs and their employees are eligible for several new federal benefits designed to ease the effect of the COVID-19 outbreak. The recently announced Canada Emergency Response Benefit (“CERB”) will provide a taxable benefit of $2,000 a month for up to four months for workers who have been impacted by COVID-19. Qualified recipients include workers who have lost their job, have been quarantined, have to care for sick family members or have children who require daily care or supervision. Additionally, workers who are still employed but are not receiving income because of disruptions to their work due to COVID-19 also qualify. All Canadians who have ceased working due to COVID-19, whether they are eligible for employment insurance (“EI”) or not, would be able to receive the CERB. The benefit will be administered through the CRA and will be open for applications beginning in April 2020.

Other workers may also qualify for the EI Work Sharing Program, which will provide EI benefits for workers who have agreed to reduce the number of hours they work for up to 76 weeks due to circumstances beyond the control of their employers. Employees of charities and NPOs are not precluded from applying if they meet the specific criteria.

The federal government has further announced a special wage subsidy to prevent lay-offs by employers, including charities and NPOs. Although initially restricted to smaller businesses, any employer who has seen a decrease of 30% or more in their revenues due to COVID-19 may now apply for the subsidy. Originally set at 10% of remuneration paid, the subsidy was subsequently increased to 75% of the first $58,700 earned by employees (or up to $847 per employee per week) and made retroactive to March 15, 2020. This program will additionally allow employers to reduce the remittances of income tax withheld on their employees’ remuneration. The federal government is urging employers to make up the remaining 25% of employee wages not covered by the subsidy and has warned of serious consequences for employers who attempt to take advantage of the program. Of course, there are real questions still on how this will apply.  For example, is the required reduction in revenue based on whole year revenue or simply a monthly 30%?

The CRA has additionally announced that employers are not required to comply or remit on existing requirements to pay until further notice.

Extending access to credit

The Government of Canada also established a Business Credit Availability Program to provide $65 billion of additional support. The new Canada Emergency Business Account is a part of this program and is designed to provide interest-free loans of up to $40,000 to qualified  organizations, which include not-for-profits, to help cover their operating costs during a period where revenues have been temporarily reduced. A not-for-profit organization’s ability to qualify relates to the payroll they paid in 2019.

Earmarked funding for shelters and Indigenous communities

Certain charities and NPOs may qualify for federal funding that has been earmarked for organizations serving homeless and other at-risk populations. The recently announced Providing the Reaching Home initiative has pledged $157.5 million to support Canada’s homeless population during the COVID-19 pandemic. Potential uses of the fund include the purchasing of additional beds and physical barriers to help maintain social distancing and reduce overcrowding in homeless shelters. Another $50 million in funding has also been reserved for women’s shelters and sexual assault centres, including organizations serving Indigenous communities, to help mitigate potential outbreaks in their facilities. Indigenous communities are also set to receive $305 million from the Indigenous Community Support Fund to help address immediate concerns related to COVID-19 in First Nations, Inuit and Metis communities. Each of these funds will be implemented by April 2020, subject to receiving Royal Assent.

 

Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.

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