CCRA AND CHARITIES: WHAT’S NEW?
A Summary of Developments from June 2002 through March 2003
By R. Johanna Blom and Terrance S. Carter
This Charity Law Bulletin is provided as a brief summary
of resource materials made available from and initiatives taken
by the Charities Directorate of Canada Customs and Revenue Agency
(CCRA) between June 2002 and March 2003. It is not intended
to constitute either a thorough review or an analysis of any
of the documents and resources available. Instead, the Bulletin
is meant to point out some of the more important developments
that charities should be aware of on the CCRA web-site and to
direct charities to resources from CCRA that could be of assistance
in navigating their on-going relationship with CCRA. Most of
the matters discussed in this Bulletin are available on the
web-site of CCRA.
B. WHAT’S NEW
1. Future Directions
In September 2002, CCRA released a report entitled Future
Directions for the Canada Customs and Revenue Agency (“Future
Directions”), which is the culmination of 18 months of consultations
with Canadians intended to determine how CCRA can improve service
and strengthen compliance. The key to strengthening CCRA and
its relationship with its clients as identified by the Future
Directions report is to develop a client-centred approach
by targeting CCRA’s services and verification activities to
the needs and character of its different constituencies.
The needs of charities differ from those of CCRA’s other constituencies,
namely small and medium enterprise, large business, and individuals.
In Future Directions, CCRA promises to build a stronger
relationship with charities through streamlining its procedures
and “making dealings with the CCRA simpler, more timely, and
easier to understand.” CCRA will focus on enhancing electronic
services, transparency, compliance, and cooperation with the
voluntary sector. To this end, CCRA has started by updating
its web-site and making various documents and forms available
on-line. A number of these are discussed later in this issue
of the Charity Law Bulletin.
The full Future Directions report is available at: http://www.ccra-adrc.gc.ca/agency/directions/report_sept-e.pdf
and a summary is available at http://www.ccra-adrc.gc.ca/E/pub/xi/rc4313/rc4313-e.pdf.
A brochure explaining how this report is relevant specifically
to charities is available at: http://www.ccra-adrc.gc.ca/E/pub/xi/rc4313/rc4313-e.pdf.
2. Voluntary Sector Initiative – Joint Regulatory Table
The Joint Regulatory Table is an advisory body created under
the Voluntary Sector Initiative, a joint undertaking by the
Government of Canada and the voluntary sector to examine ways
to improve the relationship between the voluntary sector and
the government, enhance the capacity of the sector to serve
Canadians, and improve the legislative and regulatory environment
in which the voluntary sector operates. The Joint Regulatory
Table released its interim report, Improving the Regulatory
Environment for the Charitable Sector, on August 7, 2003.
The recommendations included in the report focus on four areas:
accessibility and transparency of the regulatory regime for
charities, refining the sanctions regime for non-compliance
by charities, improving the process for appeals from decisions
by CCRA, and institutional reform of the regulatory regime.
The Joint Regulatory Table held consultations on its recommendations
through September and October, 2002. Its final recommendations
are expected at the end of March, 2003.
The interim report is available on the Voluntary Sector Initiative’s
website at: http://www.vsi-isbc.ca/eng/joint_tables/regulatory/reports.cfm.
3. Related Business Consultation
CCRA is currently examining the results of a consultation on
policy guidelines for registered charities regarding related
businesses. The purpose of the consultation is to clarify how
CCRA interprets the law with regard to charities engaging in
related businesses. The consultation document points out that
while the Income Tax Act (Canada) contains a broad definition
of “business”, it does not adequately define what is considered
a related or unrelated business in the context of charities.
CCRA is proposing to define “business” in the charitable context
as “commercial activities, or more precisely, the seeking of
revenue by providing goods and services to people in exchange
for a fee”. According to CCRA, this would serve to keep charitable
programs out of the broad definition of business used in the
rest of the Income Tax Act and also make it easier for
charities to determine how to interpret their disbursement quota
and income from investments. According to the policy document,
the related business provisions would only involve a part of
charities’ activities, because “the ITA only covers situations
involving the ‘carrying on’ of a business, a term that has a
particular and established meaning in tax legislation”. The
policy proposal also attempts to further clarify some activities
that are engaged in by charities that are not considered “carrying
on a business”. A Charity Law Bulletin commenting upon
this policy in greater detail will be forthcoming.
The consultation document, Guidelines for Registered Charities
on Related Business, is available at: http://www.ccra-adrc.gc.ca/tax/charities/consultations/related_business-e.html.
A revised proposal on related business may be released by CCRA
in the near future.
4. 2002 Concept Draft – Registered Charities – Political
A concept draft for an Information Circular regarding charities
and political activities is open for comment and the consultation
period has been extended to April 30, 2003. Raising public awareness
is often a necessary and important part of charitable activities,
but there is a fine line between raising public awareness and
engaging in political activities, which is not charitable. The
concept draft seeks feedback from the charitable sector in order
to develop an Information Circular to give direction to charities
regarding how to reconcile their public awareness activities
with the requirement not to engage in political activities.
Aside from the technical application of CCRA’s interpretation
of political activities and the Income Tax Act, the draft
examines issues such as the nature of political activity and
communication activity, and the difference between education
as a charitable purpose on the one hand and public awareness
campaigns on the other. As well, the draft provides a number
of hypothetical scenarios intended to illustrate the distinctions
between charitable activities, and prohibited and permitted
The draft is available at: http://www.ccra-adrc.gc.ca/tax/charities/consultations/political_activities-e.html.
5. Consultation on Proposed Policy: Registering Charities
that Focus on Eliminating Racial Discrimination
Open for comment until March 31, 2003 is a consultation paper
on CCRA’s policy with regard to registering charities that focus
on eliminating racial discrimination, including organizations
whose goals are anti-racism, as well as those devoted to promoting
positive race relations in Canada. The consultation paper examines
the rationale behind the acceptance of eliminating racial discrimination
as a charitable ground and examines how this would fit under
the heads of advancement of education and other purposes beneficial
to the community. It also provides examples of acceptable wording
of charitable objects. Appendices compare the Canadian approach
to the U.S. and U.K. approaches and examine the policy, legislative,
and judicial contexts related to racial equality.
The consultation paper, Registering Charities that Focus
on Eliminating Racial Discrimination, is available at: http://www.ccra-adrc.gc.ca/tax/charities/consultations/eliminating_discrimination-e.html.
6. Draft Technical Amendments
On December 21, 2002, the Department of Finance released legislative
proposals relating to changes to the Income Tax Act that
will affect registered charities. According to CCRA’s web-site,
these technical amendments will provide more transparency for
registered Canadian amateur athletic associations, clarification
about the fact that charities cannot disburse funds to non-qualified
donees, changes to the definitions that will make the “private
foundation” designation more limited, and changes to implement
the proposals regarding split-receipting as discussed in the
next section. A Charity Law Bulletin commenting upon
these technical amendments will be forthcoming.
More information about the changes can be found at the Department
of Finance web-site at: http://www.fin.gc.ca/news02/02-107e.html.
7. Proposed Guidelines on Split-Receipting
The Income Tax Technical News Issue 26 sets out CCRA’s Proposed
Guidelines on Split-Receipting, which form the basis of
the draft technical amendments to the Income Tax Act
released on December 21, 2002 (referred to section 6, above).
The split-receipting guidelines are intended to clarify CCRA’s
treatment of donations where the donor receives some form of
advantage in return for a donation. The guidelines focus on
the “donative intent” of the donor. In order to determine donative
intent, there must be a voluntary transfer to the donee of property
with an ascertainable value, the value of any advantage received
by the donor must be ascertainable, and there must be a “clear
donative intent to enrich the donee”. The amount of a gift that
is eligible for a charitable receipt would be the amount of
the gift that exceeds the value of the advantage, while an advantage
below a certain threshold would be disregarded.
Issue 26 of the Income Tax Technical News is available at:
8. Memorandum: Donations of Gift Certificates
Another issue that CCRA has sought to give direction on is
whether or not charities can issue charitable tax receipts for
donations of gift certificates. A memorandum from the Director
General of the Charities Directorate dated October 9, 2002 discusses
possible scenarios in which a charity might receive a gift certificate
as a donation and how the different events should be treated.
Each individual case would have to be examined on its own facts.
Determinative factors would include the circumstances under
which the charity received the gift certificate and how it dealt
with the donation. Questions that would be asked include who
donated the gift certificate and how did the charity deal with
the certificate; in other words, did the charity redeem the
certificate itself or pass it on to someone else (for example
as a prize in a raffle).
The memorandum is available at: http://www.ccra-adrc.gc.ca/tax/charities/policy/gift_certificates-e.html.
9. Fact Sheet: Art Donation Schemes
Art donations are a popular and legitimate way for donors to
donate property to charities. However, a fact sheet released
by CCRA in November 2002 warns individuals and charities against
certain art donation schemes, otherwise known as art flipping.
A donor purchases a work of art by a promoter, donates the artwork
to a charity and receives a receipt for an appraised value much
higher than the original purchase price. Donors making a claim
for an inflated donation receipt could be subject to penalties
and the recipient charity or institution can be subject to penalties
or de-registration if it knew, or should have known, that the
appraisal was inflated.
The fact sheet is available at: http://www.ccra-adrc.gc.ca/newsroom/factsheets/2002/nov/art-e.html.
10. New On-line Services
One of the new services available on CCRA’s redesigned website
that will be of interest to charities and their legal advisors
is the availability of some of CCRA’s policy documents on-line.
These documents include summary policies and technical documents.
The summary policies are short synopses, usually only one or
two paragraphs, of CCRA’s position on different issues related
to charities or definitions of terms as used by CCRA. The technical
documents are longer documents that examine CCRA’s position
in greater detail with regard to the implementation of the Income
Tax Act in its dealings with charities. The documents address
various topics arranged according to three subject areas, specifically
Becoming a Registered Charity, Operating Day-to-Day,
and Keeping your Registered Status. The availability
of these documents is a welcome improvement to the CCRA’s service
to charities and will be of assistance to charities and their
legal advisors in understanding CCRA’s position and their rights
and obligations. The policy documents are accessible by clicking
on “Policy” on the Charities menu anywhere in the Charities
web-site or by going directly to: http://www.ccra-adrc.gc.ca/tax/charities/policy/policy-e.html.
As part of CCRA’s commitment to increased transparency and
accessibility, the Agency has made various documents of public
record available on its internet site. Information returns submitted
by charities are now available on-line, save and except for
any portions of the return designated as confidential (cf. sections
B and I of the return). Charities would be well advised to ensure
the accuracy of their reporting when completing their returns
and to verify their records on-line to ensure that the information
available to the public is correct. However, the overall effect
of this service will be a positive development, as it will enable
the public to better access information about charities and
evaluate their work and effectiveness when deciding what charities
to support. The annual returns are available by accessing the
charity through a searchable list of Canadian charities available
A list of newly registered charities and recently revoked charities
(covering the last 12 months) is also available at the same
11. Shortened T3010 Information Return
CCRA has re-designed the Registered Charity Information
Return (Form T3010) to make it shorter (four pages) and
simpler to complete. The new T3010A was made available on CCRA’s
web-site on February 28, 2003 and is to be used by any charity
with a year-end on or after January 1, 2003. The new T3010A
and the Registered Charity Basic Information sheet are
available at: http://www.ccra-adrc.gc.ca/tax/charities/about_t3010-e.html.
Assistance in completing the T3010A is available in brochure
T4033A, Completing the Registered Charity Information Return,
Changes to the T3010 and the Registered Charity Basic Information
sheet can be made using Form T1240, Registered Charity Adjustment
Request, available at: http://www.ccra-adrc.gc.ca/E/pbg/tf/t1240/t1240-02e.pdf.
12. Advance Passenger Information
One item that may be of concern to some charities is the Advance
Passenger Information/Passenger Name Record (API/PNR) program,
which was scheduled to be implemented by CCRA in October 2002.
This program has been introduced in the context of increased
concern for public safety and security as a part of the federal
government’s anti-terrorism initiative. However, the program
may have much broader application. The API/PNR program involves
CCRA maintaining a database of specific information gathered
from airlines about all airline passengers entering Canada.
According to CCRA’s website, this information will be kept for
six years and “allow Customs to identify known criminals, track
terrorists, and prevent other threats to Canadians when it is
run through law enforcement databases”. The information will
be analyzed in order to track and arrest known criminals and
terrorists and to identify potential criminals and terrorists
by examining travel patterns.
More information about the database is available from CCRA
and commentary is available from the federal Privacy Commissioner’s
website at: http://www.privcom.gc.ca/media/mc-ki-api_e.asp.
Many substantive and useful resources are now available on
CCRA’s website with which charities will need to become familiar.
As a result of CCRA’s continuing commitment to improve its services
to the charitable and voluntary sector, charities and their
legal advisors will now need to be diligent in keeping current
with the many CCRA initiatives in this regard.