A. INTRODUCTION
The Canada Revenue Agency ("CRA") released the
Summer 2007: Registered Charities Newsletter No. 28 ("Newsletter")
in August of this year.1 This
Newsletter focuses on information with respect to public education
and compliance issues within the regulatory environment for
charities. It also addresses legislative changes that have
been implemented with respect to re-registration, the objection
and appeals process for charities and capital gains exemptions
on gifts of securities.
B. SUMMER 2007: REGISTERED CHARITIES NEWSLETTER NO. 28
1. New Electronic Mailing List
The CRA encourages charities and their officers, directors,
and employees to subscribe to the Charities Directorate's
"What's New Electronic Mailing List" ("EML").
This is a free service offered by the CRA to "…support
sustainable development, to provide timely and up-to-date
information, to remain fiscally responsible, and to ensure
continued compliance by both the charities sector and the
public."2
Those who sign up for the EML will be "…notified
by email about new policy statements and commentaries, draft
guidelines for consultation, new calls for proposal for the
Charities Partnership and Outreach Program, various outreach
activities, the Charities Newsletter, and substantial changes
or new information added to the Charities Directorate Web
site."3
Anyone interested in subscribing to the EML can do so at
the following web site: http://www.cra.gc.ca/eservices/maillist/subscribecharities-e.html
2. Registration Statistics
The CRA reported preliminary statistics on registration and
denials of charities as a result of a recommendation by the
Joint Regulatory Table4 to establish
a policy of denying applications where applicants "…do
not respond within ninety days to communications from the
regulator."5
The CRA implemented this policy effective June 13, 2005.
The statistics illustrate a marked increase in turn down letters
following the execution of this policy compared to the previous
year. In the 2005/2006 fiscal year, fifty-two applications
for charitable status were turned down. In comparison, three
hundred and twenty-six applications were denied in 2006/2007,
more than a 6 fold increase. As a result, it will be very
important for organizations applying for charitable registration
to ensure that they have responded to communication from CRA
within 90 days.
3. New Re-Registration Process
Charities that fail to file their annual information return,
Form T3010A, within the prescribed six months following their
fiscal year end, are subject to the revocation of their charitable
status, but are able to apply for re-registration in accordance
with a new re-registration requirement of a $500 penalty imposed
by CRA. This new re-registration requirement comes as a result
of a recommendation by the Joint Regulatory Table6
providing for a $500.00 late filing penalty to charities.
At the present time, CRA has decided to only implement the
aforementioned penalty when the charity is applying for re-registration
as opposed to at the time of revocation.
As has been the case for any charity that has lost its charitable
status for failure to file in the past, it may apply for re-registration
by providing all missing annual information returns, as well
as Form T2050, Application for Registration.
4. The Objection and Appeals Process for Charities
The CRA provides an overview of the new appeals process for
charities contesting a CRA decision. This will have a significant
impact on charities, as the objections process is now mandatory
prior to making an appeal to court. Charities challenging
a CRA decision are no longer limited to an appeal at the Federal
Court of Appeal. Charities now have access to the existing
appeals process used by other taxpayers.
The Newsletter states that the Charities Redress Section
in the Appeals Branch of the CRA will now process all objections
by charities pertaining to the following notices issued by
the CRA after June 12, 2005:
The Newsletter advises, that where a charity contests that
the CRA has failed to interpret the facts or to apply the
law correctly, it can object by submitting a written objection,
which sets out all reasons and relevant facts, to the Appeals
Branch, no later than ninety days after the mailing date of
the notice. The CRA also details that where a charity does
not file its objection on time, due to circumstances beyond
its control, the charity can apply for an extension for up
to one year following the original ninety day limit.
The Newsletter states that for the first four CRA notices
listed above, if a charity disagrees with the decision on
its objection, it can appeal to the Federal Court of Appeal,
but must do so within thirty days of the Appeal Board's decision.
For the last two notices listed above, a charity must appeal
an objection decision to the Tax Court of Canada within ninety
days of the Appeal Board's decision. However, no appeal can
be made either to the Tax Court of Canada or the Federal Court
of Canada without going through the new objection process.
5. Capital Gains Exemption on Gifts of Securities
The Newsletter also discusses the federal government's budget
initiatives in 2006 and 2007 which have resulted in the complete
elimination of the capital gains tax on gifts of publicly
listed securities and ecologically sensitive land to charitable
organizations and public foundations, as well as the elimination
of the taxation of capital gains arising from donations of
publicly-listed securities to private foundations.
The Newsletter highlights the following helpful links on
the CRA website relevant to capital gains exemptions on gifts
of securities:
6. New Fillable T3010A, Registered Charity Information
Return
The Newsletter announces the Charities Directorate's initial
step towards providing charities with the opportunity to file
their annual information return electronically through its
explanation of the newly developed fillable T3010A, which
is currently available on the Charities Directorate's website
at http://www.cra-arc.gc.ca/E/pbg/tf/t3010a/t3010a-fill-05e.pdf.
Although the fillable form cannot be filed electronically
as of yet, charities are able to enter their information into
the return on their computer prior to printing it and submitting
it to the Charities Directorate by mail.
When completing the form online, charities will be able to
access help functions, links to Guide T4033A - Completing
the Registered Charity Information Return and prompted instructions
assisting the user with specific actions. Charities should
be aware that they will be unable to electronically save information
entered into the fillable form for future use without an advanced
version of the Adobe Acrobat software.
For additional information on fillable forms, charities can
visit the Charities Directorate website at http://www.cra.gc.ca/formspubs/fillable/help-e.html.
C. CONCLUSION
Charities will find that this CRA Newsletter provides helpful
direction on a range of important issues, especially with
respect to the new re-registration requirement, objection
and appeals process and capital gains exemptions on gifts
of securities. All charities should give careful consideration
to CRA's various guidelines found in their newsletters available
at: http://www.cra-arc.gc.ca/tax/charities/newsletters-e.html.
Other summaries of recent CRA newsletters can be found at
www.charitylaw.ca.
1 CRA, Registered Charities Newsletter No.
28, online: http://www.cra-arc.gc.ca/E/pub/tg/charitiesnews-28/charitiesnews-28-e.html.
2 Supra note 1 at 3.
3 Supra note 1 at 3.
4 This group was comprised of representatives of
the government and voluntary sector. Their work culminated
in Regulatory Reform Final Report: Strengthening Canada's
Charitable Sector, which can be found on the Voluntary
Sector Initiative's website at: http://www.vsi-isbc.ca/eng/regulations/jrt_finalreport/index.cfm.
5 Supra note 1 at 4.
6 Supra note 4.
7 Supra note 1 at 5.
