New Privacy Disclosure in T2050 Application to Register a Charity Under the Income Tax Act
On February 21, 2017, Canada Revenue Agency (“CRA”) updated the T2050 Application to Register a Charity Under the Income Tax Act, the application form that must be completed and submitted to CRA when applying for charitable registration.
The Form T2050 has a new privacy disclosure on the last page indicating that personal information is being collected under the authority of the Income Tax Act (the “Act”) in order to validate the identity and contact information of directors, officers and authorized representatives of the applicant organization. The information is also used as a basis for the indirect collection of additional personal information from other internal and external sources, which includes social insurance numbers, personal tax information, and relevant financial and biographical information, which may be used by CRA “to assess the overall risk of registration with respect to the obligations of registration as outlined in the Act and the common law.”
The disclosure states that where the application for charitable status is approved, CRA is permitted to make the form (including any attachments) and copies of the registration letter (including any conditions and warnings contained therein) available to the public, with the exception of the confidential information in Part 5 and Part 6 of the Form T2050. If registration is denied, the information will not be provided to the public. Personal information may also be shared with other government departments and agencies under information-sharing agreements, which may include RCMP, CSIS, as well as foreign governments and agencies in accordance with section 241 of the Act.
The CRA privacy disclosure encourages applicant organizations to voluntarily inform directors and officers that their personal information has been collected and disclosed to the CRA for the application process. There is also a requirement that those signing the T2050 on behalf of the applicant confirm they have read the said privacy disclosure.
New Online Interactive Tool to Compile Checklist of Documents to be Included with Applications for Charitable Status
On February 8, 2017, CRA updated its webpage entitled “How to apply for charitable registration” by including a new online interactive tool that helps applicants compile a personalized checklist of documents that need to be filed with the Form T2050, Application to Register a Charity Under the Income Tax Act. The interactive tool guides users through a series of questions, the answers to which are used to electronically generate a checklist of documents to be submitted with the Form T2050 to CRA based on the particular circumstances of the applicant. Other resources to guide applicants who wish to register for charitable status are available on the CRA webpage and can be accessed by clicking here.
CRA’s New Cause-related Marketing Webpage
On February 11, 2017, CRA introduced a new webpage to explain Cause-related Marketing, which was further updated on February 21, 2017. In general terms, cause-related marketing is stated by CRA to be a fundraising activity where a registered charity (or other qualified donee) works with a for-profit entity to promote the sale of the for-profit’s items or services on the basis that part of the revenues will be donated to the registered charity.
The benefit that the for-profit entity receives under the arrangement is considered an advantage. In order for a registered charity to issue an official donation receipt for a donation, the charity must first be able to calculate the value of any advantage the donor (e.g. the for-profit entity) received. The value of the advantage to a donor is normally subtracted from the amount of the donation in order to calculate the eligible amount of the gift for purposes of the official donation receipt.
However, some advantages are considered by CRA as too minimal to affect the value of a gift. If the value of all advantages related to a gift is not more than $75 or 10% of the amount gifted to the charity (whichever is less), the charity does not need to subtract those amounts from the gift amount when issuing a receipt. It should be noted that where an advantage is more than 80% of the amount gifted to the charity, CRA takes the position there was no intention to make a gift and therefore, the charity cannot issue a receipt. Reference can be made to CRA’s webpage “Split receipting” for further information on how to calculate the eligible amount to be included in an official donation receipt.
Since it can be very difficult to calculate the value of an advantage in cause-related marketing arrangements the CRA webpage suggests that where a charity is not able to issue an official donation receipt, the for-profit entity may seek professional advice to determine whether the expenses from the cause-related marketing arrangement can be claimed as an advertising expense
GST/HST – New CRA Memorandum to Assist Charities and Qualifying NPOs Calculate the Public Service Bodies Rebate Claims
On January 27, 2017, CRA released “Non-creditable Tax Charged,” a memorandum to assist public service bodies (“PSB”), including charities and qualifying non-profit organizations (“NPOs”), determine what amounts of GST/HST may be included in the “non-creditable tax amounts charged” in order to calculate their PSB rebate claims.
The PSB rebate calculation is based on the “non-creditable tax charged” in respect of property or a service. Generally speaking, “non-creditable tax charged” is the GST/HST paid or payable on an eligible purchase or expense that a PSB cannot recover in any other way other than by claiming the PSB rebate.
Given the complexity of the issues involving GST/HST charities and NPOs may wish to consult with their tax professionals prior to submitting a claim for a PSB rebate to CRA.
For further general information on claiming a PSB rebate and the types of organizations that qualify for the PSB rebate, reference can be made to CRA’s Guide RC4034, GST/HST Public Service Bodies’ Rebate. At the end of the memorandum, links to GST/HST information sheets are provided to assist a PSB (that is a charity or a qualifying NPO) calculate its PSB rebate of the GST, the federal part of the HST, and the provincial part of the HST.
Reference can also be made to The ABC’s of GST/HST for Charities and NPOs for further background information concerning GST/HST issues for charities and non-profit organizations.