Guidance Issued on the Requirements for Foreign Charities to become Qualified Donees
On June 16, 2016, Canada Revenue Agency (“CRA”) issued CG-023, Qualified donee: Foreign charities that have received a gift from Her Majesty in right of Canada (“Guidance CG-023”), which outlines the new process whereby foreign charities that have received a gift from Her Majesty in right of Canada can, upon application with Canada Revenue Agency, become a qualified donee (“QD”) that has the ability to issue official donation receipts to donors (for Canadian income tax purposes) and receive gifts from Canadian registered charities. In this regard, if an applicant meets the criteria outlined in Guidance CG-023 and the Income Tax Act and has been registered as a QD by CRA (in consultation with the Ministry of Finance), the foreign charity may become a QD for a period of 24 months as of the date on which it received the gift from Her Majesty. It should be noted that the guidance applies as of June 23, 2015 in accordance with the 2012 Federal Budget.
To apply to become a QD an authorized representative or official of the foreign charity that has received a gift from Her Majesty must send a letter to the CRA indicating that the foreign charity is applying for registration as a QD and also explain how its activities meet the applicable criteria listed in CG-023 and the Income Tax Act. The Guideline says that application must also include the following:
- a copy of the charity’s governing document(s);
- a description of all of the charity’s activities;
- a description of, and the scope of, the specific activities that meet the requirements for relief activities in response to a disaster, providing urgent humanitarian aid, or activities in the national interest of Canada;
- a list providing the full name of all the current officials (board members, directors, trustees, officers, and like officials), their contact information, and their position within the charity;
- a copy of the letter or certificate granting charitable status to the charity from the relevant authority in the country in which the charity is established;
- a copy of the charity’s most recent financial statements;
- a copy of correspondence, agreements, or other documents related to the gift from Her Majesty in right of Canada; and
- proof that the gift was made (for example, a copy of the cashed cheque with the deposit stamp, or the bank statement showing the deposit).
The Guideline states, in accordance with the Income Tax Act, that “[t]o be eligible for registration as a qualified donee, a foreign charity must:
- be established or created outside Canada and not be resident in Canada;
- have exclusively charitable purposes and activities in accordance with applicable common law (i.e. court decisions);
- ensure that its income is not payable or otherwise available for the personal benefit of any owner, member, shareholder, trustee, or settlor of the organization;
- be the recipient of a gift from Her Majesty in right of Canada; and
- be undertaking at least one of the following at the time of the application:
- relief activities in response to a disaster;
- urgent humanitarian aid;
- activities in the national interest of Canada.”
For further information regarding the above or to review CG-023 please click here.
New Infographic to assist charities calculate when their T3010 is due each year
All charities are required to file an annual Registered Charity Information Return T3010 within six months of their fiscal year end. Late filing of the T3010 can result in loss of charitable status. To assist charities determine their filing deadline, CRA has published an infographic on its website which outlines the filing deadline for T3010 based on the fiscal year end of an organization. The CRA infographic has been reproduced below.
CRA normally mails the T3010 return and related documents to each charity in the month following the end of the charity’s fiscal period. If a charity does not receive the package of documents in the mail, charities may contact CRA by phone in order to request the same.
To view the new infographic or for further information on where other documents are to be sent reference can be made to the CRA website by clicking here
New Online Questionnaire to Help Potential Charity Registrants
CRA has released a new online questionnaire to guide organizations that may be considering whether or not they should apply for charitable status. The online questionnaire is very brief and general in nature and consists of six simple questions to educate organizations regarding certain basic requirements for charitable status. The questionnaire is intended to provide general information only and does not provide any specific advice.
To view the online questionnaire, please click here.
Length of Retention for Church Offering Envelopes Changes
On July 22, 2016, CRA published a statement outlining CRA’s position on church offering envelopes. Effective as of the year 2016 church offering envelopes are now required to be kept for a period of six years from the end of the tax year to which the envelope relates. It should be noted that the new six year requirement also applies to church offering envelopes for the 2015 tax year. CRA’s previous position was that church offering envelopes must be kept for two years after the year in which the envelope relates. CRA states that the above change has been made in order to reflect consistency with the provisions of the Income Tax Act which relate to retention of source documents. Further information on CRA requirements for charity books and records can be found here.
CRA Revokes Registration of ACTLAP Children’s Foundation
CRA revoked the charitable status of the ACTLAP Children’s Foundation (“ACF”) effective July 9, 2016 following a CRA audit on the operations of ACF. The revocation was issued on the basis that ACF “operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Pharma Gifts International Inc. program.” In that regard, CRA found that ACF improperly issued receipts totalling over $64 million. The CRA audit found that “for the period of June 16, 2012 to June 15, 2014, ACF issued donation receipts for purported donations of cash and pharmaceuticals, which were not legitimate gifts and of the $1,724,814 in cash contributions it received, ACF paid $1,289,385 to the promoters of the tax shelter. Of the $62,315,818 million [sic] worth of tax receipts issued for the gifts of pharmaceuticals, CRA determined that the ACF significantly over-reported the value of the property, resulting in grossly inflated tax receipts to participants.” In summary, the CRA audit found that ACF “issued receipts otherwise than in accordance with the Act and its Regulations, did not devote all its resources to charitable activities and failed to maintain proper books and records.” The above case serves as yet another warning in a number of cases that charities should have no involvement with tax shelters and promoters of tax shelters. The full news release issued by CRA on this case can be found here.