Topics: What's New from the Charities Directorate of CRA, Canadian Charity Law, Ethics and Canadian Charities
The Charities Directorate of the Canada Revenue Agency has revised their form T3010A with a new form called the T3010B, and it is supposed to be used by Canadian charities for fiscal years ending in 2009.
Update February 22, 2009
Here is the new T3010B: t3010b-09e_T3010B_Registered_Charity_Information_Return.pdf
Here is the guide to the new T3010B: t4033b-09e_Guide_to_Completing_the_Registered_Charity.pdf
The Charties Directorate of the Canada Revenue Agency is revising their form T3010A with a new form called the T3010B.
Here is part of a draft of the new T3010B which was included in a recent Bulletin of the CCCC. This part relates to the T3010B questions on foreign activities by Canadian charities with some of my comments in red:
In the Registered Charities Newsletter # 30, CRA advises as follows:
New Registered Charity Information Return (Form T3010B)
The Charities Directorate anticipates introducing a new Registered Charity Information Return (Form T3010B) in 2009. We have divided the information on Form T3010B between a simple core form and topic-related schedules to make the form easier to use. We anticipate the re-designed form will relieve the filing burden for smaller charities in particular. It will also provide the public with more meaningful information about registered charities to allow them to make more informed donor decisions.
I understand from second hand information that the T3010B is going to include for Canadian charities a requirement that they provide a list of foreign intermediaries and the amounts of money paid to each foreign intermediary. The US in their Form 990 requires a detailed list for non-cash gifts (gifts in kind) from each US charity. In the Non-Cash Grants Paid schedule it lists: the Class of Activity; Donee Name; Donee Address; Amount (FMV); Relationship; Description; Book Value; How book value is determined; How FMV value is determined; and date of gift. For example, if you look at item 397 on page 589 of World Vision’s 866 page Form 990 filing you see that World Vision US provided World Vision Albania with a $100,497 in kind donation, which is described as a “mixed shipment” and the date was March 2006.
I think that it is an interesting and good idea in general to require the disclosure of funds paid to foreign intermediaries. Currently, foundations in Canada that give to other charities (qualified donees) need to disclose the charity and the amount given. If every charity has to disclose the amount it provides to every foreign intermediary (agent, joint venture, partner, contractor), there will be the following benefits:
1) Members of public and donors can see what organizations the charity is working with and the countries those intermediaries are operating in;
2) Canadian charities interested in working in a new country will be able to see more accurately what countries other charities are operating in, what intermediaries other organizations use and they can followup with those organizations to find out whether a potential intermediary is reputable and reliable (very good for due diligence). Perhaps they will even decide to not directly fund the activity but instead provide the Canadian charity doing the work with the funds to avoid duplication;
3) Individuals who like a particular foreign intermediary may be inclined to donate to organizations working with that foreign intermediary; and
4) It will provide the names of thousands of foreign intermediaries working with Canadian charities.
Some may raise the concern of security and privacy. Security relates to disclosing that Canadian funds are going to certain countries where such funds may not be welcome. This may in a few rare circumstances be legitimate and perhaps organizations could provide as a separate schedule any names of intermediaries to which there is a security concern, and CRA would keep that confidential and not make that public. In fact in many of the most totalitarian countries, small vulnerable NGOs are proud of their affiliation with Canadian charities, and it provides them with some small amount of protection. Privacy relates to the fact that some intermediaries are in fact individuals and this list would name the individuals. I guess some individuals may not want the world to know they are receiving funds from a Canadian charity. If this is for a legitimate reason CRA may be prepared to hold that information confidential. However, perhaps for some they are not declaring the income on their tax forms etc. and I don’t think if that this is a practice that Canadian charities should try to encourage.
In Newsletter #31 CRA Advises:
Coming soon: The Canada Revenue Agency to introduce a new Registered Charity Information Return for fiscal periods ending on or after January 1, 2009 The CRA’s new Registered Charity Information Return package, which will include Form T3010B (09), Registered Charity Information Return, Form T1235 (09), Directors/Trustees and Like Officials Worksheet, and Form T1236 (09), Qualified Donees Worksheet / Amounts Provided to Other Organizations, will be available on the CRA Web site in January, and will be mailed to all registered charities with fiscal periods ending on or after January 1, 2009. The new T3010B is to be used only when filing annual information returns for fiscal periods ending on or after January 1, 2009. For fiscal periods ending on or before December 31, 2008, registered charities must continue to use Form T3010A (05), with accompanying Forms T1235 and T1236. Returns filed on the wrong form will be returned with requests to file on the right form.
The Registered Charity Information Return is now comprised of a simple core form with topic-related schedules. The CRA anticipates that the new form will reduce the filing burden for smaller charities. It will also provide the public with more meaningful information about registered charities, allowing them to make better informed donor decisions. All CRA forms and publications are available on the CRA’s Web site at: http://www.cra.gc.ca/tx/chrts/formspubs/menu-eng.html, or by calling 1?800?267?2384.
If you call the CRA, they will advise you that the form is not currently available and will hopefully be available in early 2009.
Just by way of background, here is an executive summary of a report done by a market research firm on the T3010B and the effect of the changes on small, medium and large charities:
Corporate Research Associates Inc.
Contract Number: 46558-084791/001/CY
Registered charities are required to file a return each year in order to comply with the Income Tax Act (ITA) using form T3010A. However, the Canada Revenue Agency has noted that each year, 50% of all charities file their return late while 95% of returns are erroneous or incomplete. Based on these findings, and following informal stakeholder consultations, the Canada Revenue Agency (CRA) Charities Directorate has revised the current form T3010A to be more meaningful and user-friendly. The CRA commissioned Corporate Research Associates to conduct focus groups with end users to test reactions to a mock-up of the redesigned return (identified as form T3010B). The research aimed at identifying areas of the form considered problematic, assessing comprehension, and gathering suggestions on required amendments.
The study consisted of a total of 8 focus group discussions with representatives of registered charities and professionals, primarily accountants, having filed at least one return on behalf of charities within the past year. Two, 2-hour groups were conducted in each of Toronto, Halifax, Montreal, and Vancouver from November 13 to 20, 2007. The analysis from the focus group discussions can be found in the Key Findings section of the report.
Findings from the Focus Testing of the Redesigned Annual Information Return for Registered Charity (Form T3010B) suggest the proposed revised form T3010B is not considered a significant improvement over the current one for medium and large organizations although it is viewed as greatly facilitating the reporting requirements for smaller charities. Overall reactions were generally more positive among representatives of charities than among professionals, which primarily consisted of accountants, who are more likely to complete multiple returns every year, for larger charities. Nonetheless, the proposed revised form T3010B appeared to address most areas of the current form T3010A considered problematic by users, although participants provided specific suggestions to further improve its clarity and usability.
Dividing the information on the T3010B between a simple core form and topic-related appendices clearly contributes to the form’s ease of usage. That being said, clarity could be further improved through the use of simpler language, more detailed instructions and examples provided in the guide. Specific comments and relevant recommendations are detailed under the Key Findings section of the full report. Although no specific comments on the visual layout were discussed, it was generally felt that the revised version of the core form is more visually pleasing and de-cluttered than the current one.
Prior to finalizing the revised form, care should be taken to ensure consistent language and terminology is used throughout the core form and the appendices, that adequate detail is given with respect to the use and dissemination of information collected (especially in section B/Form T1235), and that where appropriate, a rationale is given to explain the need to report selected information (e.g. directors/trustees’ date of birth; ongoing programs).
The CRA should also explore the possibility of an electronic form that could be filed online, further simplifying the reporting process for professionals and volunteers that complete more than one return on a yearly basis. Another common criticism was the lack of consistency and relevance between the required detailed financial information and charities’ financial statements. The revisions made to the financial section were deemed insufficient to simplify the reporting process for medium and large size organizations, while they appeared to simplify the process for smaller charities.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.