Completing the Registered Charity Information Return

T4033A(E) Rev. 05

Checklist:

Before mailing the return, make sure you have attached all of the following:

To help us process your return properly, attach the peel-off labels from the Registered Charity Basic Information sheet to the return and to any attachments that tell you to attach a label.

Mail the return to:

Charities Directorate
Canada Revenue Agency
Ottawa ON  K1A 0L5

Important reminder:

Do not attach correspondence to your annual return. Correspondence should be mailed separately to the above address.

What’s new

Proposed legislative changes

This pamphlet includes income tax changes that were announced but were not law at the time of printing. Once the changes respecting the new disbursement quota rules become law, they will apply to fiscal periods that begin after March 22, 2004, except where otherwise identified.

Change of name

In this publication, we use the name “Canada Revenue Agency” and the abbreviation “CRA” to represent the Canada Customs and Revenue Agency. This reflects recent changes in the structure of the Agency.

New Disbursement Quota (DQ) Rules

DQ rate on property reduced

The disbursement quota rate on property (e.g., investment assets) held by certain registered charities and not used directly on charitable activities or administration is reduced from 4.5% to 3.5%.

Threshold introduced for application of the 3.5% DQ on property

The 3.5% disbursement requirement applies only if the value of property owned by a registered charity and not used on charitable activities or administration exceeds $25,000.

3.5% DQ on property applies to charitable organizations

The 3.5% disbursement requirement has been extended to charitable organizations that were registered after March 22, 2004. This requirement will be extended to all charitable organizations for fiscal periods that begin after 2008.

Enduring property defined

The characteristics of a gift referred to as a “bequest” or a “10-year gift” are generally incorporated into the new definition “enduring property”. See the Glossary at the end of this guide for an explanation of “enduring property”.

Enduring property transferred from registered charities

A gift of an enduring property received from another registered charity is not subject to the disbursement quota until it is spent. These gifts are subject to the same requirements as gifts of enduring property received from other persons.

Enduring property transferred to registered charities

A different disbursement requirement applies to an enduring property (other than one that is received as a specified gift) that is transferred by way of a gift to a qualified donee. The transferring charity must include 100% of the fair market value of such property in its disbursement quota requirement, which will be satisfied by the gift itself.

Charities can use realized capital gains to reduce the 3.5% DQ

A charity can now use capital gains realized on enduring property to reduce its 3.5% DQ requirement. If the value of a charity’s property not used on charitable activities or administration is greater than $25,000, the charity may claim a reduction to the disbursement requirement in respect of the amount of enduring property expended or transferred. Generally, the maximum reduction is equal to the lesser of 3.5% of this value and the “capital gains pool” of the charity. See the Glossary at the end of this guide for an explanation of “capital gains pool”, “disbursement quota”, and “enduring property”.

New Forms

Capital Gains and Disbursement Quota Worksheet (Form T1259)

This new worksheet, included in the guide, is for the charity’s use only and should not be returned to the Canada Revenue Agency (CRA). The worksheet is provided to help a charity track its capital gains, determine if the charity has met its disbursement quota for the fiscal period, estimate its disbursement quota for the next fiscal period, and track its excesses and shortfalls.

Registered Charity Information Return Summary (Form T1242)

This is the new name for Form T1242 (formerly Notice of Confirmation) that the CRA sends you to acknowledge receipt of your information return. The Summary includes a calculation of your capital gains pool, your capital gains reduction, and your disbursement quota. It should relate to the information you track yourself on Form T1259.

New/Revised Questions Asked on Annual Information Return

At Section E – Financial Information

4525 – Total enduring property included in line 4510

5060 – Total enduring property transferred to qualified donees

5070 – Total specified gifts to qualified donees

At Section F – Other Required Information

5640 – The total eligible amount of tax-receipted enduring property

5710 – Enter the amount, if any, of enduring property spent in the fiscal period.

5720 – Enter the capital gains from the disposition of enduring property in the fiscal period.

5730 – Is the charity claiming an amount that is less than the maximum capital gains reduction?

5740 – If yes, enter the amount from line 11 of Form T1259.

5900 – Indicate the average value of property not used for charitable activities or administration during the 24 months before the beginning of the fiscal period.

5910 – Indicate the average value of property not used for charitable activities or administration during the 24 months before the end of the fiscal period.

The notation “See the guide” on the annual information return T3010A (05) is generally used to identify a new line requirement.

New Definitions Added to Glossary

• “Adjusted cost base”
• “Capital gain”
• “Capital gains pool”
• “Capital gains reduction”
• “Capital property”
• “Enduring property”
• “Eligible amount of gift”
• “Excepted gift”
• “Financial statements”
• “Official donation receipt”
• “Property (3.5% DQ)”
• “Tax receipt”

New Public Notification of Late Filing

Registered charities have six months from the end of their fiscal period to file an annual information return. In the interest of public disclosure and to encourage registered charities to file in a timely manner, the names of late filers will be published on the CRA Web site. Once a charity has filed the required information return, its name will be removed from the list. If a charity which is identified as a late filer does not subsequently file its information return, its registration will be revoked.

New $500 Penalty for Failure to File

Registered charities that are late filing their annual information returns are now liable for a $500 penalty. However, this penalty will only be assessed once the registration of a charity is revoked for failure to file its information return. A charity will be required to pay this penalty before it will be considered for re-registration.

New Sanctions

A new sanctions regime has been introduced that will impose penalties ranging from small financial penalties to temporary suspension of receipting privileges and partial loss of tax-exempt status. For more details on this subject, please consult the summary policy Sanctions, CSP-S17, which is available on the CRA Web site.

New Rules on Release of Financial Statements

Registered charities filing their annual information return are also required to file a copy of their financial statements. Previously, charities were able to choose whether these financial statements could be released to the public. However, as a result of recent legislation, financial statements will now be available to the public on request. Therefore, charities are cautioned to not include sensitive information (e.g., bank account number) within their financial statements.

Table of Contents

• Canada Revenue Agency’s Service Pledge
• Need More Information?
• Your Opinion Counts!
• Before You Start
  • When does a registered charity have to file its information return?
  • What is an information return?
  • What information on the return is available to the public?
  • Registered Charity Information Return Summary
  • General notes on completing the return
• How to Amend the Return
• Completing Form TF725, Registered Charity Basic Information
• Table 1 - Field Codes and Program Activities
• Completing Form T3010A, Registered Charity Information Return
  • Section A – Identification
  • Section B – Directors/Trustees and Like Officials
  • Section C – Programs and General Information
  • Section D – Compensation
  • Section E – Financial Information
  • Section F – Other Required Information
  • Section G – For Foundations Only
  • Section H – Certification
  • Section I – Confidential Data
• Calculating the Disbursement Quota
• Glossary
• Order Form

Canada Revenue Agency’s Service Pledge

As a client, you can expect reliable, responsive, fair service in the official language of your choice. We will provide this service to you, explain our decisions and actions, and seek your suggestions on ways to improve our services.

Charities Directorate

Our Mission

Our mission is to promote compliance with the income tax legislation and regulations relating to charities through consistency, education, quality service, and responsible enforcement, thereby contributing to the integrity of the voluntary sector and the social well-being of Canadians.

Our Vision

The Charities Directorate will be recognized and respected by charities, stakeholders, and the Canadian public for its integrity, fairness, knowledge, and innovative service delivery resulting in client-oriented service and compliance.

Need More Information?

Please contact the Charities Directorate if you need more information on a particular topic.

You can reach the Charities Directorate by calling:

• 954-0410 for local Ottawa calls (English)
• 954-6215 for local Ottawa calls (bilingual)
• 1-800-267-2384 for toll-free, long-distance calls (English)
• 1-888-892-5667 for toll-free, long-distance calls (bilingual)
• 1-800-665-0354 for toll-free TTY service for persons with a hearing or speech impairment

The Charities Directorate’s fax numbers are:

• (613) 954-8037 – Client Assistance
• (613) 957-8925 – Returns
• (613) 952-6020 – Assessment, Determinations and Monitoring
• (613) 948-1320 – Policy, Planning, and Legislation Division

You can get copies of most of the forms, pamphlets, information circulars, and interpretation bulletins referred to in this guide from the Charities Directorate or from any of the tax services offices. See the order form printed at the back of this guide.

To contact a tax services office, call 1-800-959-8281.

Internet access

You can find the list of registered charities and many of our publications including fact sheets, Q’s and A’s and summary policies at www.cra.gc.ca/charities.

Starting with returns for fiscal period 2000, we have been posting the public sections of charity returns on our Web site. The Web site also has a list of newly registered charities as well as a list of charities that have recently been revoked.

Your Opinion Counts!

If you have any comments or suggestions that would help us improve this guide or our services, we want to hear from you. Please send your comments to:

Charities Directorate
Canada Revenue Agency
Ottawa ON  K1A 0L5

Before You Start

When does a registered charity have to file its information return?

Under the Income Tax Act, every registered charity has to file an information return each year. The return must be filed no later than six months after the end of the registered charity’s fiscal period. For example, if your fiscal year end is March 31st, your annual information return is due by September 30th.

A charity that does not file its return can lose its registered status. After losing its registered status, a charity can no longer issue tax receipts for donations. Also, the charity will be liable to pay a revocation tax equal to the full value of any remaining assets.

Registered charities that are revoked for failure to file are liable for a $500 penalty.

If a charity’s registered status is revoked, the charity can apply for re-registration by completing Form T2050, Application to Register a Charity Under the Income Tax Act, and by providing the requested documentation, information, and signatures. The charity will also have to pay the $500 penalty and file all missing information returns before we consider registering it again.

For more information, see the guide entitled Registering a Charity for Income Tax Purposes (T4063).

What is an information return?

An information return includes:

• Registered Charity Information Return, Form T3010A;
• Registered Charity Basic Information sheet, Form TF725;
• the list of directors/trustees or like officials, with all the required information, Form T1235;
• the list of qualified donees, with all the required information (if applicable), Form T1236; and
• a copy of the registered charity’s own financial statements (See the Glossary at the end of this guide for an explanation of the term “financial statements”).

Note for Registered National Arts Service Organizations (RNASOs)

Under the Income Tax Act, RNASOs have the same privileges as registered charities and the same filing requirements. They must file Form T3010A, Registered Charity Information Return, and Form TF725, Registered Charity Basic Information sheet along with a copy of their financial statements.

RNASOs should note the following:

• All references to a “registered charity” on the information return form, the basic information sheet, and in this guide extend to RNASOs;
• RNASOs should interpret the term “charitable programs” as the work they carry on to fulfill their purposes; and
• RNASOs are treated as if they were charitable organizations.

What information on the return is available to the public?

On request, we will provide the public with copies of a registered charity’s information return (excluding the confidential information in Section B and Section I) and the charity’s basic information sheet. The public part of the return will also be available at www.cra.gc.ca/charities.

The CRA’s policy is to not release to the public sections of the return that are marked confidential. Under the Income Tax Act, the CRA can share some confidential information with other government departments and agencies but only under strict federal rules. The CRA is also required to release confidential information in connection with any legal proceedings.

Under proposed legislative amendments, financial statements may be released to the public without consent of the registered charity.

Registered Charity Information Return Summary

The Registered Charity Information Return Summary is a new form that has replaced the former Notice of Confirmation.

We will send you a Registered Charity Information Return Summary (Form T1242) to acknowledge that we have received and processed your return. The Summary will also provide you with your capital gains pool calculation, your capital gains reduction calculation, your disbursement quota calculation, and certain reported and recalculated financial totals.

General notes on completing the return

First, check all the information on Form TF725, Registered Charity Basic Information, and make corrections if necessary (see page 8 for detailed instructions on how to complete this sheet).

Answer every question that applies to the registered charity (see the detailed instructions on how to complete Form T3010A, Registered Charity Information Return, on page 10). Except for yes/no questions, if a question does not apply to the registered charity, please leave it blank.

Except for the list of directors/trustees or like officials and the list of qualified donees, all requested information must be entered on the return itself.

Report all dollar amounts in Canadian funds in the spaces provided. Do not enter more than one amount in a space. Round all amounts to the nearest single dollar; do not show cents (e.g., report $125,754, not $125,753.53).

A director/trustee or like official must sign and date the certification area in Section H. The person who signs Form T3010A, Registered Charity Information Return, is also certifying Form TF725, Registered Charity Basic Information.

Mail the return to us with all the required attachments. Keep a copy for the charity’s records.

Certain religious organizations meet the criteria for exemption from completing some questions on the return. The religious organization must have existed on December 31, 1977; have never issued any receipts for tax purposes; and have never, directly or indirectly, received gifts from another registered charity which issues official donation receipts.

If, on the basic information sheet, there is a message about your organization meeting the criteria for exemption, you do not have to provide the following information on the return:

• questions D2 and D4;
• questions E1 to E3;
• questions F1 to F8, and F10; and
• the amounts of gifts and specified gifts to qualified donees, as referred to in question C11.

How to Amend the Return

If you need to make a change to the return after you have mailed it, complete and send Form T1240, Registered Charity Adjustment Request. This form is available on our Web site at www.cra.gc.ca/charities. If you do not have access to the Internet or are unable to print this form, please contact us.

Mail the adjustment request form to the address given on page 2, or fax it to us at (613) 957-8925. Keep a copy of the form for your records.

Completing Form TF725, Registered Charity Basic Information

The Registered Charity Basic Information sheet is an integral part of the information return. Attach it to the return when you file it.

Verify the information about your registered charity, as it reflects what we have in our records. The person who signs Form T3010A, Registered Charity Information Return, is also certifying that the information on the basic information sheet is correct, complete, and up-to-date.

Some information on the basic information sheet cannot be changed directly on the sheet. This information includes:

• the name of the registered charity;
• the registered charity’s designation, registration date, and BN/registration number; and
• the date the registered charity’s fiscal period ends.

In these cases, you can only change the information by sending us a letter with supporting documentation. Send the letter and supporting documentation separate from the information return. An authorized representative of the registered charity must sign the letter.

You can change some information directly on the sheet in the boxes provided for this purpose. This information includes:

• the address of the registered charity;
• the registered charity’s telephone number, fax number, email address, and Web site address;
• the name of the public contact person at the registered charity;
• the names the registered charity is known by other than its registered name; and
• the registered charity’s primary areas of activity.

If you have already requested changes that do not appear on your Registered Charity Basic Information sheet, please contact us.

Name of registered charity

The name on the sheet is the name we have in our records for the registered charity. If the registered charity has made any changes to this name, you must send us an official copy of the amendment that reflects the changes to the registered charity’s governing documents. Although the charity’s name may have been legally amended, we cannot amend our records until we receive the appropriate supporting documentation. See the Glossary at the end of this guide for an explanation of the terms “governing documents” and “official copy”.

Designation

We designate all registered charities as either:

• a charitable organization;
• a public foundation; or
• a private foundation.

This designation should be the same as on the notice we sent you when the charity was registered or as later changed by us. If the charity wishes to request a change in designation, complete and send us Form T2095, Registered Charities: Application for Re-Designation.

Registration date

The registration date is the effective date of the charity’s registration. This date should be the same as on the notice we sent you when the charity was registered. However, if the charity’s registration was revoked and the charity later applied for re-registration and we granted it, the registration date on the basic information sheet will be the effective date of re-registration and not the date the charity was first registered.

BN/registration number

The registered charity’s Business Number is the number on file with the Charities Directorate and includes the account identifier. See the Glossary at the end of this guide for an explanation of the term “BN/registration number”.

Fiscal period end

A fiscal period is the 12 months (or, for incorporated charities, a period of up to 53 weeks) covered by the registered charity’s financial statements. Many registered charities have a fiscal period that covers the calendar year (that is, their fiscal period is from January 1 to December 31). Others have a different fiscal period (e.g., ending August 31 or March 31).

Under the Income Tax Act (the Act), a registered charity has to obtain our permission before it changes its fiscal period since such changes affect the registered charity’s obligations under the Act. Separate from the return, send us a letter stating the reason for the fiscal period change, the effective date of the change, and have the letter signed by an authorized representative of the registered charity.

The fiscal period end is always stated as month and day only (e.g., March 31). The year is not included because, unless formally changed, the fiscal period stays the same year after year. On the other hand, the phrase “fiscal period ending” does include the year because it identifies one specific fiscal period that ends in that year.

When a registered charity changes its fiscal period, it has a transition period that is not a full 12 months. Therefore, it has to file a separate information return for the months of the transition (e.g., if the fiscal period end was December 31 and the organization is changing it to March 31, one return is required for the original fiscal period of January 1 to December 31 and a separate return is required for the transition period from January 1 to March 31).

Because we have recently revised Form T3010A, Registered Charity Information Return, make sure you file the correct form for the calendar year in which your fiscal period end falls.

• Form T3010 applies to the year 2002 and prior.
• Form T3010A applies to the year 2003 up to and including fiscal periods that begin before March 23, 2004.
• Form T3010A (05) applies to fiscal periods that begin after March 22, 2004.

Telephone number, fax number, email address, and Web site address

Telephone and fax numbers, as well as email and Web site addresses, will help us to contact you if needed. This information is also valuable to the public who may want to inquire about the registered charity. If any of this information is incomplete or incorrect, give the correct information in the space provided.

Public contact name or position

The public contact name or position is the person the public can contact for information about the registered charity (e.g., “Mrs. F. Jones” or “Treasurer”).

Make sure the public contact name or the position is current. Use the space provided to make any changes.

Names the charity is known by other than its registered name

Some registered charities use and are widely known by names other than their registered name. For example, people will associate a major fundraising campaign with the registered charity. If your registered charity has become well-known by another name or other names, use the space provided to add the name(s).

Program areas

This section lists the primary areas in which the registered charity carries on programs. It is based on the information the charity provided when it registered or on previous returns.

If the registered charity’s program areas have changed or if the percentage of emphasis has changed, please provide the correct information in the space provided. To do this, use Table 1 on this page. Look under all categories to find an area that adequately describes the registered charity’s programs. If you cannot find a suitable area, use the “Other” category and describe the program.

After selecting the area that best reflects the registered charity’s programs during the fiscal period, enter the field code and the description (e.g., F2 – Nursing Homes, H6 – Libraries) in the box provided. A registered charity active in four or more areas should select its three most important areas according to the amount of time and resources it devoted to them.

Enter approximate percentages to show how much emphasis the registered charity gave to each area. We do not expect exact figures. Estimate as best you can the registered charity’s involvement in the various areas. For example, a registered charity dividing its attention roughly equally between two areas would enter 50% on both lines. The percentages given should reflect the total time and resources used in a program area, including human and financial resources.

Table 1 – Field Codes and Program Activities

Social services in Canada

International aid and development

Education and research

Culture, arts

Religion

Health

Environment

Other community benefits

Other

Completing Form T3010A, Registered Charity Information Return

Section A – Identification

Check “Yes” if there have been changes to the registered charity’s governing documents during the fiscal period. If so, you must send us an official copy of the amended governing documents. The amended governing documents should be mailed in a separate envelope from the information return to avoid a delay in processing. See the Glossary at the end of this guide for an explanation of the terms “governing documents” and “official copy”.

Check “Yes” if the registered charity is an internal division, that is, an internal branch, section, or other division of another registered charity. Internal divisions do not have their own governing documents to establish them as separate entities. Rather, they abide by the governing documents of the registered charity that is their head body.

Please provide the name and the BN/registration number of the other registered charity in the boxes provided.

Check “Yes” if the registered charity has its own governing documents but is, at least in some respects, subordinate to another organization. See the Glossary at the end of this guide for an explanation of the term “linked charities”.

Please provide the name and the BN/registration number of the other registered charity.

Check “Yes” if the registered charity is no longer in operation. Attach a letter asking us to revoke the charity’s registration. If you have already submitted this request, contact us to make sure that the charity’s registration has been revoked. If so, the charity will have to file a final return and may be liable for tax. See Form T2046, Tax Return Where Registration of a Charity is Revoked, for more information.

Check “Yes” if the charity has merged, amalgamated, or consolidated with another organization. Please call us for advice as to what documentation you have to submit.

Section B – Directors/Trustees and Like Officials

You must attach a list with the last name, first name, and initial of each director/trustee and like official, his/her home address (including street number, street name, city, province or territory, and postal code), telephone number, position in the charity, whether or not he/she was a director/trustee at the end of the fiscal period, whether or not he/she was at arm’s length from all other members of the governing board, and his/her date of birth.

Directors/trustees and like officials are persons who have governing authority within the registered charity. This usually means persons who hold positions identified in the registered charity’s governing documents, such as chair, vice-chair, treasurer, secretary, or past president. The registered charity may have other officials that have governing powers similar to a director or trustee. While they may not have the title of director or trustee, the Income Tax Act considers these people to be like officials. For example, religious leaders often have some governing authority and would be considered as like officials.

Registered charities that are represented by a trustee (e.g., a bank or financial institution) should fill in this information under the Last name field on the form.

To enter this information, use the worksheet included in this guide, or use a sheet of paper to give the same information and in the same format and attach it to the return. Only the Public information is available to the public. The Confidential information is for the CRA’s use only and remains confidential. See the Glossary at the end of this guide for an explanation of the terms “arm’s length” and “like officials”.

Check “Yes” to show that you have attached the worksheet or a sheet of paper with this information.

Directors/trustees are required to provide information such as date of birth and home address to facilitate the administration and enforcement of the Income Tax Act. The date of birth information provides further means of identification of directors/trustees who are fiscally accountable for the management of the charity. This information will remain confidential.

Section C – Programs and General Information

Sometimes charities go through inactive periods. However, they may want to keep their registered charity status. To keep this status, they must continue to file information returns.

An inactive charity is one that did not carry on any programs during the entire fiscal period, had little or no income, and did not issue tax receipts. It may have had some assets and liabilities.

Check “Yes” if the registered charity was inactive during the entire fiscal period, and explain why in the space provided on question C2.

In the spaces provided, describe every ongoing program and new program the registered charity carried on.

The term “program” covers all the charitable work the organization carries out on its own, as well as gifts it makes to qualified donees. Grant-making registered charities should describe the types of organizations they support. Do not send documents such as annual reports in place of describing the registered charity’s programs in the space provided in question C2. Do not report information on fundraising activities here.

If the registered charity is undertaking new programs that we have not yet approved, please contact us.

Use active verbs such as “do,” “offer,” “provide,” “operate,” “conduct,” “perform,” “educate,” “feed,” “give,” or “house” to describe how the registered charity carried out its charitable programs during the fiscal period. For example:

• operates a recycling service;
• houses and counsels young street persons;
• provides free meals for the homeless on a weekly basis; and
• conducts research aimed at developing less harmful industrial processes.

Provide enough detail for a reader to clearly understand what the registered charity actually does. For example, simply saying “we advance religion,” or “we relieve poverty” is not enough. See Table 2 below for an example involving a fictitious religious charity.

Table 2

Ongoing programs

We hold worship services weekly.

We provide ministries for women, men, youth, and children, weekly, or monthly.

We give pastoral care.

We run a summer camp for recreation and religious programs.

We run a food bank, clothing give-away program, and a daycare centre.

We donate funds to denomination headquarters for overseas missionary activities.

New programs

We hold a senior care program two times a week.

We provide a Sunday school bus service for children.

Check the category that best describes where you carried on programs within Canada.

If all the beneficiaries of the registered charity’s programs were outside Canada (even if significant administrative functions were carried on in Canada), leave the boxes blank.

Registered charities can conduct charitable programs outside Canada if these are their own charitable programs. To carry on their programs abroad, registered charities can use employees or volunteers posted in other countries, or they can retain the services of an agent or contractor under an agency agreement, contract, joint-venture, or similar arrangements provided that the registered charities exercise control and direction over the programs. They can also make gifts to other qualified donees that conduct their charitable programs outside Canada.

For more information about carrying on programs outside Canada, see our publication RC4106, Registered Charities: Operating Outside Canada.

If any (or all) of the beneficiaries of the registered charity’s programs were outside Canada, check “Yes” or “No” for each of the means listed in this question.

List every country or region where the registered charity managed or co-managed programs. Do not include countries where programs were managed totally by other qualified donees to whom the registered charity made a gift.

If the registered charity did not carry on programs outside Canada, leave these boxes blank.

Check “Yes” if the registered charity issued scholarships, bursaries, awards, prizes, or honoraria to individuals during the fiscal period. Here, “honoraria” means payments to individuals other than staff.

Check “Yes” if the registered charity carried out political activities. We presume an activity to be political if a charity:

(a) explicitly communicates a call to political action (i.e., encourages the public to contact an elected representative or public official and urges them to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country);

(b) explicitly communicates to the public that the law, policy, or decision of any level of government in Canada or a foreign country should be retained (if the retention of the law, policy or decision is
being reconsidered by a government), opposed, or changed; or

(c) explicitly states in its materials (whether internal or external) that the intention of the activity is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country.

Both the common law and the Income Tax Act allow registered charities to conduct political activities. The law recognizes the historical and continuing role of registered charities in providing informed contributions in the development of public affairs and policy. However, registered charities are not political bodies. Therefore, they face limits on the type and extent of political activities they can pursue.

There are three important restrictions:

• Activities must be entirely non-partisan in nature. Registered charities must not support or oppose political parties or candidates for public office. For example, a registered charity cannot purchase tickets to a fundraising event held by a political party;
• Disbursements are allowed only as additional expenditures after registered charities have satisfied the requirement that they devote substantially all their resources to charitable programs. As a guideline, we suggest registered charities devote no more than 10% of their disbursements to political activities; and
• Activities must relate directly to the registered charities’ purposes. Registered charities are not permitted to commit their resources to campaigning on issues, policies, and laws that are unrelated to their formal purposes. For example, a registered charity established to protect the environment may press a government on its environmental policies but not on an unrelated issue such as prison reform.

We accept that a registered charity is not necessarily engaging in a political activity when it addresses a government body or the public at large on legislative and policy matters. Instead, the activity can sometimes form a regular part of its charitable or administrative activities. Examples include:

• conducting day-to-day business with government agencies (e.g., the costs to a hospital of preparing reports for or meeting with officials of a ministry of health);
• providing governments or the public with specialized information at the registered charity’s disposal; and
• expressing the registered charity’s views to a governmental body on an issue affecting its ability to carry out its charitable mandate.

For more information, see Policy Statement CPS-022, Political Activities.

Check all the fundraising methods used by the registered charity during the fiscal period.

Check “Yes” if any fundraisers, whether internal or external to the registered charity, were paid on an incentive basis during the fiscal period. Examples of incentive-based compensation include bonuses, commissions, finder’s fees, or honoraria paid in direct relation to outcomes from fundraising activities.

Registered charities should keep in mind the potential impact on meeting their disbursement quota before undertaking fundraising arrangements.

A registered charity may charge fees or receive regular income from the sale of goods or services, or from the use of the registered charity’s assets. The term “regular” does not necessarily mean daily. It means on a repeated basis where there is a system and continuity to the transactions being carried on. Some examples would be weekly bingos, monthly operation of a used clothing store, or an annual summer camp. These include revenue from goods or services provided as part of the registered charity’s programs.

Goods sold can include gift-shop items, books or other publications, tapes, food, clothing, furniture, or used items. Services provided include shelter, catering, housekeeping, medical or health care, education, counselling, nursery, day care, or transportation. Use of a registered charity’s assets includes allowing a group to hold a meeting on the registered charity premises for a fee, or receiving revenue from the use of the registered charity’s mailing list, or allowing individuals or corporations to use the registered charity’s name or logo in return for compensation.

Registered charities designated as charitable organizations and public foundations can carry on related businesses that accomplish or promote their charitable objects. Private foundations cannot carry on any business activities. A related business is a commercial activity (i.e., revenue-generating) that is either related to a charity’s purposes, or substantially run by volunteers. For more information, see Policy Statement CPS-019, What is a Related Business?

Registered charities can make gifts to qualified donees. Qualified donees are organizations that the Income Tax Act allows to issue official receipts for income tax purposes for gifts that individuals or corporations make to them. See the Glossary at the end of this guide for an explanation of the term “qualified donee”.

Check “Yes” if the registered charity made gifts to qualified donees. If so, you must attach a list with the name of each qualified donee stating whether or not it is an associated charity, its location, its BN/registration number, the total amount of the gift for the fiscal period, and the amount, if any, of specified gifts.

To enter this information, use the worksheet included in this guide or a separate sheet of paper with the same information using the same format and attach it to the return.

List the qualified donees in descending order of the total value of the gifts made from the largest value to the smallest. The qualified donee’s location must include the city and province or territory, if the qualified donee is located in Canada, and the city and country, if the qualified donee is located outside of Canada. Also report the total number of qualified donees to whom the registered charity made gifts. The total amount of all gifts to qualified donees (excluding specified gifts and enduring property) should be reported on line 5050.

The total amount of enduring property transferred to qualified donees should be reported on line 5060. The total amount of specified gifts to qualified donees should be reported on line 5070.

See the Glossary at the end of this guide for an explanation of the terms “associated charities”, “enduring property”, and “specified gift”.

If the registered charity received non-cash gifts (gifts-in-kind) for which it issued tax receipts, check all the types of non-cash gifts the registered charity received during the fiscal period.

See the Glossary at the end of this guide for an explanation of “non-cash gifts” (“gifts-in-kind”).

Because most of the terms in this question are common, only two are explained here.

Cultural property is property that the Canadian Cultural Property Export Review Board certifies as being of outstanding significance and national importance.

Note
Under the Income Tax Act, if a registered charity disposes of a gift of cultural property, within ten years of the certification date, to other than an institution or public authority designated under the Cultural Property Export and Import Act, it will be liable to a tax equal to 30% of the object’s fair market value on the day of disposition. A registered charity subject to this tax must complete and send us Form T913, Part XI.2 Tax Return – Tax for the Disposition of Certain Properties, and pay the tax within 90 days of the end of its fiscal period.

For more information, see Pamphlet P113, Gifts and Income Tax, and Interpretation Bulletin IT-407, Dispositions of Cultural Property to Designated Canadian Institutions.

Ecological property is ecologically sensitive land (including a covenant, an easement, or in the case of land in Quebec, a real servitude), that the Minister of the Environment, or a person designated by that Minister, has certified as ecologically sensitive and whose conservation and protection is, in the Minister’s opinion, important to the preservation of Canada’s environmental heritage.

Note
Under the Income Tax Act, if recipients of ecological property dispose of it or change its use without authorization from the Minister of the Environment, they are subject to a tax equal to 50% of the ecological property’s fair market value on the day they disposed of it or changed its use. A registered charity subject to this tax must complete and send us Form T913, Part XI.2 Tax Return – Tax for the Disposition of Certain Properties, and pay the tax within 90 days of the end of its fiscal period.

Section D – Compensation

Compensation includes all forms of salaries, wages, commissions, bonuses, fees, honoraria, etc., plus the value of taxable and non-taxable benefits. In general terms, it includes all amounts that form part of a recipient’s income from employment plus the registered charity’s portion of payments, such as employee’s pension, medical or insurance plan, employer CPP and EI contributions, Federal and Provincial income tax, and workers compensation benefits.

Do not include reimbursements for expenses incurred while working on the registered charity’s behalf, such as travel claims.

Enter the average number of permanent, full-time, compensated positions the registered charity had in the fiscal period. The number should represent the usual number of positions the charity had on a given day including both managerial positions and others.

For the five highest compensated positions in the registered charity during the fiscal period, enter how many fall within each salary range regardless of the type of work.

Enter the average number of part-time or part-year employees (e.g., seasonal) the registered charity employed during the fiscal period.

Enter the total expenditure on compensation for part-time or part-year employees in the fiscal period.

This question applies only to directors/trustees and like officials who are members of the registered charity’s elected or appointed governing body. See the Glossary at the end of this guide for an explanation of the terms “directors/trustees” and “like official”.

Generally, a registered charity cannot pay its directors/trustees and like officials simply for occupying their positions. However, a registered charity can pay its directors/trustees or like officials a reasonable amount when they provide services to the registered charity. Please note that provincial laws may differ in this regard.

Check “No” if the only payments the registered charity made to its directors/trustees and like officials were reimbursements for amounts spent to carry on their duties (e.g., an out-of-town director’s accommodation and travel expenses while attending a board meeting).

A registered charity has to make sure that none of its income is used to personally benefit its proprietors, members, shareholders, trustees, or settlors. This includes the transfer of a registered charity’s property. However, it does not include the transfer of a registered charity’s income or assets to individuals or organizations in the operation of the registered charity’s programs.

Check “Yes” if the registered charity transferred some of its income or assets to individuals and/or organizations not at arm’s length to the registered charity. See the Glossary at the end of this guide for an explanation of the term “arm’s length”.

Check “No” if the only compensation made to individuals was, for example, reasonable amounts spent to host a recognition night to honour the services of employees and volunteers.

Section E – Financial Information

Note if the financial information is reported on an accrual or cash basis.

The accrual basis records revenue in the fiscal period in which the registered charity earned it, even if the registered charity receives the revenue after the end of the fiscal period. Similarly, the registered charity records an expenditure in the fiscal period the charity incurred it, even if the registered charity pays this bill in the following period.

Financial information prepared on a cash basis records only revenue or expenditures the registered charity actually received or paid during the fiscal period.

When you complete this section, make sure that you round all amounts to the nearest single dollar.

Assets

Line 4100 – Cash, bank accounts, and short-term investments. Enter the total amount of cash the registered charity had readily available at the end of the fiscal period. Include amounts on hand and in bank accounts. Include the value of all short-term investments with an original term to maturity not greater than one year, such as guaranteed term investment certificates, treasury bills, bonds, notes, and all other current investments. Do not include investments in non-arm’s length parties on this line.

Line 4110 – Amounts receivable from non-arm’s length parties. Enter amounts owed to the registered charity by its founders, directors/trustees, employees, or members, or by any person or organization not at arm’s length to these individuals or to the charity. This includes loans, mortgages, or advances and interest receivable on these amounts. It also includes amounts receivable for goods and services purchased or rented by related parties. See the Glossary at the end of this guide for a definition of “arm’s length”.

For more information, see Interpretation Bulletin IT-419, Meaning of Arm’s Length, and Interpretation Bulletin IT-64, Corporations: Association and Control – After 1988.

Line 4120 – Amounts receivable from all others. Include amounts receivable from individuals or other organizations. Amounts receivable include accounts receivable such as funds owing from the provision of goods or services, and the current portion of long-term investments such as loans and mortgages. Long-term investments are investments issued for a term of greater than one year. Do not include any amounts already reported on line 4100 on line 4120. Do not include amounts receivable from non-arm’s length individuals or organizations on this line.

Line 4130 – Investments in non-arm’s length parties. Enter the total of long- and short-term amounts that the registered charity has invested with founders, directors/trustees, non-arm’s length employees or members, or any person or organization not at arm’s length to these individuals or to the charity. See the Glossary at the end of this guide for a definition of “arm’s length”. These amounts would include limited partnership investments, shares, and investments in Canadian or foreign related corporations. Do not include any amounts already reported on line 4110 on line 4130.

Line 4140 – Long-term investments. Include the value of all investments that will mature in one year or later, such as the cash-surrender value of life insurance policies, stocks, bonds, notes, shares, debt, loans, mortgages, and all other long-term investments. Do not include amounts receivable from non-arm’s length individuals or organizations on this line. Do not include any amounts reported on lines 4120 or 4170. Also, note that you have to report restricted funds on line 4170.

Line 4150 – Inventories. Inventory covers the value of supplies and goods on hand at the end of the fiscal period and available for use in the registered charity’s programs or held for sale (e.g., articles that workers in a sheltered workshop manufacture, publications found in a religious bookstore, or medication in a hospital dispensary). Include the fair market value of any donated items held as inventory. Do not include amounts reported on lines 4120 or 4170.

Line 4160 – Capital assets (at cost or fair market value). Assets can include land, buildings, equipment, vehicles, computers, and furniture and fixtures.

A registered charity will report its capital assets at their cost to the charity, or if the asset was donated, at fair market value at the time the gift was made.

Line 4170 – Other assets. Report the value of any assets the registered charity has that do not fall under any of the previous categories. Include works of art and other valuables not considered inventory. Prepaid expenses would also be included on this line (accrual basis only). Include the registered charity’s restricted funds such as enduring property on this line. See the Glossary at the end of this guide for an explanation of “enduring property” and “restricted funds”.

Line 4200 – Total assets. Add lines 4100 to 4170 and enter the total on line 4200.

Line 4250 – Enter the total of any portion of the amounts on lines 4150, 4160, and 4170 that the registered charity did not use in its charitable programs.

Liabilities

Line 4300 – Accounts payable and accrued liabilities. Enter the amounts owing including salaries owing, the current (short-term) portion of long-term debt obligations such as loans, mortgages, notes, and payments due for goods and services received. Also include any contributions, gifts, and grants payable for charitable programs. Do not include any amounts payable to non-arm’s length parties.

Line 4310 – Deferred revenue. Enter the total of amounts received by the charity to pay for goods or services not yet provided (accrual basis only).

Line 4320 – Amounts owing to non-arm’s length parties. Enter the total of amounts owing to non-arm’s length parties including advances, loans, notes, or mortgages owing to founders, directors/trustees, non-arm’s length employees or members, or to any person or organization not at arm’s length to these individuals. These also include amounts owing to such persons for goods and/or services received, any rent due for the use of property, and salaries payable. See the Glossary at the end of this guide for an explanation of “arm’s length”.

Line 4330 – Other liabilities. Enter the total amount of all other liabilities not included above, such as an unused part of a government grant that the registered charity must return and long-term debt obligations such as loans, mortgages, and notes.

Line 4350 – Total liabilities. Add lines 4300 to 4330 and enter the total on line 4350.

Note
Line 4200 does not have to balance with line 4350. A registered charity’s accounting system will usually have a balancing account such as net assets or surplus. We do not require this information.

When you complete this section, make sure that you round all amounts to the nearest single dollar.

Government rebates such as goods and services tax/harmonized sales tax (GST/HST) and provincial sales tax (PST) should not be included in income to the extent the related tax has not been included as an expense.

Note
Pledges are considered revenue only in the fiscal period in which they are honoured.

Revenue

Except for line 4600, enter gross amounts the registered charity received. Do not deduct any expenditures involved in earning the revenue.

Line 4500 – Total eligible amount of tax-receipted gifts. Enter the total eligible amount of all gifts for which tax receipts were issued by the registered charity during the fiscal period. Do not include gifts received from other registered charities. Report these amounts on line 4510. Also do not include amounts reported on line 5520 here. See the Glossary at the end of this guide for an explanation of “eligible amount of gift”.

Line 4510 – Total amount received from other registered charities. Enter the total amount received from other registered charities. Receipts for income tax purposes should not be issued for amounts received from other registered charities. Do not include grants from other registered charities that are given for specific purposes. Report these grants on line 4650.

Line 4520 –Total specified gifts. Enter the total amount of specified gifts included in line 4510. See the Glossary at the end of this guide for an explanation of “specified gift”.

Line 4525 – Total enduring property included in
line 4510 – Enter the total amount of enduring property included in line 4510. See the Glossary at the end of this guide for an explanation of “enduring property”.

Line 4530 – Total other gifts. Enter the total amount of all other gifts for which an official donation receipt was not issued. Also include gifts for which the registered charity did not issue tax receipts because it could not identify the donor, such as anonymous gifts, collection boxes, or loose collections. Do not include revenue from governments on this line. Revenue from fundraising should be included at line 4630.

Line 4540 – Revenue from federal government. Enter the total revenue received or earned from the federal government. This amount should include all revenue received from federal government grants, contributions, and contracts for goods and services provided directly to the federal government or on its behalf.

Line 4550 – Revenue from provincial/territorial governments. Enter the total revenue received or earned from provincial/territorial governments. This amount should include all revenue received from provincial or territorial government grants, contributions, and contracts for goods and services provided directly to these governments or on their behalf.

Line 4560 – Revenue from municipal/regional governments. Enter the total revenue received or earned from municipal/regional governments. This amount should include all revenue received from municipal or regional government grants, contributions, and contracts for goods and services provided directly to these governments or on their behalf.

Line 4570 – Total revenue from government. Add lines 4540, 4550, and 4560 and enter the total on line 4570.

Line 4580 – Interest and investment income. Enter the total interest and other investment income the registered charity received or earned during the fiscal period (e.g., interest from bank accounts, mortgages, bonds, and loans). Include all investment income, whether or not the registered charity received an information slip for the amount and whether or not the registered charity received the income from a non-arm’s length individual or organization.

Report all foreign investment income in Canadian dollars. Convert the amount at the exchange rate in effect on the day the registered charity received the income or the rate of exchange in effect at the end of the fiscal period (accrual basis only). Call your local tax services office or your local financial institution for the applicable exchange rates. The exchange rates are also available on the CRA Web site.

Line 4590 – Proceeds from disposition of assets (gross amount). Enter the gross amount received on disposition of assets. See the Glossary at the end of this guide for an explanation of gross and net “proceeds of disposition of assets”.

Line 4600 – Proceeds from disposition of assets (net amount). Enter the net gain or loss on disposition of assets.

Line 4610 – Rental income (land and buildings). Enter the gross income received or earned by the registered charity from renting its land and buildings. Add all such rents, including those derived from property the registered charity used in carrying on its charitable programs. For example, include:

• rents from a seniors’ home the registered charity operated; and
• any rent derived from leasing out surplus space, such as a church parking lot during the week or a university residence during the summer.

When the registered charity earns rental income on property it does not use for charitable programs, the charity should provide details on this property in an explanatory note, or appendix to its financial statements.

Report any income the registered charity earned from leasing out equipment or other resources on line 4650, “Other revenue”.

Line 4620 – Memberships, dues, and association fees (non tax-receipted). Enter the total revenue received from memberships, dues, and association fees for which the registered charity did not issue a tax receipt. See the Glossary at the end of this guide for an explanation of “tax receipt”.

Line 4630 – Total revenue from fundraising. Enter the total amount of revenue from fundraising activities. Do not include revenue for which tax receipts were issued. These amounts should be reported as gifts on line 4500. Include the gross amounts the registered charity received from activities carried on by the registered charity as well as gross amounts received directly by contracted fundraisers.

Line 4640 – Total revenue from the sale of goods and services (except to government). Enter the gross revenue received from the sale of all goods and services provided to individuals or organizations. This includes revenue received from provision of goods and services as part of the registered charity’s programs. Revenue from goods and services provided to governments should be reported on lines 4540, 4550, or 4560. Revenue from the sale of goods and services for fundraising purposes should be reported on line 4630.

Line 4650 – Other revenue. Enter the total of all other revenue received by the registered charity not already included in the amounts above. Grants that are not gifts and not from government should be included on this line. Also include income from the rental or leasing of any equipment or other resources on this line.

Line 4700 – Total revenue. Add lines 4500, 4510, 4530, 4570, 4580, and 4600 to 4650, and enter the total on line 4700.

Expenditures

The categories on the return may not correspond to the categories used by the registered charity to record its expenditures. However, we need to know how much the registered charity spent on these categories to determine if it meets all of its requirements under the Income Tax Act.

The registered charity must keep track of its expenditures during the fiscal period in such a way that it is able to give amounts that are reasonably accurate. The registered charity cannot arbitrarily allocate its expenditures at the end of the fiscal period. It must be able to justify its amounts.

Note
When you report expenditures, enter the amount paid (cash basis) or the amount of the expenditure incurred (accrual basis).

The account categories on lines 4800 to 4920 represent common expenditure categories used in accounting systems to record various types of expenditures. The total on line 4950 should represent all expenditures recorded by the registered charity except gifts to qualified donees.

Line 4800 – Advertising and promotion. Enter the total amount paid or incurred for advertising and promotion. Include on this line all amounts spent to draw attention to the registered charity and its programs, including advertising and promotion costs related to fundraising activities. Specific examples include meals and entertainment, seminars, presentation booths, publications, and postage related specifically to fundraising. Report professional and consulting fees on line 4860.

Line 4810 – Travel and vehicle. Enter the total amount paid or incurred for travel and vehicle expenses. Include travel and accommodation costs, vehicle costs such as gas, repairs, upkeep, and lease payments.

Line 4820 – Interest and bank charges. Enter the total amount paid or incurred in interest and bank charges (e.g., interest portion of mortgage payments).

Line 4830 – Licences, memberships, and dues. Enter the total amount paid or incurred for licences, memberships, and dues.

Line 4840 – Office supplies and expenses. Enter the total amount paid or incurred for office supplies and expenses. This includes, for example, postage, minor equipment purchases, meeting expenses (not including accommodation), and the cost of preparing and distributing annual reports. Do not include any amounts reported on line 4800 on this line.

Line 4850 – Occupancy costs. Enter the total amount paid or incurred for occupancy costs. This includes rent, mortgage payments, maintenance and repairs, utilities, taxes, and all other costs related to maintaining premises used by the registered charity. Expenditures related to investment assets should be reported on line 4920.

Line 4860 – Professional and consulting fees. Enter the total amount paid or incurred for professional and consulting services (e.g., legal, accounting, fundraising).

Line 4870 – Education and training for staff and volunteers. Enter the total amount paid or incurred for education and training for staff and volunteers. This includes the cost of courses, seminars, conferences, etc.

Line 4880 – Salaries, wages, benefits, and honoraria. Enter the total amount paid or incurred for all compensation. See the Glossary at the end of this guide for an explanation of “compensation”.

Line 4890 – Donated and purchased supplies and assets expensed for the fiscal period. Include all supplies and assets purchased in the fiscal period. Do not include assets that have been capitalized.

Regardless of which accounting method a registered charity uses, a donated asset will affect the disbursement quota if a tax receipt was issued for the asset. If the donated asset is being used for charitable programs, the fair market value of that asset should be reported as an expenditure on this line and also on line 5000. Do not include assets that have been capitalized and for which you intend to report amortization on line 4900.

Line 4900 – Amortization of capitalized assets. Enter the total amortization expense for the fiscal period for capitalized assets. Amortization is often referred to as depreciation. A registered charity that is amortizing assets used in charitable programs should also report this amount on line 5000. If the asset was donated and included on line 4890 at full value, do not include annual amortization on line 4900. Amortization on donated assets reported on line 4890 should not be included because the full value of the donated asset has already been included.

Line 4910 – Research grants and scholarships as part of charitable programs. Enter the total amount paid for research grants and scholarships that were part of the registered charity’s programs.

Line 4920 – Other expenditures. Enter the total expenditures not included on the lines above. This line can include grants that must be returned (accrual basis), and expenditures made to earn rental income if these can be segregated by the registered charity.

Line 4950 – Total expenditures before gifts to qualified donees. Add lines 4800 to 4920 and enter the total on line 4950.

Lines 5000 to 5040 represent a breakdown of the expenditures on lines 4800 to 4920. The total of lines 5000 to 5040 should equal line 4950.

Line 5000 – Total charitable programs expenditures. Enter the part of the amount of line 4950 that represents expenditures for charitable programs. This includes all expenditures essential for the registered charity to carry out its charitable programs. Do not include any current expenditures that came from amounts that were accumulated in previous years and used to reduce the registered charity’s disbursement quota. Report these amounts on line 5040. Do not include any amounts reported on lines 5010, 5020, 5030, or 5040 on this line.

Line 5010 – Total management and administration expenditures. Enter the part of the amount of line 4950 that represents management and administrative expenditures. This includes all expenditures related to the overall management and administration of the registered charity.

Some expenditures will be attributable to both charitable programs and management and administration expenses, such as salaries and occupancy costs. In these cases, it will be necessary to allocate the amounts accordingly. The allocation should be made on a consistent and reasonable basis.

Line 5020 – Total fundraising expenditures. Enter the part of the amount on line 4950 that represents fundraising expenditures. Enter the total expenses the registered charity paid out for fundraising activities whether carried out by the registered charity or by contracted fundraisers. Examples of fundraising expenditures are:

• expenditures for conducting fundraising activities, including salaries and overhead costs, promotional materials, campaign supplies, electronic data processing, and year-round office expenses directly related to fundraising;
• expenditures for promoting the registered charity and its activities to the community primarily for fundraising purposes;
• fees the registered charity paid to outside fundraising consultants or agencies (or amounts retained by them); and
• postage costs for direct mail canvassing.

Line 5030 – Total political activity expenditures. Enter the part of the amount on line 4950 that represents expenditures for political activities.

Line 5040 – Total other expenditures. Enter the part of the amount on line 4950 that represents expenditures for other activities. Examples of other expenditures are:

• the premiums the registered charity paid to maintain life-insurance policies that donors have given to the registered charity;
• the costs of rental property the registered charity does not use to operate its charitable programs, administration, or fundraising;
• the costs of producing and selling goods and services the registered charity does not use, produce, or sell in the context of its charitable work; and
• amounts spent in the fiscal period that the registered charity had previously accumulated with our permission.

Line 5050 – Total gifts to qualified donees, excluding enduring property. Enter the total expenditures for all gifts to qualified donees. Do not include any specified gifts or enduring property transferred to qualified donees. Report the amount of enduring property transferred to qualified donees on line 5060, and the amount of specified gifts transferred to qualified donees on line 5070. See the Glossary at the end of this guide for an explanation of “enduring property”, “qualified donee”, and “specified gift”.

Line 5060 – Total enduring property transferred to qualified donees. Enter the total amount of enduring property, excluding specified gifts, that was transferred by way of gift to qualified donees. See the Glossary at the end of this guide for an explanation of “enduring property”, “qualified donee” and “specified gift”.

Line 5070 – Total specified gifts to qualified donees. Enter the total amount of specified gifts that were transferred to qualified donees. See the Glossary at the end of this guide for an explanation of “specified gifts” and “qualified donee”.

Line 5100 – Total expenditures. Add lines 4950, 5050, 5060 and 5070 and enter the total on line 5100.

Section F – Other Required Information

Enter the total expenditures for programs carried on outside Canada during the fiscal period. Include expenditures made directly by the registered charity to carry on these programs and payments made to other individuals or organizations to carry on the programs on behalf of the registered charity.

Do not include gifts made to qualified donees.

In this section, a contracted fundraiser means an individual not employed by the registered charity or an outside company specializing in fundraising that solicits funds on the registered charity’s behalf.

If the registered charity retained contracted fundraisers to help with its fundraising activities, enter the appropriate amounts on the following three lines:

• On line 5450, enter the gross amount collected by the fundraisers on behalf of the registered charity.
• On line 5460, enter the total of any amounts the registered charity paid directly to contracted fundraisers, plus any amounts that the contracted fundraisers retained before giving the balance of the funds to the registered charity.
• Line 5450 minus line 5460 represents the net fundraising revenue to the registered charity. Enter this amount on line 5470.

Only registered charities that have received our written permission to accumulate funds should complete this section.

If the registered charity decides to abandon a project, it must treat the amount accumulated to date and any income it has earned on this amount as a tax-receipted gift in the year it decides to abandon the project. If the registered charity does not use the entire accumulated amount before the accumulation period expires, it must treat the unused part as a tax-receipted gift it received in the final year of the accumulation period. In both cases, the registered charity must consider the total amount plus any income when calculating its disbursement quota for the next fiscal period.

If the registered charity has our written permission to accumulate property, enter the appropriate amounts on the following three lines:

• On line 5500, enter the amount accumulated this fiscal period, including income earned on previously accumulated funds.
• On line 5510, enter the amount spent this fiscal period for the specific purpose for which we have given permission to accumulate property.
• On line 5520, enter the accumulated amount that is treated as a tax-receipted gift this fiscal period.

See the Glossary at the end of this guide for an explanation of “accumulated property”.

Enter the breakdown of the registered charity’s tax-receipted gifts received during the fiscal period in the following order:

• On line 5600, enter the total eligible amount of tax-receipted non-cash gifts (gifts-in-kind).
• On line 5610, enter the total eligible amount of tax-receipted tuition fees. This amount represents tuition fees (or part of tuition fees) that the registered charity can acknowledge with an official donation receipt. For more information, see Information Circular 75-23, Tuition Fees and Charitable Donation Receipts Paid to Privately Supported Secular and Religious Schools, and the Information letter titled Treatment of Tuition Fees as Charitable Donations under Information Circular 75-23.
• On line 5640, enter the total eligible amount of tax-receipted enduring property. See the Glossary at the end of this guide for an explanation of “enduring property”.

During the fiscal period, the registered charity may have spent enduring property that it received in the current or a previous fiscal period. The registered charity may claim a reduction to its disbursement requirement in respect of these amounts. If this is the case, enter the fair market value of enduring property spent during the fiscal period on line 5710. See the Glossary at the end of this guide for an explanation of “enduring property”.

The registered charity needs to keep track of enduring property gifted to the charity so that when it makes the decision to spend such gifts, its expenditure is a reminder to include the amount in calculating its disbursement quota for the fiscal period.

Bequests or inheritances that the charity received prior to 1994 do not have to be included in the disbursement quota when they are spent.

While the annual calculation of the capital gains pool is voluntary, the charity should nevertheless declare its capital gains realized on the disposition of enduring property on line 5720 which will preserve its right to do the calculation and claim a reduction in the disbursement quota in a subsequent fiscal period. See the Glossary at the end of this guide for an explanation of “capital gain”, “capital gains pool”, “capital gains reduction”, and “enduring property”.

Example

A registered charity may have accrued capital gains in respect of enduring property. If the charity disposes of enduring property to meet its disbursement quota, it must include the fair market value of the enduring property spent in the fiscal period on line 5710. A charity can claim a reduction to its disbursement quota in respect of the capital gains realized on the disposition of the enduring property. See “Calculating the disbursement quota” for instructions on how to claim a capital gains reduction.

If the charity wishes to claim a capital gains reduction that is less than the maximum capital gains reduction available to the charity, check “Yes” at line 5730, and enter the amount from line 11 of the Capital Gains and Disbursement Quota Worksheet (Form T1259).

Where a charity has not realized capital gains from the disposition of enduring property, and, therefore, is not entitled to claim a reduction to its disbursement quota, it is not necessary to complete lines 5730 and 5740.

However, where the charity identifies at line 5720 that it has realized capital gains from the disposition of enduring property, the charity must complete lines 5730 and 5740. Where no response is provided at lines 5730 and 5740, we will calculate the disbursement quota based on the maximum capital gains reduction available to the charity.

If the charity wants to claim a lesser amount, or where an error is made in completing the annual information return, an adjustment can be made to the return by completing Form T1240 Registered Charity Adjustment Request. You can also contact the Charities Directorate at the phone numbers identified on page 6 of this guide for further clarification.

A charity can apply for approval to have us treat a specified amount as if it was money that the charity had spent on its charitable programs. This provision is available to a charity whose expenditures on charitable programs are reduced by circumstances beyond its control. However, we will only consider giving approval in extraordinary circumstances (e.g., where a charity could not generate enough interest income from investments in order to meet its disbursement quota.) A charity must use its disbursement excesses from prior years and any excesses from the subsequent year before we consider granting relief.

To apply for approval, use Form T2094, Registered Charities: Application to Reduce Disbursement Quota, which is available from the Charities Directorate or any tax services office.

Only report on line 5750 the amount for which the charity has received our prior approval to treat as an expenditure for this fiscal period.

In the case of micro-lending organizations and certain other entities, we may have pre-approved certain amounts as a special reduction to the registered charity’s disbursement quota. In the case of micro-lending organizations, we will consider an amount placed on line 5750 as fulfilling the requirement of subsection 149.1(5) of the Income Tax Act for an “application made to the Minister on prescribed form”, as long as “micro-enterprise loans” is written beside the entry on line 5750.

For more information, see RC4108, Registered Charities and the Income Tax Act; RC4143, Registered Charities: Community Economic Development Programs.

Check “Yes” if the registered charity acquired a non-qualifying security or allowed a donor to use any of the registered charity’s property (loanbacks) during the fiscal period.

The special provisions governing non-qualifying securities affect the conditions under which a tax receipt may be issued for a particular class of gifts. The loanback provisions directly affect some donors but not registered charities. We recognize that these are complex provisions, and, if necessary, we recommend that registered charities seek advice from their legal or accounting experts. See the Glossary at the end of this guide for an explanation of “non-qualifying security” and “loanbacks”.

For more information, see RC4108, Registered Charities and the Income Tax Act.

Registered charities that are designated as charitable organizations and have an effective date of registration that is earlier than March 23, 2004, are exempt from completing this question. All registered charities will be required to complete this question for fiscal years that begin after 2008.

On line 5900, enter the average value of property not used directly for charitable activities or administration during the 24 months before the beginning of the fiscal period, basing the value on the number of periods chosen by the registered charity as explained below.

On line 5910, enter the average value of property not used for charitable activities or administration during the 24 months before the end of the fiscal period, basing the value on the number of periods chosen by the registered charity as explained below.

Property, for purposes of calculating the disbursement quota, includes any real estate or personal property, or part of such property that was not used directly for charitable activities or administration. This may include, for example, cash on hand and in bank accounts, stocks, bonds, GICs, mutual funds, and land and buildings not used directly for charitable activities or administration.

The value of property is an average value based on a specified number of periods over a 24-month period. The number of periods the registered charity chooses will depend on the accounting method in place and the type of property it holds. Usually, these periods are chosen when the registered charity files its first annual information return. The number of periods chosen may have a significant impact on the disbursement quota. Once chosen, the registered charity has to get our written permission to change this number.

For example, if a charity calculates the value of its property only once a year, it will have to rely on two 12-month periods to establish an average value. If it values its property every six months, then it will have four six-month periods to establish an average value.

To establish the average value, first determine the value of all the registered charity’s property at the end of each period within a 24-month period. Then add together all of the values from the 24-month period, and divide the total by the number of periods.

Example

Foundation ABC has two assets: a building not used for administration or charitable activities and shares in a publicly traded company. The value of the building is the fair market value of the property, while the value of the shares is set by the closing price (or the average of the bid and asking prices) on the stock exchange for the day on which the valuation period ended. See section 3702 of the Income Tax Regulations for details on how to establish the value of assets.

ABC calculates the value of its property not used on charitable activities or administration at the end of each fiscal period, that is every 12 months. Therefore, it uses two periods to establish the value of its assets. For the return for the fiscal period ending December 31, 2004, it should calculate the average value as follows:

The average value of property for the 24 months before the beginning of the fiscal period is $60,000 ($64,000 + $56,000 = $120,000, divided by two valuation periods).

The average value of property for the 24 months before the end of the fiscal period is $58,000 ($56,000 + $60,000 = $116,000 divided by two valuation periods).

The building’s value as an investment asset will be less if ABC used part of it for charitable activities or administration. In the above example, if the foundation used 25% of the building for charitable activities or administration during each valuation period, then it should reduce the value of its property by about 25%.

Section G – For Foundations Only

Check “Yes” if the foundation acquired control of a share-capital or for-profit corporation in the fiscal period. Under the Income Tax Act, public and private foundations are not allowed to acquire control of any corporation. However, a foundation that acquires control of a corporation in the fiscal period will not be considered to have acquired control unless it had bought or otherwise acquired for consideration more than 5% of the issued shares of any class of the capital stock of the corporation.

A foundation that receives a gift of shares in the year that results in the foundation having control (see below) of the corporation, will only be considered to have acquired control of the corporation if it also, in the current year or previously, bought or otherwise acquired shares for consideration the cumulative total of which is more than 5% of the issued shares of any class of the capital stock of the corporation. If, in any subsequent year, the same foundation were to buy or otherwise acquire shares of the same corporation for consideration which when added to any shares previously bought or otherwise acquired for consideration exceeds 5% of the issued shares of any class of the capital stock of the corporation, the foundation would be considered to have acquired control at that time.

Under the proposed legislative amendments, where a charitable foundation acquires control of a corporation, the foundation is liable for a penalty equal to 5% of the amount of a dividend received by the charitable foundation. The penalty is increased to 100% of the amount of a subsequent dividend if, less than 5 years after the assessment of the 5% or this 100% penalty, the charity continues to control the corporation or has again acquired control of a corporation.

Control usually means that the foundation owns, or the foundation plus persons not dealing with it at arm’s length own, more than 50% of a corporation’s issued share capital with full voting rights.

Check “Yes” if the foundation incurred debts other than for current operating expenses in connection with the purchase and sale of investments or in the course of administering charitable programs at any time during the fiscal period.

Public and private foundations are not allowed to acquire debts other than in situations described above.

Debts incurred for current operating expenses are short-term debts of smaller amounts. This allows a foundation to have accounts payable, such as salaries payable, rent payable, or an amount due on account with their office supplies supplier.

Debts incurred in connection with the purchase and sale of investments allows for miscellaneous types of debts such as brokerage fees or other incidental amounts that relate to the purchase or the sale of investments. It does not include money borrowed and used to pay for the investment.

Generally, debts incurred in the course of administering charitable programs must have a direct link to the charitable programs of the foundation. They can include short-term debts, as for current operating expenses, and debts of larger amounts and longer terms such as might be incurred in the purchase of an asset used directly in charitable programs. An example would be a loan used to purchase a vehicle used to deliver meals to shut-ins as part of the registered charity’s programs.

Check “Yes” if the private foundation held any shares, rights to acquire shares, or debts owing to it that could be defined as a non-qualified investment at any time during the fiscal period. See the Glossary at the end of this guide for an explanation of “non-qualified investment”.

Non-qualified investments (debts, shares, or rights to a share) may result in a tax payable by the debtor if the private foundation receives interest or dividends on these investments, falling short of an amount based on the prescribed rate (section 4301 of the Income Tax Regulations). For more information about this tax and to receive Form T2140, Part V Tax Return – Tax on Non-Qualified Investments of a Registered Charity, contact the Charities Directorate or any tax services office.

Section H – Certification

The return must be signed by a director/trustee or like official of the registered charity who is authorized to sign on behalf of the registered charity. The person signing this return should check all the information to make sure it is correct, complete, and up-to-date. See the Glossary at the end of this guide for an explanation of “like official”.

By signing the return, the person certifies “to the best of [his or her] knowledge”, that the registered charity’s return is correct, complete, and up-to-date. This means that the person who signs the return is responsible for obtaining the best knowledge possible about the information reported on the return.

Certification applies to all components of the registered charity’s information return:

• the completed Form T3010A, Registered Charity Information Return;
• the verified Form TF725, Registered Charity Basic Information sheet;
• the registered charity’s own attached financial statements;
• the list of directors/trustees or like officials, with all required information; and
• the list of qualified donees, with all required information (if applicable).

If you already submitted a request to change information shown on the basic information sheet, we consider the certification to be based on those requested changes.

Section I – Confidential Data

The information you provide in this section is confidential and will not be available to the public.

In the space provided, enter the physical address of the registered charity. This means the address of where the registered charity is actually located, including the street number; street name; apartment, suite, or lot and concession number; city; province or territory; and postal code. A post office box or a rural route number alone is not sufficient.

No matter where the registered charity carries out its activities, it must have books and records available at an address in Canada that would enable an audit to verify:

• the official donation receipts it issued;
• the revenue it received and the expenditures it made;
• that the organization meets all the requirements for continued registration set out in the Income Tax Act (the necessary information will vary from charity to charity but could include other financial records, copies of minutes of meetings, correspondence, publicity brochures, and any other documents that provide details about the registered charity’s programs including agreements for programs outside Canada); and
• source deductions and taxes payable.

You can find general information on retaining and destroying records in Information Circular 78-10, Books and Records Retention/Destruction.

In the space provided, enter the address of where the books and records are kept. This address must be complete and include the street number; street name; apartment, suite, or lot and concession number; city; province or territory; and postal code. You can include general delivery, post office box, rural route, site, or compartment number as part of the address, but we will not accept this information by itself as a complete address. If the area does not have street names or numbers, provide a description that will easily allow a person to locate the office (e.g., the first green house eastbound on Highway 4 from Oldtown).

In the space provided, enter the requested information about the person who prepared the return.

Calculating the Disbursement Quota

A registered charity must spend a specific amount each year on charitable programs or as gifts to qualified donees. This amount varies according to a registered charity’s designation and is called its “disbursement quota”. The purpose of the disbursement quota is:

• to ensure that most of the registered charity’s funds are used to further its charitable purposes and activities;
• to encourage registered charities not to accumulate excessive funds; and
• to keep other expenses at a reasonable level.

To help registered charities plan their expenditures, the quota is largely based on what happened in previous years. Consequently, at the end of one year, a registered charity should have a fair estimate of how much it will need to spend on its charitable programs the following year.

We will calculate your disbursement quota based on the information you provide in the registered charity’s returns and will provide this calculation to you in a Registered Charity Information Return Summary. However, as part of your registered charity’s planning process, you may want to calculate your disbursement quota before receiving our calculation. We have included a capital gains and disbursement quota worksheet in the guide to help you with your calculations. The worksheet is provided for your use only. Do not file this worksheet with the return. See the Glossary at the end of this guide for an explanation of “capital gains pool”, “capital gains reduction”, and “disbursement quota”.

Completing Form T1259, Capital Gains and Disbursement Quota Worksheet

Step 1 – Calculating the Capital Gains Pool and Capital Gains Reduction

A registered charity that disposes of enduring property to meet its disbursement quota should complete Step 1 to track its capital gains realized on the disposition of enduring property and to determine the amount that it wishes to claim as a capital gains reduction. While the annual calculation of the capital gains pool is voluntary, the charity should nevertheless declare its capital gains realized on the disposition of enduring property (line 5720), which will preserve its right to do the calculation and claim a reduction in the disbursement quota in a subsequent fiscal period.

Step 1 is broken down into two parts, Capital Gains Pool Calculation and Capital Gains Reduction Calculation.

A charity will first begin by entering the amount of capital gains realized from the disposition of enduring property (other than a capital gain from the disposition of a bequest or an inheritance received by the charity in a fiscal period that included any time before 1994). It may then calculate the maximum capital gains reduction for the fiscal period and determine what amount, if any, it wishes to claim as a capital gains reduction.

Once a charity has determined the amount that it wishes to claim as a capital gains reduction (line 11), it will then transfer this amount to line 4 of the Capital Gains Pool Calculation, to line 22 in Step 2, Calculating the disbursement quota requirement for the fiscal period covered by the return, and to line 5740 in its annual information return.

Step 2 – Calculating the disbursement quota requirement for the fiscal period covered by the return

This step helps a registered charity determine its disbursement quota requirement for the fiscal period.

The first part of the calculation is based on:

• the eligible amount of tax-receipted gifts in the preceding fiscal period;
• the amount deemed to be a tax receipted gift in the preceding fiscal period;
• enduring property spent in the fiscal period;
• enduring property transferred to qualified donees in the fiscal period; and
• amounts received from other registered charities in the preceding fiscal period.

The second part of the calculation is based on the charity’s 3.5% disbursement quota requirement on property held by the charity and not used for charitable activities or administration.

The second part of the calculation applies only if the value of the property held by a charity exceeds $25,000. If the average value of the property is $25,000 or less, the value of the property is deemed to be nil (line 30). This requirement is extended to registered charities that are designated as charitable organizations. However, charitable organizations that were registered before March 23, 2004, will not be subject to this requirement until their fiscal periods that begin after 2008.

Step 3 – Calculating whether the registered charity met its disbursement quota requirement

This part of the disbursement quota helps a charity determine the amount spent by the charity during the fiscal period for purposes of the disbursement quota.

The amounts a charity can include in meeting its disbursement quota requirement include:

• amounts spent on charitable programs;
• gifts to qualified donees;
• enduring property transferred by way of gift to qualified donees;
• the amount of property accumulated during the fiscal period; and
• the special reduction amount approved for the fiscal period.

A charity has met its disbursement quota requirement where its charitable expenditures for the fiscal period meet or exceed its disbursement quota requirement (i.e., the amount at line 48 equals or exceeds the amount at line 47).

Step 4 – Estimating the disbursement quota requirement for the next fiscal period

This step is an estimate of the registered charity’s disbursement quota for the next fiscal period.

The first part of the calculation for next year is based on:

• the eligible amount of tax-receipted gifts in the current fiscal period;
• the amount deemed to be a tax receipted gift in the current fiscal period; and
• amounts received from other registered charities in the current fiscal period.

The second part of the calculation applies only if the value of the property held by a charity exceeds $25,000. It is based on the charity’s 3.5% disbursement quota requirement on property held by the charity and not used for charitable activities or administration.

This part of the calculation applies only if the value of the property held by a charity exceeds $25,000. Where the average value of property is $25,000 or less, the value of the property is deemed to be nil. The 3.5% disbursement quota requirement is extended to registered charities that are designated as charitable organizations. However, charitable organizations that were registered before March 23, 2004, will not be subject to this requirement until their fiscal periods that begin after 2008.

Note
Step 4 does not account for enduring property spent in the next fiscal period or transferred to qualified donees.

Keeping track of disbursement excesses

The purpose of this table is to help a registered charity keep track of the charity’s disbursement excesses.

The first two columns list the excesses by the year in which they occurred. The middle column identifies which disbursement excesses the charity is using, in whole or in part, to compensate for a disbursement shortfall in this fiscal period. The right-hand column reports the unused excesses still available for future years.

Because any particular year’s excess is only available for five years, a charity that is drawing on its excesses should use up its oldest excesses first.

Glossary

The definitions included here are intended to provide an overview of the defined terms and, as such, are not comprehensive. For further information, refer to the definitions of these terms in the Income Tax Act.

Accumulated property

Sometimes registered charities will want to set aside funds to make certain major expenditures, such as the purchase of a building or costly equipment, at some future date. By saving the funds rather than spending them on charitable programs, the registered charity may have difficulty meeting its disbursement quota. If that is the case, the registered charity may want to take advantage of a special provision of the Income Tax Act to accumulate property. Under this provision, amounts are considered applied against the disbursement quota as they are saved rather than when they are actually spent.

To accumulate property, a registered charity must apply in writing to us for permission. The letter must specify the amount of funds the registered charity wishes to accumulate, how long the registered charity will need to accumulate the funds, and why the registered charity wishes to accumulate these funds. We will confirm permission to accumulate property in writing. Please consult the policy commentary, CPC-005, Accumulation of Property, for more information on situations where permission to accumulate may be granted.

Adjusted cost base

Generally, this is the amount the registered charity originally paid for the property, plus the costs (such as legal fees or surveys) associated with the purchase, plus the cost of improvements to the property.

Arm’s length

The term “at arm’s length” describes a relationship where persons act independently of each other or who are not related. The term “not at arm’s length” means persons acting in concert without separate interests or who are related.

Related persons are individuals who are related to each other by blood, marriage or common law partnership, or adoption. Examples of blood relatives include grandparents, parents, brothers, sisters, and children. Examples of persons related by spousal relationship include the grandparents of a spouse, the parents of a spouse, the brothers and sisters of a spouse, the spouse of a child, and the spouse of a grandchild. Generally, in determining arm’s length relationships, common law partners are treated in the same way as legally married spouses. Adopted children are treated in the same way as blood-related children.

Related persons also include individuals or groups and the corporations in which they have a controlling interest. Persons related to these individuals or groups are also considered related to those corporations.

For more information on arm’s length, see Interpretation Bulletin IT-419, Meaning of Arm’s Length.

Associated charities

Associated charities are two or more registered charities that have applied for and received this designation from us. Associated charities can pass funds among themselves without being affected by the usual limitation placed on gift making by charitable organizations.

The Income Tax Act generally requires that charitable organizations spend no more than half their income as gifts to qualified donees, otherwise they will be re-designated as public foundations.

You must obtain written permission from us to have an associated status designation. To obtain associated status, complete and send us Form T3011, Registered Charities: Application for Designation as Associated Charities.

Bequests

A bequest is an amount a registered charity receives from the will of a deceased person. Bequests are one form of enduring property. See “enduring property” for further information.

BN/registration number

The BN is used by the federal government to identify organizations and the various program accounts they have. A complete BN has two parts: the registration number (first nine digits) and the account identifier (two letters and four digits). The registration number is the same for all accounts you have with the federal government. The account identifier is assigned by the Canada Revenue Agency for each of its business programs including corporate income tax, import/export, payroll deductions, goods and services tax/harmonized sales tax (GST/HST), and registered charities. The registered charity account identifier always starts with the letters “RR”.

When you deal with the Charities Directorate, you must use the RR number designation. If you are unsure of your registered charity’s number, please contact us.

Capital gain

A capital gain is realized when a capital property (e.g., share) is sold or considered to have been sold for more than the total of its adjusted cost base and the outlays and expenses incurred to sell the property. Outlays and expenses include fixing-up expenses, finders’ fees, commissions, brokers’ fees, surveyors’ fees, legal fees, transfer taxes, and advertising costs.

Capital gains pool

The new definition “capital gains pool” applies for the purpose of the definition “disbursement quota” and is applicable to fiscal periods that begin after March 22, 2004.

The capital gains pool of a registered charity for a fiscal period is the amount by which the total amount of declared capital gains of the charity from the disposition of enduring property (other than a capital gain from the disposition of a bequest or an inheritance received by the charity in a fiscal period that included any time before 1994) after March 22, 2004, exceeds the amount claimed by the charity as a capital gains reduction.

The annual calculation of the capital gains pool is voluntary, nevertheless the charity should declare its capital gains realized on the disposition of enduring property which will preserve its right to do the capital gains reduction calculation and claim a reduction in the disbursement quota in a subsequent fiscal period. See “Calculating the disbursement quota” on page 22 for instructions on how to calculate the capital gains pool.

Capital gains reduction

If the amount identified on form T3010A, line 5900 (i.e., the value of property owned by the charity at any time in the 24 months immediately preceding the fiscal period that was not used directly in charitable activities or administration) is $25,000 or less, the capital gains reduction is deemed to be nil.

Where the amount at line 5900 is more than $25,000, the capital gains reduction is the lesser of

• 3.5% of the amount at line 5900; and
• the capital gains pool of the charity for the fiscal period.

See “Calculating the disbursement quota” on page 22 for instructions on how to claim a capital gains reduction.

Capital property

This includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. Capital property is usually bought for investment purposes or to earn income. It does not include trading the assets of a business, such as inventory. Some common types of capital property include:

• securities, such as stocks, bonds, and units of a mutual fund trust; and
• land, buildings, and equipment used in a business or a rental operation.

Compensation

Compensation, for persons (employees) working full-time or part-time for a registered charity, includes salaries, wages, commissions, bonuses, fees, and honoraria, plus the value of taxable and non-taxable benefits.

Directors/trustees

Directors and trustees are persons who make up the registered charity’s elected or appointed governing body. This generally means persons who hold positions identified in the registered charity’s governing documents, such as chair, treasurer, secretary, or past president. The registered charity’s governing board likely includes all its directors and trustees but not necessarily. See also “like official”.

Disbursement quota

The disbursement quota is the minimum amount a registered charity has to spend on charitable activities or gifts to qualified donees to keep its registered status. In general, it is an expenditure test based on tax-receipted gifts and amounts received from other registered charities in the previous fiscal period. Enduring property spent in the fiscal period or transferred to qualified donees as well as certain properties must also be considered.

The purpose of the disbursement quota is to ensure that registered charities actively use their tax-assisted donations to help others according to their charitable purposes.

Eligible amount of gift

This is the amount by which the fair market value (FMV) of the gifted property exceeds the amount of an advantage, if any, in respect of the gift.

The advantage is generally the total value of all property, services, compensation, or other benefits that a person is entitled to receive as partial consideration for, in gratitude for, or is in any other way related to the gift. The advantage may be contingent or receivable in the future, either by the donor or a person or partnership not dealing at arm’s length with the donor.

For gifts made after February 18, 2003, the advantage also includes any limited-recourse debt in respect of the gift at the time it was made. For example, there may be a limited-recourse debt if the property was acquired through a tax shelter that is a gifting arrangement.

Services provided to the registered charity are not considered gifts because services are not property.

Pledges are not considered gifts until the donor honours them.

For more information, see RC4108, Registered Charities and the Income Tax Act and Income Tax Technical News, Issue 26.

Enduring property

The new definition “enduring property” applies for the purpose of the definition “disbursement quota” and is applicable to fiscal periods that begin after March 22, 2004. The enduring property of a registered charity includes:

• gifts received by way of bequest or inheritance;
• direct distributions of proceeds to a registered charity that is the designated beneficiary of a life insurance policy, a registered retirement savings plan, or a registered retirement income fund;
• gifts received by a charitable organization from another registered charity that are subject to certain trust requirements; and
• ten–year gifts.

Gifts of enduring property are generally excluded from the charity’s disbursement quota in the year they are received. However, the charity must consider these gifts when calculating the value of property for its 3.5% disbursement requirement. When the charity spends or transfers some or all of the enduring property, the amount spent or transferred must be included when calculating the disbursement quota requirement.

Excepted gift

An excepted gift is a gift of a share made to a donee (other than a private foundation) with whom the donor deals at arm’s length. If the donee is a charitable organization or public foundation, it will be an excepted gift if the donor deals at arm’s length with each director, trustee, officer, and like official of the donee.

Fair market value

Fair market value is usually the highest dollar value you can get for your property in an open and unrestricted market and between a willing buyer and a willing seller who are knowledgeable, informed, and acting independently of each other.

Financial statements

At a minimum, financial statements consist of a statement of assets and liabilities and a statement of revenue and expenditures for the fiscal period. They should show the different sources of a registered charity’s revenue and how it spent its money.

Gift

In most cases, a gift is a voluntary transfer of property without valuable consideration to the donor. However, for gifts made after December 20, 2002, a transfer of property for which the donor received an advantage (see description of “advantage” in the definition of “eligible amount of gift”) will still be considered a gift for purposes of the Income Tax Act as long as we are satisfied that the transfer of property was made with the intention to make a gift. An intention to make a gift will be presumed where the fair market value of the advantage does not exceed 80% of the fair market value of the transferred property.

For gifts made after December 20, 2002, it is the eligible amount of the gift that is used to calculate the donor’s donation tax credit or deduction.

Gifts-in-kind

Gifts-in-kind, also known as non-cash gifts, are gifts of property. They cover items such as artwork, equipment, securities, and cultural and ecological property.

A contribution of service, that is, of time, skills or efforts, is not property and, therefore, does not qualify as a gift or gift in kind for purposes of issuing official donation receipts.

Governing documents

These are the documents that formally establish an organization and govern its operations. Some examples of governing documents are letters patent, certificate of incorporation, memorandum or articles of association, a constitution, trust documents, and by-laws.

Internal division

An internal division is an internal branch, section, or other division of a registered charity. An internal division does not have its own governing documents.

Like official

A like official is a person who has governing responsibilities for the registered charity similar to those of a member of the governing board or a trustee. This should be interpreted broadly to include anyone having control and management of the administration of the registered charity. These people generally hold positions such as chair, vice-chair, treasurer, secretary, or past president.

Linked charities

A linked charity is a registered charity with its own governing documents that is, at least in some respects, in a subordinate position to a head body.

The head body usually has policies that govern the charitable programs the linked charities deliver and that regulate their administrative and financial affairs. It may also require dues from the linked charities.

Loanbacks

Special rules may apply to reduce the fair market value of a gift in the following cases.

In the first case, a donor makes a gift and within five years of making the gift the charity holds a non-qualifying security of the donor (see definition of “non-qualifying security”) that was acquired by the charity within the five-year period before the gift was made. In this case, the fair market value of the gift is reduced by the amount paid by the charity to acquire the non-qualifying security.

In the second case, a donor makes a gift and within five years of making the gift, the following things happen:

• the donor is not dealing at arm’s length with the charity;
• the donor, or a person or partnership not dealing at arm’s length with the donor, uses the charity’s property under an agreement made no earlier than five years before the gift was made; and
• the property is not used in the charity’s charitable activities.

Here, the fair market value of the gift is reduced by the fair market value of the property used, even if the donor is compensating the charity for the right to use the property.

In either of these cases, if the gifted property is a non-qualifying security, the gift must be an excepted gift (see definition of “excepted gift”) before the special rules will apply. Otherwise the rules relating to a donation of a non- qualifying security apply.

Non-arm’s length

See “arm’s length”.

Non-cash gift

See “gifts-in-kind”.

Non-qualified investment

This applies to private foundations only.

A non-qualified investment is:

1. a debt, other than a pledge or an undertaking to make a gift, owing to the foundation by:

or

2. a share of a class of the capital stock of a corporation, other than an “excluded corporation”, described in 1 above that the foundation holds. However, the law excludes from non-qualified investments any share listed on one of the prescribed stock exchanges named in section 3200 or 3201 of the Income Tax Regulations or any prescribed share (see subsection 6203(1) of the Regulations) of the capital stock of a taxable Canadian corporation.

3. a right the foundation holds to acquire a share described in 2 above.

An excluded corporation is:

• a limited dividend housing company of the type identified in paragraph 149(1)(n) of the Income Tax Act;
• a corporation whose issued shares are all held by the private foundation; or
• a corporation whose operations are only to hold property a registered charity uses for its administration or charitable activities.

Non-qualifying security

In general terms, a non-qualifying security is:

• an obligation (such as a promissory note) from a donor or the donor’s estate or any person not dealing at arm’s length with the donor or the donor’s estate;
• a share in a corporation that the donor or the donor’s estate does not deal with at arm’s length;
• any other security issued by the donor or the donor’s estate or by any person not dealing at arm’s length with the donor or the donor’s estate.

The securities described above do not include those listed on a prescribed stock exchange.

A registered charity can acquire a non-qualifying security either by receiving one as a gift or by buying one (or giving something in exchange for it).

When a registered charity receives a non-qualifying security as a gift, it should record the security’s “fair market value” at that time for future reference.

A registered charity can issue a tax receipt to the donor of a non-qualifying security only if the security is an excepted gift. Otherwise one of two things must happen in the five years after the non-qualifying security is acquired before a receipt can be issued:

• the registered charity disposes of the non-qualifying security. In this case, the fair market value of the security is the lesser of the fair market value of the security at the time of disposition and the fair market value of the security at the time it was gifted; or
• the security ceases to be a non-qualifying security (e.g., if a privately held company goes public and its shares become listed on a prescribed stock exchange). In this case, the fair market value of the consideration received by the charity on disposition is the lesser of the fair market value of the consideration at the time of disposition and the fair market value of the consideration at the time it was gifted.

After the five-year period, the registered charity can never issue a receipt for the non-qualifying security.

A non-qualifying security is considered to be an excepted gift if it meets all of the following criteria:

• it is a share;
• the charity that receives the non-qualifying security is not a private foundation;
• the donor is at arm’s length to the charity; and
• the donor is at arm’s length to each of the charity’s directors/trustees, officers and like officials.

For more information, see RC4108, Registered Charities and the Income Tax Act.

Official copy

What we consider an “official copy” of the governing documents depends on how the registered charity is formed.

If the registered charity is incorporated, the appropriate provincial or federal incorporating authority usually has to approve changes to the registered charity’s governing documents. In this case, the official copy we want is a photocopy of the amending documents displaying the stamp or other approval mark from the incorporating authority.

If the registered charity is not incorporated, the official copy we want is a photocopy of the amended documents showing the date the documents came into effect. Two people who are directors, trustees, or like officials of the registered charity must sign the photocopy.

Official donation receipt

Registered charities can issue official donation receipts (also referred to in this guide as “tax receipts”) to acknowledge gifts. An official donation receipt is subject to particular requirements under the Income Tax Act including identification that it is an official receipt for income tax purposes. The publication RC4108 “Registered Charities and the Income Tax Act” provides greater detail on contents of receipts and other tax receipting requirements. In addition to the required contents of receipts identified therein, registered charities must also include the eligible amount of the gift and the name and Web site address of the Canada Revenue Agency on official donation receipts (www.cra.gc.ca/charities). See Glossary definition “eligible amount of gift”.

Note that registered charities issue other forms of receipts to acknowledge acceptance of services or items that are not gifts. These are not tax receipts and should be clearly distinguished from the tax receipts issued to acknowledge gifts. Contributions of services, that is, of time, skills or efforts, are not property and, therefore, do not qualify as gifts for purposes of issuing official donation receipts. Accordingly, a charity cannot issue an official donation receipt for services rendered free of charge. For more details on this subject, please consult the policy commentary Gifts of Services, CPC-017, which is available on the CRA Web site.

Planned giving

Planned giving is a fundraising program that involves arranging donations to serve the interests of the registered charity and that suits the personal, financial, and tax situation of the individual donor. Through a planned-giving program, a registered charity seeks to attract significant gifts by identifying potential donors and helping them with information and advice.

Examples of planned giving include bequests, annuities, life insurance policies, and residual interests or charitable remainder trusts.

Proceeds of disposition

This is usually the amount a person receives or will receive for property sold. When a registered charity sells a property such as land, buildings, securities, and works of art, it may have a gain or loss from the sale.

Property (3.5% DQ)

Property, for purposes of the 3.5% disbursement quota requirement for a registered charity, is property that:

• was owned by the registered charity at the beginning or end of the fiscal period covered by the return; and
• was not used directly for charitable programs or administration.

Qualified donee

Qualified donees are organizations that can, under the Income Tax Act, issue official tax receipts for gifts that individuals or corporations make to them.

They include:

• registered charities;
• registered Canadian amateur athletic associations;
• registered national arts service organizations;
• housing corporations in Canada set up exclusively to provide low-cost housing for the aged;
• municipalities in Canada;
• for gifts made after May 8, 2000, municipal or public bodies performing a function of government in Canada;
• the United Nations and its agencies;
• universities outside Canada with a student body that ordinarily includes students from Canada (these universities are listed in Schedule VIII of the Income Tax Regulations);
• charitable organizations outside Canada to which the Government of Canada has made a gift during the registered charity’s fiscal period, or in the 12 months immediately before the period; and
• the Government of Canada, a province, or a territory.

Restricted funds

Restricted funds are funds tied to a specific use and not available for the general purposes of the organization (e.g., a fund consisting of contributions that donors specifically direct the registered charity to use to buy a new building). Endowments are one type of restricted fund. Donors create them when they stipulate that the registered charity must maintain the principal amount and only use the income earned on it.

Specified gift

Specified gifts under the Income Tax Act allow for the transfer of gifts from one registered charity to another registered charity. The amount will not be added to the recipient charity’s disbursement quota. However, the gift must be considered by the recipient charity when determining the value of property not used for charitable activities or administration. The donor charity cannot use the specified gift to satisfy its own disbursement quota.

A gift becomes a specified gift if the donor charity identifies it as such in its return for the year.

Tax receipt

See “Official donation receipt”.

Ten-year gifts

Registered charities can receive gifts subject to a donor’s written trust or direction that the registered charity holds the gifts for at least ten years. These gifts are one form of enduring property. See Glossary definition of “enduring property”.

For more information, see RC4108, Registered Charities and the Income Tax Act.

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