Over the next few months a number of you will be working hard to complete your annual charity return and may find yourself panicking, because yet again, CRA has come out with a new charity return form. The good news is that the changes are relatively minor and can be broken down into three main topics.
Over the next few months a number of you will be working hard to complete your annual charity return and may find yourself panicking, because yet again, CRA has come out with a new charity return form. In March of 2010 the federal government decided that they would make a few changes to the T3010B charity return to help reduce the administrative burdens on a charity. All charities with year ends of December 1, 2010 and later are now responsible for filing the T3010-1. The good news is that the changes are relatively minor and can be broken down into three main topics:
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The charitable expenditure rule was repealed
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The capital accumulation rule was simplified
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The anti-avoidance rule was strengthened
Charitable Expenditure Rule Repealed
The charitable expenditure rule was introduced in 1976 in order to prevent charities from accumulating cash reserves. The rule required a charity to spend a minimum amount annually on charitable activities. Charities were required to spend 80 per cent of the previous year's receipted donations, plus 80 per cent of gifts from other registered charities. On March 4, 2010 this rule was eliminated as part of the federal budget.
Capital Accumulation Rule Simplified
Under the past legislation, charitable foundations were required to spend 3.5 per cent of all assets not currently used in charitable activities or administration if those assets were over $25,000. The new T3010-1 reflects an increase in the threshold from $25,000 to $100,000 to help smaller organizations build a reserve.
Anti-Avoidance Rule
Under the old legislation CRA was able to revoke the registration of a charity if they determined that the charity made a gift to another registered charity with the main purpose being to delay charitable expenditures. The new rule now applies to all transactions (not just gifts), and applies to any purpose, as opposed to the main purpose of delaying the expenditure. The new anti-avoidance rule also requires the recipient charity of a non-arm's length transaction to spend the full amount it received on charitable activities in the next taxation year, or elect to designate the transfer, which removes the requirement.
There is lots of information available on the new charity return on the CRA website (see link below), and if you have any questions, RLB is always willing to help provide answers.
