In the March issue of this newsletter we described the proposals for change announced in the 2012 Federal Government Budget relevant to registered charities and political activities. In general, we commented that the changes proposed would require grants to qualified donees that can be considered to be made in support of the donee’s political activities to be considered expenditures by the donor charity on political activities, and that these expenditures will be included in the calculation of the resources of the donor charity devoted to political activities.
The Budget also proposed that the CRA increase the required reporting that charities make on political activities, including the extent to which such political activities are funded by foreign sources.
Both changes were to require amendmentsto the T3010 Annual Information Return filed by registered charities. CRA has recently uploaded to its website the amended T3010 E (13) which incorporates the required changes. It should be noted that the T3010 E (13) is only required for use by registered charities filing for years ending on or after January 1, 2013. Registered charities should not use the new form for fiscal years ending December 31, 2012 or earlier.
The new T3010, as was to be expected given the comments of the Federal Government in its budget, requires charities to provide greater and detailed information about expenditures by charities on permitted political activities and further to require charities to separately identify gifts received from foreign sources.
As revised, the T3010 will require additional information about the nature of political activities (if any) pursued by registered charities. Charities that carry on political activities during the period will also be required to complete a new Schedule 7 to the Form. Schedule 7 asks the charity to describe the activities pursued and how such activities relate to the charities' purposes. It also asks the charity to identify the way in which it participated and lists a number of possibilities including media releases, publications, rallies, internet, etc. All information on Schedule 7 will be publicly available on the CRA website.
Where funding from outside Canada is received for political activity, the Schedule requires the charity to identify the particular political activity supported, the amount of funding received and the source country. It does not require the name of the recipient, although elsewhere on the form (in a section that remains confidential) a charity is required to list the names of donors not resident in Canada that provide a gift of any kind valued over $10,000.
As set out above, the other significant change is that a registered charity that makes grants to other qualified donees is required to include, when determining the extent of its resources devoted to political activity (which cannot be over 10%), those grants made to qualified donees that the grantor intends be used for political activity. Such grants are reported on a Form T1236 –Qualified Donees Worksheet. As revised the Form T1236 will require a charity to identify the total amount of the grant and the portion of the grant intended for political activities.
A new Guide to Complete the Registered Charity Information Return was released along with the new T3010 E (13). It highlights the changes and provides general guidance for charities on the topic of political activities, confirming that political activities are permissible under certain conditions. It also provides commentary on how the reporting should be done.
It is also worth remembering that Budget 2012 also gave CRA additional funding to audit in this area so these rules and changes should not be ignored. Given the heightened interest of the government in this area and the Income Tax Act requirement that charities demonstrate they do not devote more than 10% of their resources to political activities, it will be worthwhile for organizations to review these changes and consider implementing the processes internally to ensure they can track and provide the information required of them on the T3010 E (13) when filing it next year.