Darwin’s Did You Know: Deciphering Canada’s Charity Reporting Changes

NEW T3010 REPORTING

The Canada Revenue Agency has issued a new T3010 version (version 24). Therefore, effective immediately, charities with fiscal periods ending on or after December 31, 2023, will need to file their Form T3010 using version 24. There are some important differences in this version. However, charities with fiscal periods ending on or before December 30, 2023, should file their Form T3010 using version 23 for this final time.

METHOD OF ACCOUNTING – FINANCIAL STATEMENTS

The Canada Revenue Agency is eliminating the method of accounting called the Restricted Fund Method. If your church has been using this method, please contact your auditor/accountant immediately to ask about changing your accounting method. The final standard (posted decision) is projected to be accepted/published in July 2024. Therefore, you can wait until then to take significant action. If your church uses the Deferred Method of accounting, you will not need to make any changes. If you are unsure which method your church uses, you can determine that by looking at your last yearend audited or reviewed financial statement. Usually a note will exist toward the back of the document titled ‘Significant Accounting Policies’, where your method of accounting would be identified.

JOB POSTINGS – BC PAY TRANSPARENCY LAWS

The BC government has legislated new laws regarding salary transparency for all organizations in BC. Effective immediately, all employers in BC must include either the expected pay (hourly or salary) or the expected pay range for a job posting that they advertise publicly. In addition, employers in BC can no longer ask a job applicant what they have been paid at positions with other employers.

For some of our larger churches, employers with more than 50 employees will be required to complete and post pay transparency reports by November 1st of each year, starting as follows:

  • By November 1, 2024: all employers with 1,000+ employees
  • By November 1, 2025: all employers with 300+ employees
  • By November 1, 2026: all employers with 50+ employees

T3 TRUST REPORTING FOR CHARITIES – INTERNAL TRUSTS AND BARE TRUSTEES

The Canada Revenue Agency has established new T3 reporting for Internal Trust and Bare Trustees. Internal Trusts exist when an entity receives property as a gift that is subject to certain legally enforceable terms and conditions. If this is your case, you will not need to complete this reporting, as this reporting does not apply to registered Canadian charities (qualified donees). Bare Trustees exist when a property is held in trust in the name of another charity (most of our church properties are such). At this point, legal representatives state that “non-profit organizations (NPOs) or registered charities… are excluded from the new rules… (however, NPOs may still have trust reporting requirements where they hold funds or assets in trust for donors)” – Grant Thornton Trusts: New reporting requirements (31 Jul 2023). However, the Canada Revenue Agency has not yet officially stated whether the registered owner (The Pentecostal Assemblies of Canada or the BC/Yukon District) might have to complete this reporting or not. But it is known that the beneficial owner (the church) would not have to complete this reporting.

UNDERUSED HOUSING TAX ACT (Bare Trustee Tax)

As you might be aware, a new tax has been established called the Underused Housing Tax Act (UHTA). As this was being drafted, it was not known whether charities would be exempt or not from this tax and whether it would make a difference if the property was held in the name of the church or held in the name of the PAOC (also known as a Bare Trustee). Both of those unknowns have now been made clear.

First, it is important to know that this might apply to churches who would also own a residence, such as a manse, parsonage, pastor’s house, etc. If your church owns such, it would be important to continue below. If your church does not own such, your church would be exempt.

Second, if your church would own a residence, while also being a registered charity (qualified donee), your church would also be exempt, as the ACT states:

6(3) Subject to this Act, every person that is, on December 31 of a calendar year, an owner (other than an excluded owner) of a residential property must pay to Her Majesty in right of Canada tax in respect of the residential property for the calendar year in the amount determined by the formula …

The ACT then defines what an excluded owner is:

…excluded owner of a residential property for a calendar year means a person (other than a prescribed person) that is on December 31 of the calendar year …    (e) a registered charity as defined in subsection 248(1) of the Income Tax Act;

Third, if your church would own a residence, while also being a registered charity and while the residence might be unused (vacant), your church would also be exempt, because, as stated by our District lawyers, “charities are assumed to use residential properties for charitable purposes, or at least if they are vacant then charities have a good reason for leaving them vacant.” Therefore, as excluded owners, registered charities with residence properties, whether vacant or not, as our District lawyers have stated, “do not need to file a return to confirm their status, and of course do not need to pay the tax.”

However, if either your church might lose its charity status (being revoked, voluntarily terminate, or other) or either your church or the PAOC might lose its charity status if the church is held in the name of the PAOC, your church would then be obligated to file a return before December 31st of each year and perhaps pay the consequential tax (if no other exemptions apply). If this would be your case, please contact either your legal counsel or the CRA for more details.

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