1. Canada Revenue Agency: Charities Directorate Update
CGA – BC

2. Today’s Topics Charities Directorate overview Review of 2008-2009:
Regulatory changes
Court activity
Initiatives
Policy developments
Compliance activities, statistics & issues
Assessment, Determinations and Monitoring activities and statistics
Client Service activities
Public Education and External Relations activities
Looking ahead to 2010

3. Charities Directorate Overview
Role of Charities Directorate:
Ensures that all registered charities are compliant with the Income Tax Act
Registers and monitors charities, Canadian amateur athletic associations, and national arts service organizations

4. Review: Regulatory Changes
Private Foundations - Excess business holdings regime
Added to legislation in conjunction with the extension of zero inclusion rate for gains and income on gifts of publicly-listed securities made to private foundations, to prevent self-dealing opportunities.
The regime limits foundation shareholdings and considers the holdings of persons not dealing at arm’s length with the foundation.
The regime identifies three ranges of shareholdings by a foundation, with different implications for the foundation for each range.

5. Review: Regulatory Changes
Private Foundations - Excess Holdings Ranges:
Safe Harbour - foundation’s holdings for each class of shares in a corporation total 2% or less there is no divestment obligation and no monitoring requirement.
Monitoring Phase - foundation’s holdings exceed 2% of outstanding shares of that class, it is required to determine and report the shares held at the end of the year, by the foundation and by non-arm’s length persons.
Required to report any material transactions by the foundation or non-arm’s length persons for any period that it was outside the safe harbour

6. Review: Regulatory Changes
Private Foundations - Ranges cont’d:
Divestment Required -If the foundation’s holdings exceeds the 2% and the foundation and all non-arm’s length persons together hold more than 20% of all outstanding shares in any share class of a corporation, a divestment will be required.
New penalties are in place and applicable to foundations that do not reduce either the combined holdings of the foundation and non-arm’s length persons to 20% or the holdings of the foundation to 2% within specified time periods.
The same reporting requirements in the monitoring phase apply in the divestment phase.

7. Review: Regulatory Changes
New Form T3010B, Registered Charity Information Return
Balance reducing administrative burden with compliance and public transparency needs
Now a simple core form with topic related schedules that provide greater detail
Eliminates detailed financial requirements for smaller charities not engaged in higher risk activities
New thresholds means more charities only need complete core form
For use in fiscal years ending on or after January 1, 2009

8. Review: Regulatory Changes
What is the T3010B?
Revised annual information return form with simplified core sections, and separate schedules for more complex scenarios, such as:
Foreign activities
Revenue over $100,000
Compensation for directors
Intended to make filing easier for small charities
All charities filing for a fiscal period ending in 2009 must file the T3010B form – the older T3010A form will be rejected

9. Review: Regulatory Changes
What’s new with the Disbursement Quota?
3.5% DQ on property not used in charitable activities or administration applies to all charities (effective for fiscal periods starting in 2009)
All charitable organizations now subject to 3.5% DQ
However, all charities (including foundations) with less than $25,000 of property not used in charitable activities or administration are not subject to 3.5% DQ
Charitable organizations should keep track of their investments, i.e. which are enduring property and which are not, and manage investments in order to meet this requirement.

10. Regulatory Changes Proposed Legislative Amendments
“Split-receipting” legislation, changes to determining factors for designations
Tax shelter rules regarding deemed FMV and repayment of limited recourse debts
CRA is applying “split-receipting” rules, and designation changes including the “control test”

11. Review: Court Activity
Federal Court of Appeal
House of Holy God – Maple syrup
Two organizations appealed the Minister’s decision to revoke.
Two stay applications. In both cases, the Court dismissed the charities’ applications to delay revocation until their objections against the intention to revoke were decided

12. Initiative – Small and Rural Charities Initiative
Goal was to improve and enhance services and reduce the administrative burden for small and rural charities
A report and Joint Action Plan, developed collaboratively by charity representatives and the CRA, and is now available on the web site
The Charities Directorate has addressed many of the recommendations from the Joint Action Plan

13. Review: Policy Developments
New guidance released in 2009:
Fundraising
Research
Sports
Human Rights (draft)
Foreign activities (draft)
Guidance currently under development
Advancement of religion
Protection of the environment
Promotion of the arts
Alternative medicine
Voluntary disclosure for registered charities

14. Review: Compliance Activities
Completed a total of 851 audits in the fiscal year
48 charities were revoked for cause, (e.g., non-compliance with the Act other than failure to file the T3010 form)
The majority of audits resulted (about 89%) resulted in no change, or education or compliance agreements
Continued to review and audit charities involved in tax shelters arrangements
33 registered charities and RCAAAs have been revoked so far
Approximately 20 audits still in progress

15. Review: Compliance Activities cont’d
Fraudulent Receipting
In 2004 CRA received information from an informant -Sale of donation receipts 10% face value
Since that time more than 150 files screened for audit
122 audits completed – 61 revoked
Many based in southern Ontario
Tax preparers involved – maximizing refunds
Numerous cases referred to Enforcement
Some prosecutions already completed
Potential re-assessments of donors 100, ,000

16. Review: Compliance Statistics
851 charity audits conducted in
Audit Results:

17. Review: Compliance Issues
Five major compliance issues ( )
Donation receipts
Incomplete / inaccurate / false
89%
T-3010 returns
Incomplete / inaccurate information
72%
Books and records
Insufficient or non-existent
71%
Non charitable objects/activities
13%
Foreign activities 4%

18. Enhanced service at the applications stage
Improvements have been made to our processes so that 4,585 applications for charitable status were resolved in the 2008 – 2009 fiscal year, an increase of 25% over the average productivity of the previous two years.
This resulted in a reduction of about 26% in the backlog of applications from a peak in the fiscal year of 3,223 to under 2,400
The total backlog of written enquiries to our Client Service section was reduced by 78%

19. Enhancements to our web site
Webinars introduced – interactive presentations similar to a Charities information session (Roadshow) but an hour long and only available online
Samples of a completed T3010B posted online for charities’ reference
Many forms are now available for download in a saveable PDF format

20. Review: Public Education & External Relations
Public education activities in :
Direct mail campaign to 400,000 households
Public notices in 80 newspapers across the country
19 trade shows and conferences nationally
Education leaflets online in 14 languages
Collaboration with four provinces on joint educational products (calendars and leaflets)

21. Looking Ahead: 2010
Beginning January 1, 2010, charities that do not file their financial statements with their annual information return will have their registration revoked.
Continue efforts to reduce inventories and delays in resolving applications
Continue to aggressively address all tax shelter and false receipting abuse by registered organizations

22. Looking Ahead: 2010
Implementing year two of Joint Action Plan from Small and Rural Charities Report (SARC)
Actively consult with external stakeholders when developing new policies and identifying technical issues
Ongoing enhancements to Web site

23. Thank you. Please visit our Web site at: www.cra.gc.ca/charities