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Canada Revenue Agency new T3010 reporting requirements

CRAformThere is a new reporting requirement for Form T3010, Registered Charity Information Return. The addition is necessary because of changes announced as part of the 2015 Federal Budget.

Prior to the budget changes, a charity that invested in a partnership may have been risking its registered charity status with the Canada Revenue Agency (CRA), because the charity was automatically deemed to be carrying on the business of the partnership. This in turn may have violated the conditions under which registered charity status is maintained, because a charity must limit its business activities to related businesses, or, if the charity is a private foundation, it is not allowed to carry on any business at all. (A related business is one that is either substantially run by volunteers or is linked to the charity’s purposes.) These criteria made it difficult for charities to comply with CRA registration requirements while holding partnership interests, so most charities avoided partnerships as investment vehicles, altogether.

As of April 21 2015, registered charities can more easily invest in partnerships without jeopardizing their charitable status, if the following conditions are met:

  • The charity must be a limited partner (that is, the charity’s liability for the debts and liabilities of the partnership is limited to the amount invested).
  • The charity and non-arm’s length entities must hold 20% or less of the fair market value of all partnership interests; and
  • The charity deals at arm’s length with the partnership’s general partner (a general partner’s liability for the debts and liabilities of the partnership is unlimited).

If a registered charity invests in a partnership and does not meet the criteria above, the charity will risk its registration as a charity under the Income Tax Act.

The change allows charities to diversify their investment portfolios and facilitates greater flexibility in designing business structures to achieve charitable objectives. However, the change also brings additional reporting requirements. Each year, charities must declare their partnership interests, or lack thereof. For 2015 reporting, charities must answer the following question, and attach it to their T3010 forms, and for future years, CRA will include the question in the T3010 forms it issues:

Did the charity have direct partnership holdings at any time during the fiscal period?  Yes   No

If a charity has any direct holding in a partnership, either as a limited partner or a general partner, the charity must answer the above question, “Yes”.

A charity can answer “No”, if it does not hold any partnership interests, or if its partnership interests are indirect. Indirect partnership interests include:

  • Holdings in mutual fund trusts, mutual fund corporations, or unit trusts which in turn have partnership holdings.
  • Arrangements between the charity and other parties, which do not create partnership holdings, for example joint ventures or agency agreements.

CRA’s announcement of the reporting changes can be found here, and there is a useful Q&A section on the topic here. Information on what constitutes a related business can be found here.

Apolone Gentles, JD, CPA,CGA, FCCA, Bsc (Hons)

Apolone Gentles is a CPA,CGA and Ontario lawyer and editor with over 20 years of business experience. Apolone is leveraging 20 years of business and accounting experience to build a commercial litigation practice with an emphasis on construction law. She has held senior leadership roles in non-profit organizations, leading finance, human resources, information technology and facilities teams. She has also held senior roles in audit and assurance services at a “Big Four” audit firm. Apolone has also lectured in Auditing, Economics and Business at post-secondary schools. Read more here

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