But Who Shall Return?
By the spring of 1997, registered charities had received
a letter from the Charities Division of Revenue Canada headed
"A Message to Registered Charities", telling them about
the need to complete a revised form T3010 in 1997. The information
in this letter should not be overlooked. Nor should the changes
brought about by the revised T3010 form be underestimated, despite
the tone of the Revenue Canada letter. With the letter is a Question
and Answers sheet which solicits suggestions to improve future
revisions. Charities should both send in their suggestions and
make arrangements to go to any information sessions in their
area.
The new Returns' express purposes are set out in the letter:
simplify filing requirements and give the general public a more
accurate description of a charity's activities. The letter notes,
"[i]t is unfortunate that some charities do not give their
T3010 forms the attention they deserve. ... stories about them
tend to undermine public confidence in all charities. By providing
Canadians with complete and accurate information, your charity
can show that it respects public expectations."
The last paragraph ends on an ominous note:
"We intend to do all that we can to enhance the good name
of Canadian charities. We are concentrating our efforts on groups
with a casual attitude towards the filing requirements, and we
will revoke their registrations if necessary. By working with
us, your organization can help maintain public confidence in
the charitable sector."
The charitable sector is under increasing scrutiny. A variety
of publicity hints at wrong-doing. For a number of years the
Liberal MP from Hamilton-Wentworth, John Bryden, has been trying
to focus attention on what he sees as problems with how charities
raise money from the public. The well-known author, Walter Stewart,
subtitled his book The Charity Game, "Greed Waste and Fraud
in Canada's $86 Billion-A-Year-Compassion Industry." One
common theme of this complaint is that the public information
available from T3010s is incomplete and inconsistent. Nobody
can tell what charities are truly doing. Revenue Canada has responded
to this situation, in part, with a revised information return
which "[b]y providing Canadians with complete and accurate
information, your charity can show that it respects public expectations."
The new return is about 30% longer than its predecessor. The
Guide to Completing the Registered Charity Return printed
from a file available from Revenue Canada's Internet site is
nearly 50 pages. While it is true that an enhanced use of the
yes/no format makes the form easier to complete, overall you
are required to supply more information. And beginning in 1997
Revenue Canada intends to enter the information filed on T3010s
into its mainframe computer. Any missing or inconsistent data
will result in a rejection and a follow-up, something that was
never done before. A charity will not meet its filing requirements
unless it returns an acceptably complete form within 6 months
of the end of the fiscal period.
For example, charities must report how much they spent on the
five types of disbursements listed on the return: operation of
charitable programs directly, gifts to qualified donees, management
and general administration, fund-raising, and political advocacy.
Disbursements that do not readily fit into these five categories
must be identified and reported as Other. It is noted that the
five categories may not correspond to those the charity uses
when it draws up its accounts for other purposes. But Revenue
Canada needs to be provided with information about how much the
charity spent on these categories to determine whether it continues
to meet its requirements under the Income Tax Act. As
a result, the charity must keep track of its disbursements during
the fiscal period in a way that allows it to enter figures that
are reasonably accurate. In the words of the Guide, the charity
cannot simply invent an allocation of its disbursements at the
end of the year. It must be able to justify its figures to us.
And, if necessary, the charity should allocate disbursements
on a single item among the categories on a reasonable basis.
For example, by dividing occupancy costs of a building if the
building housed one of the charity's programs, its administrative
offices, and a commercial tenant. The Guide and Return are replete
with other similar requirements.
The writing, as the saying goes, is on the wall or, in this case,
in the return. In its message to Canadian charities, Revenue
Canada acknowledges that charities are often run by volunteers,
and that it does not want to take up any more time with paperwork
than is necessary. But - and this might easily have been in capital
letters - keep in mind that the T3010 is not simply for our use.
Its main focus is to provide information to all Canadians, in
their roles as both taxpayers and potential donors. The revised
T3010 represents a threshold point in the enhanced regulation
of charitable activity. Those working for, with, and giving to,
charities should get used to the idea.
Laird Hunter is a lawyer
with the firm of Worton & Hunter in Edmonton, Alberta.
