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Welcome Aboard - Reporting Requirements of Registered Charities and Non-Profit Organizations

Registered charities and non-profit organizations have a number of reporting requirements and obligations under the Income Tax Act. The overall administration of these organizations is the responsibility of the volunteer board of directors, however, when the administration of the organization becomes too time-consuming or requires specialized skills, a board may choose to delegate specific responsibilities or tasks to a manager or staff person.

It is important that everyone involved in the administration of a non-profit or registered charity understand the reporting requirements and their role in providing the required information to the Canada Revenue Agency. This pamphlet is intended to provide an overview of these responsibilities.

Are there differences between non-profit organizations and registered charities?

Yes. The terms non-profit and charity are often used interchangeably but there are significant differences in the administration of these organizations and their reporting requirements to the Canada Revenue Agency (CRA) under the Income Tax Act.

Non-profit / Not-for-profit

  • can be incorporated or unincorporated
  • can apply for tax-exempt status under the Income Tax Act
  • cannot issue tax receipts for donations or membership fees

Registered charities

  • must be incorporated non-profit organizations
  • have been granted charity status by the CRA under the Income Tax Act
  • must keep activities within the scope of its charitable mandate
  • are tax-exempt and may apply for a rebate on taxes paid
  • may issue official tax receipts for donations

What are some of the CRA reporting obligations for charities and non-profit organizations?

The obligations of a non-profit or charity organization typically become more complicated when the organization begins fundraising, hiring staff, accumulating assets or collecting money from investments or property. These obligations may include filing remittances such as Employment Insurance and Canada Pension Plan deductions, income tax returns or applying for tax rebates. To ensure organizations receiving tax exemptions or rebate on taxes are complying with the regulations and guidelines, the CRA requires additional information returns for non-profit organizations and registered charities.

For charities, filing an annual return is critical to keeping registered charity status. The CRA requires an Annual Information Return (Form T3010) six months after the organization’s fiscal year ends. This is not an income tax form; the information collected is not used to assess taxes. The information helps the CRA determine how the organization raised money to support its activities and the types of expenses incurred.

While the staff may be asked to prepare these types of returns, the board of directors must sign the documents and certify that the information is complete and accurate before it is submitted to the CRA.

Can a board of directors delegate CRA reporting and other legal requirements to employees or volunteers?

The board of directors may delegate much of the day-to-day administration and financial management to employees or volunteers. However, the board is ultimately responsible for every aspect of the organization. Although directors may rely on staff or volunteers to provide information or prepare returns, delegating tasks or administration does not relieve the board of directors from their responsibilities under the law. Boards must outline their expectations and be clear on who is responsible for preparing returns and when these documents must be filed.

The consequences of failing to meet the organization’s reporting requirements can be serious. For example, registered charities which fail to meet their reporting requirements or are acting outside the CRA’s regula¬tions and guidelines may have fines imposed and could have their charity status suspended or revoked. Board members often rely on employees to provide clear, accurate and up-to-date information on the organization’s operations and finances to make decisions. It is important that both board members and employees are aware of the laws that impact their organization, programs and services to avoid fines and sanctions which could result in lost funding and bad publicity.

There are a number of provincial and federal laws and regulations which may apply to an organization’s programs and services. Non-profits and registered charities are expected to know how the law applies to their organization and to ensure their operations comply with the law. In a sector which often experiences high turn-over, training opportunities, communication, and record-keeping are important to ensure board members and employees understand the CRA requirements and the laws which apply to the specific organization. If questions or special circumstances arise, consider contacting the CRA, accountants or lawyers for advice or guidance.

Where can board members and employees learn more about financial reporting, fundraising and other information specific to the non-profit and charities sectors?

The Canada Revenue Agency can be a valuable resource for information and assistance. The CRA website has a wealth of information on reporting requirements and guidelines for fundraising and record-keeping. CRA staff members are also available to answer questions and to provide guidance on specific issues related to the Income Tax Act or the regulation of charities in Canada. www.cra-arc.gc.ca.

Public Legal Education and Information Service of New Brunswick provides a number of free resources that can help explain the law for charities and non-profit organizations. These can be found in the Consumer and Non-Profit Law section of our website. www.legal-info-legale.nb.ca.

Published by:

Public Legal Education and Information Service of New Brunswick
P.O. Box 6000
Fredericton, New Brunswick
E3B 5H1
Tel: (506) 453-5369
Fax: (506) 462-5193
E-mail: pleisnb@web.ca
www.legal-info-legale.nb.ca

ISBN: 978-1-55471-751-4

 

 

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Disclaimer: Please note that our website contains general information about the law. This is not a complete statement of the law on particular topics. We try to update our publications often, but laws change frequently so it is important for you to check to make sure the information is up to date.  The information in our publications is not a substitute for legal advice. To receive legal advice about your specific situation, you need to speak to a lawyer.