There have been a number of new developments in statutory filing requirements for not-for-profit organizations. We are taking this opportunity to provide a brief update on the mandatory requirements and some of the non-mandatory filing requirements. Statutory requirements are in a constant state of evolution. You should periodically discuss the requirements with your professional advisors to make sure that your organization is in compliance with its statutory obligations.
Ontario Ministry of Government Services
Commencing in 2000, for-profit corporations operating in Ontario are required to complete a filing with the Ontario Ministry of government Services with each Ontario income tax return. Commencing 2009, all not-for-profit organizations in Ontario file this form as part of their federal corporate T2 income tax return. As registered charities do not have to prepare a T2 return, the Ontario Ministry of Government services is mailing out forms to them directly. These forms should be completed and returned within 60 days of the year end. There is currently no penalty for failure to file.
Canada Revenue Agency
T2 Corporate Income Tax Returns
Canada Revenue Agency (CRA) requires all not-for-profit organizations that are not registered charities to file a T2 Corporate income tax return annually. The return must be filed within six months of the organization’s fiscal year end. There are no penalties for late filing.
Non-Profit Organization Information Returns (T1044s)
All not-for-profit organizations that are not registered charities, incorporated or otherwise, must file a T1044 information return if either of the following conditions applies:
- a) The organization has interest, dividend and other investment income in excess of $10,000 in the year; or
b) The organization has total assets in excess of $200,000 in the prior year.
The T1044 return is due within six months of the year-end and must be filed with a copy of the annual financial statements. This form must be filed in addition to a T2 Corporate income tax return. Unlike the T2 Corporate income tax return, there are significant financial penalties for late filing. Specifically, a late filer will be charged a late filing penalty of $25 per day up to a maximum of $2,500. CRA is giving first-time filers a penalty holiday to encourage filing. Once an entity files a T1044 they must file a T1044 annually regardless of whether or not they continue to meet the above criteria for first-time filers.
If you do need to file a T1044 it is critical that you have your financial statements prepared in advance of the six month filing deadline. If you do not have financial statements ready within six months of the year end we recommend that that you submit a draft of your financial statements together with a completed T1044 return to avoid a late filing penalty.
Note that all organizations required to file a T3010 do not have to file a T1044.
Registered Charity Information Returns (T3010s)
Every registered charity must file a T3010 Registered Charity Information Return within six months of the organization’s year-end. Failure to file this return on time may result in de-registration of the charity. CRA has evidently accelerated the de-registration period.
In the past, organizations not filing a T3010 were not de-registered until at least 12 months after their filing deadline had passed. Recent dealings with CRA lead us to believe that this period has been shortened to six months.
In our experience de-registration occurs most often when organizations have moved, do not forward their change of address to the Agency and then forget to file their T3010 on time. CRA’s subsequent warnings and reminders, usually sent through registered mail, are then not received and de-registration occurs.
De-registered organizations can re-register by completing form T2050, paying $150, getting a certificate of good standing from the Ontario Ministry of Consumer and Commercial Relations and filing certain letters. The charity is not allowed to issue donation receipts while it is de-registered.
HST registration and refunds
Requirement to Register
Most not-for-profit organizations need only register for HST purposes and charge HST if they meet both of the following criteria:
- a) Taxable sales for HST purposes exceed $50,000 during the fiscal year; and
b) The organization has in excess of $250,000 in revenue from all sources.
In some cases fees charged by not-for-profit organizations are not considered taxable sales (they are instead a recovery of costs) and therefore the organization should not register even though annual revenue from these sources may exceed $50,000. In other cases, not-for-profit organizations provide an exempt service (e.g. provision of childcare) where HST cannot be charged. If you have concerns or questions whether or not you should register for HST purposes you should consult CRA at 1-800-267-2384.
Not-for-profit organizations that are not registered charities are eligible for a 50% refund of HST provided they receive at least 40% of their funding from government sources in the current year or 40% on average over the past three years. It is important to note that not-for-profit organizations must exclude services purchased by governments from the definition of government funding. An example of a purchased service is childcare or hostel services purchased by municipal agencies on a per diem basis.
Most registered charities are automatically eligible for a refund of one half of HST paid on expenses. The refund can be applied for on a monthly or annual basis. We recommend that you file an annual HST refund form at the completion of your annual audit unless the HST refund is significant to the organization. Note that CRA has sanctioned the simplified method whereby the HST refund may be calculated based on an estimate of HST paid during the year. You can alternatively base the refund on actual amounts of HST paid if that information is collected within your accounting system.
Organizations can apply for refunds for up to three proceeding years.