Trust reporting to the CRA – a developing potential concern for our sector

Sara Krynitzki

Policy Advisories

3 mins read

August 10, 2023

Coming out of Bill C-32, one of the government’s budget bills from 2022, Finance Canada introduced new reporting rules for trusts aimed at increasing transparency to begin applying at the end of this year. They comprise some requirements for what trusts must report in their T3 information returns starting in 2024, with considerable financial penalties for not complying.

A concern has developed this summer in our sector that these rules may apply to trusts held within charities. PFC supports transparency and addressing the data deficit regarding our sector more broadly, but having charities report at the individual trust level through the T3 would not support these aims. They already report to the CRA annually via the T3010, and it could also create a giant, unnecessary administrative burden for our sector, which is largely managed by staff and volunteers inexperienced in the nuances of tax law.

A trust is when one party, often called the settlor, gives property to another party—the trustee—to manage on behalf of other people – beneficiaries. Identifying what is (and is not) a trust is not a straightforward exercise for laypeople, but some funds held within charities, such as some donor advised funds, may be considered trusts.

While the new rules explicitly exempt trusts that are registered charities, they are silent on trusts that are held within registered charities, which may have created some confusion. Historically there has been an understanding at the CRA that trusts within the charity sector didn’t have to file these returns.

PFC has met with both the Charities Directorate at the CRA and key individuals at Finance Canada involved on the issue. We also encouraged prominent legal experts we know to also engage with Finance and CRA, which they did.

We do not believe the changes made to trust law in Bill C-32 were ever intended to change the rules for charities. It feels clear that an unintended issue has been created, but that the government must now solve it.

PFC is working very closely with sector colleagues on the issue, and we have participated in calls with several leaders to share intelligence and coordinate strategies. There is real and clear urgency to finding a workable solution.

As PFC has recommended to government that overhauling the T3010, including mechanisms for reporting on investments and DAFs, would be a much better way to capture data more effectively and usefully, and increase accountability in a reasonable and fair manner. Details on these recommendations can be found in our position paper on the subject, and in our recent Submission for the Pre-2024 Budget Consultations.

PFC will continue to keep our network informed on this important issue, and share developments if and when it’s warranted.