Update on T3 Trust Reporting issue

Sara Krynitzki

Policy Advisories

3 mins read

November 9, 2023

Update: November 10, 2023

Today the Canada Revenue Agency issued a communication clarifying that it will NOT require registered charities to file the T3, Trust Income Tax and Information Return, for internal trusts. This is excellent news for our sector.

Registered charities already report on their finances and activities annually by filing the T3010, Registered Charity Information Return. These returns include aggregate information about all the property a charity holds, including internal trusts.

The correction of this government oversight is thanks in large part to the collaborative advocacy efforts of many philanthropy, charity, and legal experts and leaders from across Canada.

November 9, 2023 – Late last year, as part of Bill C-32, which introduced several measures related to Budget 2022, new reporting rules for trusts were introduced that aim to increase compliance and reporting regarding OECD commitments. This includes requirements for trusts to report using a T3 information return starting in 2024—with considerable financial penalties for not complying.

As PFC first shared with our membership in the summer, a question arose in our sector and with the federal government regarding whether charities that house trusts are required to submit annual T3 returns for each trust they hold. While the rules explicitly exempt trusts that are registered charities, the language is silent on trusts that are held within registered charities. This has created confusion and is a serious concern.

PFC staunchly 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. Charities already report to the CRA annually via the T3010, which is currently undergoing revisions for greater transparency and accountability. T3 reporting would create a significant, redundant administrative burden for our sector, which is largely managed by staff and volunteers inexperienced in the nuances of tax law.

PFC, along with sector leaders at other national charities, as well as legal experts, have met with the Charities Directorate at the CRA and key individuals at Finance Canada. We have been repeatedly assured that the changes made to trust law in Bill C-32 were not intended to change the reporting requirements for charities, and that leaders within Finance and the CRA are working to find a solution.

As we continue to wait for clarity from government on the issue, many in our network have shared with us their growing concern and understandable anxiety.

We know that some lawyers are advising their charity clients to start planning now, which includes preparing to resource the major investment of time and dollars to meet the new requirements. Some are already spending funds on additional human resources, legal support and consulting guidance now – costs which cannot be recouped.

PFC has been clear with government that we are requesting a legislative amendment, or at least an administrative directive or some sort of public clarification from Finance or the CRA.

In mid October, PFC, CFC, and Imagine Canada wrote a joint letter to the Minister of Finance to urge the department’s attention to issue. We are also supporting other actions being taken by sector colleagues to garner the government’s attention.

We are cautiously optimistic that a resolution is forthcoming, but remain troubled at the pace, timing, and resources this issue is demanding of our sector. We are continuing to advocate on behalf of charities, and will continue to keep our network updated.