Help Desk: Form T3010: A Step by Step Guide



Section A - Identification

Charity's telephone number: If the charity does not have its own office, the complete telephone number of a spokesperson for the charity who can be contacted during the day should be provided.

Charity's fax number: Provides a fax number if one is available.

Charity's Web site address: Provides a Web site address if one is available.

Charity's email address: Provides an email address if one is available.

If the organization received a preprinted label, the label should contain the following information:

If they did not receive a preprinted label, the label section should be filled in manually.


Line 001 - BN/ Registration number: A business number (BN) is a single number a charity can use in all its dealings with the federal government. This business number is also referred to as the organization's charitable registration number.

Line 002 - Return for fiscal period ended: A fiscal period is the 12 months (or, for incorporated charities, a period of up to 53 weeks) covered by the charity's financial statements. Many charities have a fiscal period that matches the calendar year (i.e., their fiscal period ends on December 31). Others have selected a different fiscal period (e.g., September 1 to August 31, or April 1 to March 31).

The law requires a charity to obtain the permission of the CCRA before it changes its fiscal period, since such changes affect the charity's obligations under the Act, in particular the requirement to file T3010 returns.

However, if the charity has changed its fiscal period from that on record with the CCRA, they must attach a letter to the return, signed by a person authorized to sign on the charity's behalf, indicating the reason for the change and the effective date of the change.

Sometimes when charities change their fiscal period, they have a period that is longer than 12 months. If so, they must file a second T3010 return covering the additional months.

Line 003 - Charity's designation: The box checked shows the charity's designation.

If the charity's designation is not shown, look for this information on a previous year's T3010 return. The Charities Directorate can also provide this information.

We designate all registered charities as either:

a) a public foundation;
b) a private foundation; or
c) a charitable organization.

A charitable organization is a registered charity that devotes at least 50% of its income to charitable activities that it directs and controls itself. It may, however, spend up to 50% of its income on gifts to certain other organizations that meet the definition of qualified donees. Most registered charities are designated as charitable organizations.

A public foundation is a registered charity that focuses on grant making. It spends more than 50% of its income on gifts to qualified donees.

A registered charity may be designated, whether it operates like a charitable organization or a public foundation, as a private foundation if:
  • half or more of its directors/trustees do not deal at arm's length with each other and with each of the others; or
  • it has received more than half of its funding from a single source since it started.
Depending on their designation, the Income Tax Act has different requirements for charities.

A charity can request a change in its designation by completing Form T2095, Registered Charities: Application for Re-Designation. New designations go into effect in the fiscal period after the CCRA approves the change.

Legal name of charity - The charity's governing documents specify its legal name. If the charity has changed its name, they must attach an official copy of the amendment to the charity's governing documents by which this change was made (see line 700 in the guide for the definition of governing documents and official copy). The CCRA will not recognize the charity by its new name until they receive this documentation.

c/o line - This line is used to add or correct the name or position of the authorized person to whom the CCRA should send any mail (e.g., c/o "Mrs. F. Jones" or "Treasurer").

Line 004 - A2. Names other than legal one: Some charities use and are widely known by names quite different from the legal name in their governing documents. If the charity uses alternative names, they will check yes and write these names in the space provided on the return.

Note: The official donation receipts that charities issue for tax purposes must carry their legal name.

Line 006 - A3. Internal division: Yes must be checked if the charity:
  • is an internal division; and
  • does not have governing documents to establish it as a separate legal entity.
An internal division means an internal branch, section, or other division of another registered charity. Governing documents include a constitution, letters patent, or trust indenture.

Line 008 - A4. Linked to another organization: For the purposes of this return, a link with another organization describes a relationship in which a charity is, at least in some respects, in a subordinate position to a head body.

The head body usually has policies in place that govern the charitable programs the linked organizations deliver and that regulate their administrative and financial affairs. It may also require dues from the linked organizations. Often, the linked organization and head body share similar names (e.g., the "Winnipeg Branch of the X Association" and the "X Association").

Hierarchical organizations may have many layers of linked organizations, starting perhaps with an international head body and working down to the local level. The CCRA asks linked organizations to give the name of the organization that is the next step up in the hierarchy. For instance, the next step up from the "Winnipeg Branch of the X Association" might be the "X Association of Manitoba".

If the charity is a linked organization or head body, check yes. On the lines below, linked organizations should identify the name and location (city and province or country) of the organization that is the next step up in the hierarchy, while head bodies should write "Head body" on the name line and leave the location line blank.

City includes municipalities of all types.

Note: Associated charity is a specialized term that is unrelated to the concept of linked organizations.

Line 009 - A5. First return: If the charity is newly registered and this is its first return, yes should be checked.

Line 010 - A6. Final return: Yes will be checked only if the charity will not be filing a return next year because the charity is no longer in operation. If the charity is no longer in operation, a letter must be attached to the return asking the CCRA to revoke its registration (if it has not already done so).

Line 011 - A7. Religious organizations exempted from some sections: A small number of religious charities can claim an exemption from completing certain sections of Form T3010. To be exempted, a charity must meet all the following criteria:

  1. it already existed on December 31, 1977;
  2. it has not received a gift at any time after December 31, 1977, for which it issued an official donation receipt;
  3. it has not, either directly or indirectly, received a gift from another registered charity (even an associated one) that has issued official donation receipts since December 31, 1977; and
  4. either it was a religious organization, or it was associated with a registered charity that was a religious organization, in the fiscal period this return covers. If it was associated with a religious charity, attach a statement giving the legal name and BN/registration number of the associated charity or charities.
Religious organization represents one that is established and operated for the advancement of religion. An organization that controls or owns a qualifying religious organization is not exempt unless it is associated with the religious organization. See lines 501 to 503 for the meaning of "associated."

Most religious organizations do not meet the T3010 exemption criteria. Most, for example, have issued tax receipts to acknowledge gifts they have received since 1977.

A charity that does meet all four exemption criteria should check yes. This means it does not need to complete the following sections of the return:
  • Section D, lines 051 to 128
  • Section E, lines 170 and 171, 230, 232 to 234, and the last two lines of question E7
  • Section F, lines 302 to 316
  • Section H, dollar amounts in the two right-hand columns, lines 501 to 503
  • Section I, lines 611, 612, 614, 616, 631, and 640

Section B - Directors/Trustees

Line 015 - B1. Number of directors/trustees: Directors/trustees are the directors, trustees, and other similar officials who make up the charity's elected or appointed governing body. This should be interpreted broadly to include any such persons having control and management of the administration of the charity. Such people hold positions often identified in the charity's governing documents, such as chair, treasurer, secretary, or past president.

Line 016 - B2. Number of non-arm's length directors/trustees: At arm's length is a tax concept describing a relationship in which the parties are acting independently of each other. The opposite, not at arm's length, covers people acting in concert without separate interests. Not at arm's length also includes individuals who are related to each other by blood, marriage, or adoption.

The chart below provides a quick guide to the people to whom an individual (marked "X" on the chart) is defined as being related by blood, marriage, or adoption. These are the people whom X is considered not to deal at arm's length with. Generally, in determining arm's length relationships, common law spouses are treated in the same way as legally married spouses. Also, adopted children or children born outside a marriage are generally treated in the same way as natural children of a married couple.

You will find general information on this subject at the CCRA's web-site; Interpretation Bulletin IT-419, Meaning of Arm's Length.

Directors/trustees are not at arm's length if they are linked with any of the other directors/trustees. For example, let's consider a five-member board of directors, two of whom are married to each other, while the other three members have no links either to the married couple or among themselves (e.g., Mr. Martin, Mrs. Martin, Mr. Smith, Ms. Jones, Mr. Green).

The names of the two non-arm's length members have been underlined . But suppose Mr. Green's daughter is added to the board. Even though the two Greens have no ties with the Martins, the number of non-arm's length directors/trustees rises to four (e.g., Mr. Martin, Mrs. Martin, Mr. Smith, Ms. Jones, Mr. Green, Ms. Green).

Charities with only one director/trustee will enter "1" on both lines 015 and 016.

B3. List of directors/trustees: This area lists the full names of all the charity's directors/trustees during the fiscal period, and identifies the following for each:
  • any special position within the charity (e.g., treasurer, board member, trustee, minister);
  • the postal code of their residence;
  • their usual occupation or line of business (e.g., school teacher, builder, homemaker, car sales); and
  • the months during which each individual served as a director/trustee (e.g., January-April). You can leave the column blank if the director/trustee served throughout the fiscal period.
Full name includes at least the given name and family name of the director/trustee. When a particular name is used by many people (e.g., John Smith), they must include further given names to clearly identify the individual.

If the charity is a local congregation, they must include the name of the priest, minister, or other religious leader, even if this person was not a director/trustee.

To protect individual privacy, the CCRA only asks for the postal code of a director/trustee's residence, not the full home address. For the residences of directors/trustees living outside Canada, they must provide their country's zip code or other equivalent to the Canadian postal code (if available) and the name of the country.

Section C - General Information

Line 020 - C1. Active during the fiscal period: Sometimes charities pass through dormant periods. For one reason or another, they may want to keep their registered charity status. Accordingly, they continue to file their T3010 returns. Such dormant charities have very little to report on their annual returns.

A dormant charity is one that did not carry on any programs during the fiscal period, had little or no income, made no disbursements, and issued no tax receipts. It may have had some assets or liabilities.

If the charity was dormant, no will be checked. Most charities will check yes, signifying they were active during the fiscal period.

C1. The charity's programs during the fiscal period: This space explains how the charity carried out its charitable purposes during the fiscal period in sufficient detail to give a reader a good understanding of what the charity actually did.

The term program covers both charitable work the organization carries out on its own and gifts it makes to qualified donees (see line 501). For example, any of the following might constitute the program of a charity established to protect the environment:
  • operating a recycling service;
  • preserving wetlands on a migration route;
  • conducting research aimed at developing less harmful industrial processes; or
  • funding other charities that provide these services.
Note: The people reading this information include potential donors to the charity.

Lines 021 and 022 - C2. Programs in Canada: No will be checked if all the beneficiaries of the charity's programs were outside Canada, even if significant administrative functions were carried on inside Canada. No should also be checked if all the charity's program expenditures went to an organization located in Canada which used the charity's contributions to help people in other countries.

If some or all the people the charity helped were living in Canada, yes should be checked. Also the appropriate box on line 022 indicates where the charity delivers its programs. A charity that offers programs on different geographic bases (e.g., one program is available only in Vancouver, while another is offered to all residents of British Columbia) should select the larger geographic category (in this case, "Within one province or territory").

Lines 023 to 036 - C3. Programs outside Canada: If any or all of the immediate beneficiaries of the charity's programs were outside Canada, yes should be checked (this is a direct program). Yes should also be checked if the charity sent its resources to an organization in Canada which then used these contributions to help people in other countries (this is an indirect program).

If the charity was directly or indirectly active outside Canada, it should also check as many of the boxes as necessary to indicate where it sent its support.

Lines 037 to 040 - C4. Type of foundation: This question applies only to charities designated as public or private foundations. Go to question C5 if we designated the charity as a charitable organization. You can find information on designation in the guide at line 003.

Foundations have to identify whether they fall into the categories listed on lines 037 to 040. Because this list is not all-inclusive, some foundations will answer no on all four lines.

An example of a provider of support for a specific qualified donee is a foundation dedicated to helping one particular hospital or university.

An employees' charity trust collects donations from employees and sends the amounts to another charity. These trusts do not issue the usual tax receipts, but document the donations they receive on employees' T4 slips.

A charitable trust of a service club or fraternal society includes Legion Poppy Funds, as well as charitable trusts established by groups like the Lions Club and the Knights of Columbus.

Lines 041 to 048 - C5. Fields of work: The return lists fields of charitable endeavour. The organization will select a field that adequately describes the charity's programs. If they cannot find a suitable field, they will use field I1 (Other) and briefly describe these programs.

After selecting the field that best reflects the charity's programs during the fiscal period, they enter the code (e.g., F2 or H6) for the field on line 041. If necessary, they will add other field codes on lines 042 to 044 to show further fields in which the charity was active.

A charity active in five or more fields should select its four most important fields according to the amount of time and resources it devoted to them.

Lines 045 to 048, contains approximate percentages to show how much emphasis the charity gave the selected field(s). We do not expect exact figures; estimate as best you can the charity's involvement in the various fields. For example, a charity dividing its attention roughly equally between two fields would enter 50% on both lines 045 and 046.

Line 049: Religious organizations may be active in fields other than E1 to E5 (e.g., F1 hospitals or A6 senior's services). If so, they should answer yes and enter these other fields on lines 041 to 044. If the charity is not involved in religious activities, they should answer no.


Section D - Financial Information

The organization should attach a separate copy of the charity's own financial statements.

This will be a copy of the financial statements which the charity has produced for its own purposes. These statements form a separate document and are in addition to the financial information required in section D of the return.

At a minimum, financial statements consist of both a statement of receipts and disbursements and a statement of assets and liabilities for a particular fiscal period. They should show the different sources of a charity's income and how it spent its money.

The Canada Customs and Revenue Agency recommends that charities file audited financial statements if their gross income from all sources is more than $250,000. The charity's treasurer should sign any financial statements that have not been professionally audited.

Line 050 - Financial statements available to the public: Sometimes members of the public ask for copies of a charity's own financial statements. Yes should be checked if the charity wants to give the CCRA permission to provide this information to the public. No will be checked if the charity wants the CCRA to treat its financial statements as confidential documents.

Statement of assets and liabilities: Assets: Reports the value of the charity's assets, other than cash or amounts receivable, on a cost basis (i.e., in terms of how much the charity had to pay to acquire the asset).

If there is no cost to the charity because it did not buy the asset but instead received it as a gift, the value is the fair market value of the asset on the date the charity received it. The same amount would appear on an official donation receipt for the asset if the charity issued one.

The generally accepted meaning of fair market value is the highest price that a property would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.

Line 051 - Cash: Reports the total amount of cash the charity had readily available at the end of the fiscal period. Includes amounts on hand and in bank accounts.

Lines 052 and 053 - Amounts receivable: Includes amounts receivable from individuals or other organizations. Amounts receivable include loans, mortgages, and money owing from sales.

Line 052, contains amounts owed to the charity by its founders, directors/trustees, employees, or members, or by any person or organization not at arm's length to these individuals.

A non-arm's length relationship between individuals is defined at line 016 above. In general, an organization is not at arm's length to an individual if it is controlled by:
  • that individual;
  • someone else who is not at arm's length to the individual; or
  • a group of people not at arm's length with each other, one or more of whom is not at arm's length to the individual.
For more information, see Interpretation Bulletin IT-419, Meaning of Arm's Length, and Interpretation Bulletin IT-64, Corporations: Association and Control - After 1988.

Line 053, will contain all other amounts receivable.

Line 054 - Other investments: Reports the value of all other investments, such as the cash-surrender value of life insurance policies, guaranteed term investment certificates, stocks, bonds, notes, and other securities.

Note, this does not include amounts receivable (lines 052 and 053) or fixed assets (lines 055 and 056).

Line 055 - Fixed assets and inventory used in charitable programs: Fixed assets include land, buildings, equipment, and vehicles. Include the value of all fixed assets the charity or another charity used to deliver charitable programs.

This does not include properties that the charity rented out to non-charity tenants. If a single property is partly used by the charity and partly used by non-charity tenants, its cost value is allocated on a reasonable basis between lines 055 and 056.

Inventory covers supplies and items on hand that the charity uses or produces in operating its charitable programs (e.g., articles that workers in a sheltered workshop manufacture, publications found in a religious bookstore, and medications in a hospital dispensary).

Line 056 - Other fixed assets and inventory: Reports the value of all other fixed assets and inventory, including property rented out to non-charity tenants.

Line 057 - Other assets: Reports the value of any assets the charity has that do not fall under any of the previous categories (e.g., works of art and other valuables). It should briefly describe the nature of these assets.

Charities with restricted funds may want to include them on this line.

Restricted funds are those tied to a specific use and not available for the general purposes of the organization (e.g., a fund consisting of contributions that donors specifically instruct the charity to use to buy a new building). Endowments are one type of restricted fund. Donors create them when they stipulate that the charity must maintain the principal amount and only use the interest earned on it.

Liabilities: Line 061 - Contributions, gifts, and grants payable for charitable programs: Reports the total amount of contributions, gifts, and grants the charity had committed to but not paid out at the end of the fiscal period.

Includes amounts that the charity plans to give to qualified donees, as well as funds the charity has designated for scholarships, bursaries, awards, or other charitable gifts.

Lines 062 and 063 - Amounts payable: Amounts payable includes loans, mortgages, salaries owing, or payments due for goods and services rendered.

Line 062, reports the amounts that the charity owed to its founders, directors/trustees, employees, or members, or to any person or organization not at arm's length to these individuals.

Line 063, reports all other amounts payable.

Line 064 - Other liabilities: Includes any other liability the charity has, such as an unused portion of a government grant that the charity must return. This area should also briefly explain the nature of the liability.

Line 065 - Total liabilities: Note: Line 065 does not have to balance with line 058.

Statement of receipts and disbursements: A charity may complete the "Statement of Receipts and Disbursements" on the same basis as its financial statements were prepared.

Line 099 - Accounting: Line 099 indicates whether the information is reported on a cash or an accrual basis.

Statements prepared on an accrual basis record income in the fiscal period in which the charity earned it, even if the charity is paid for its work at some point after the end of the fiscal period. Similarly, the charity records an expense in the fiscal period the charity incurred it, even if the charity pays this bill in the following period. In contrast, financial information prepared on a cash basis records only the payments the charity actually received or made during the fiscal period.

Note: A charity that reports on an accrual basis must keep reporting this way in the future. If a charity wishes to stop reporting on an accrual basis, it must obtain authorization from the CCRA.

Gifts and grants received this fiscal period: Gifts include:
  • all cash donations and cheque amounts;
  • the value of all non-cash gifts
  • the cash-surrender value of life insurance policies donated to the charity and the amount of premiums the donor paid directly to the insurance company on behalf of the charity;
  • gifts the charity received under a will;
  • gifts subject to a trust or written direction that the charity hold the property given, or substituted for it, for a period of not less than 10 years;
  • amounts from foreign donors. Report in Canadian funds, converted at the rate of exchange in effect when the charity received the gift.
Does not include pledges.

Line 100 - Total tax-receipted gifts: A tax receipt or an official donation receipt bears the charity's BN/registration number, the statement that it is an official receipt for income tax purposes, and other information the law requires. The charity uses these receipts to acknowledge gifts when the donor wants to claim a tax deduction or credit. See line 702 of the guide for more information.

The amount entered on line 100, is determined by adding the value of all gifts the charity received during the fiscal period for which it has issued or will issue official donation receipts.

Line 101 - Tax-receipted gifts from other charities: Note: Charities should not issue official donation receipts to other charities, since it makes calculating their expenditure requirement more complicated. It is also unnecessary; charities do not pay taxes and therefore do not need a tax receipt. An ordinary receipt-one that does not state it is an official receipt for income tax purposes-should be sufficient to acknowledge such gifts.

However, if the amount on line 100 does include tax-receipted gifts from other charities, the total of these gifts should be entered on line 101. Other charities includes not only charitable organizations, but also public and private foundations.

Line 102 - Total other gifts: On line 102, include amounts for which the donor does not require an official donation receipt. An individual whose income is not taxable in Canada may not be able to use a tax receipt. This is also true of any organization that is not taxable in Canada, such as other charities and non-profit organizations.

Should also include gifts for which the charity did not issue tax receipts because it could not identify the donor, such as anonymous gifts or loose collections.

Note: Some charities receive non-cash gifts for which no official donation receipts have been issued and which are promptly handed over to beneficiaries, such as when a church or school collects snowsuits or canned goods. A charity does not need to report the value of these gifts on line 102 if it gives them to another charity or uses them in its own charitable programs before the end of its fiscal period. However, if it does calculate their value in order to include them on line 120 or line 121, "expenditures on charitable work" or "gifts to qualified donees," it should report them on line 102.

Line 103 - Other gifts from charities: Of the amount recorded on line 102, line 103 should indicate how much the charity received from other registered charities, including foundations.

Lines 104 to 108 - Government grants: On lines 104 to 107, the amounts listed are of grants and contributions in support of the charity or one of its programs that the charity received from various governments.

Does not include payments under contracts or purchase of service agreements for goods or services the charity provided to or on behalf of a government. These amounts should be listed on line 111 below.

Amounts received from other sources this fiscal period: Note: Gross amounts the charity received should be reported on lines 109 to 114 and 116 to 117 (i.e., do not deduct the costs involved in acquiring the amount).

Line 109 - Memberships: Line 109, contains membership fees that are not gifts (e.g., those entitling members to some privilege or service). This type of fee is not a gift because members are receiving a significant benefit in return for their payment.

Note: Members are not receiving a significant benefit if paying membership dues only gives them the right to attend and vote at meetings or receive newsletters. In such cases, the charity can treat the membership payment as a gift, issue an official donation receipt for it, and record the amount on line 100.

Line 110 - Rental income: Reports the charity's gross income from renting its land and buildings. This total includes all such rents, even those derived from property it used in carrying out its charitable programs. For example, included are:
  • rents from a seniors' home the charity operated; and
  • any rent derived from leasing out surplus space, such as a church parking lot during the week or a university residence during the summer.
When the charity earns rental income on property it does not use for charitable programs, the charity's own financial statements should provide details on this property in an explanatory note or appendix.

Any income the charity earned from leasing out equipment or other resources should be reported on line 116, "Other income."

Line 111 - Receipts from governments: Reports the gross amounts that the charity received from federal, provincial or territorial, and municipal governments in return for goods and services the charity provided to these governments or on their behalf.

Line 112 - Other fees and earned income: Includes the gross income the charity received from such sources as subscription fees for magazines, day care fees, registration fees for seminars and courses, and tuition fees.

This includes any income the charity received from selling goods and services on a regular basis. For example, income from operating a catering service, church bookstore, or hospital gift shop, and from selling recycled and donated goods or crafts produced by poor communities.

This does not include income from occasional fund-raising events, such as a once-a-year sale of chocolate bars or a bingo the charity held from time to time. This income should be reported on line 113.

Also, this does not include revenues from governments. This income will be reported on line 111.

Not included, are those tuition fees (or portion of tuition fees) which the charity can acknowledge with an official donation receipt according to the policy explained in Information Circular 75-23, Tuition Fees and Charitable Donation Receipts Paid to Privately Supported Secular and Religious Schools. These fees should be reported on line 100. For more details, see lines 710 to 712 in the guide.

Line 113 - Payments from fund-raising activities: Includes the gross amount the charity received from activities, events, or campaigns it conducted occasionally to raise funds (e.g., an auction, mail campaign, concert, or golf tournament).

Note: Some fund-raising events attract payments that, in whole or in part, are in the nature of gifts. These gifts should be reported on line 100 (if the charity issued a tax receipt) or on line 102 (if the charity did not issue a tax receipt). See also lines 713 to 715 for more information.

Line 114 - Interest and dividends: Includes the total interest and other investment income the charity received during the fiscal period (e.g., interest from bank accounts, mortgages, bonds, and loans). The gross amount before any tax or other source deductions are made should be reported.

Includes all investment income, whether or not the charity received an information slip for the amount, and whether or not the charity received the income from a non-arm's length individual or organization.

The organization should report all foreign investment income in Canadian dollars. This amount should be converted at the exchange rate in effect when the charity received the income.

Line 115 - Capital gains or losses: When a charity sells a capital property, it may have a capital gain or a capital loss. Examples of capital property are land, buildings, securities, and works of art.

In simple terms, a charity may have a capital gain if it sells a property for more than it paid for it. It may have a capital loss if the amount it receives from the sale is less than the amount it paid to buy the property.

The charity's capital gain or loss should be calculated on each property it sold as follows:

   Proceeds of disposition
-   Adjusted cost base
=   Capital gain or loss

The proceeds of disposition are the amount the charity received for the property: the selling price.

The adjusted cost base is the amount the charity originally paid for the property, plus any costs (such as legal fees or surveys) associated with the purchase, plus the cost of any capital improvements to the property, plus any costs the charity incurred to sell it.

If a gain is spread out over a number of years (e.g., if the charity sells a building and takes back a mortgage), include only amounts the charity received during the fiscal period.

If the charity sold several properties during the fiscal period, add together the capital gain or loss on each property and enter the net result on line 115.

If the figure on line 115 contains brackets, it represents a net loss.

Lines 116 and 117 - Other income: Reports any other gross income not already recorded on lines 100 to 115. Should contain a brief explanation of the nature of the income.

Note: Government rebates are not income. Neither GST rebates nor GST payments should be included in the "Statement of receipts and disbursements." The same applies to other government rebates (e.g., PST, HST, gasoline rebates).

Disbursements this fiscal period: Charities have to report how much they spent on the five types of disbursements listed on the return (lines 120 to 124). The organization must identify and report disbursements that do not readily fit into these five categories on the three "Other" lines (lines 125 to 127).

The five categories on the return may not correspond to those the charity uses when it draws up its accounts for other purposes. However, the CCRA needs to know how much the charity spent on these categories to determine whether it continues to meet its requirements under the Income Tax Act. The charity must keep track of its disbursements during the fiscal period in such a way that it is able to enter figures that are reasonably accurate. The charity cannot simply invent an allocation of its disbursements at the end of the fiscal period. It must be able to justify its figures to us.

If necessary, the charity should allocate disbursements on a single item among the categories on a reasonable basis. For example, they may divide the occupancy costs of a building among line 120, line 122, and line 125 if the building housed one of the charity's programs, its administrative offices, and a commercial tenant.

Note: In reporting disbursements, the actual amount expended (cash method of accounting) or the full amount of the expenditure incurred (accrual method) should be reported. Depreciation expenses should not be reported, but the cost of capital assets acquired during the fiscal period should be included.

Line 120 - Expenditures on charitable work: Reports all disbursements the charity made that are essential to providing the charitable program. A hospital, for example, would include the salaries not only of the medical and nursing staff who are treating the patients, but also of those providing support services that enable the patient to stay in the hospital, such as kitchen and housekeeping staff, or those providing assistance the doctors and nurses need to perform their healing role, like laboratory technicians. Include also any disbursements for supplies and equipment that these nurses, kitchen workers, and technicians use.

Not include on line 120 are any accumulated amounts reported on Schedule B on lines 753 or 755. These are amounts for which the charity has received the permission of the CCRA to treat as expenditures, even though the charity is retaining them for a future project. The charity should not report either the money going into these savings, or the money coming out of them, on line 120. When the charity finally disburses these specialized funds, they should be reported on lines 125 to 127 and identified as, for example, "purchase of new building (previously accumulated amounts)."

Line 121 - Gifts to qualified donees: In determining the amount to enter, the charity must complete section H. Amounts entered on lines 121 and 503 should be the same.

Line 122 - Management and general administration: Line 122, reports disbursements related to the overall management and administration of the organization.

This would usually include the salaries and expenses of managers and their clerical and other staff. However, if these people also have other functions, such as hands-on involvement in the charity's work (line 120) or in fund-raising (line 123), these salaries and expenses should be allocated accordingly.

Other examples of expenditures that should be included here are the cost of:
  • holding meetings of the board of directors;
  • preparing and distributing annual reports;
  • holding committee and staff meetings on issues not covered in any of the other four disbursement categories;
  • providing accounting, auditing, personnel, and other administrative services;
  • providing legal services on the organization's behalf; and
  • purchasing supplies and equipment, and paying occupancy costs for administrative offices.
Line 123 - Fund-raising: Reports the total disbursements the charity made to raise funds. Examples of such disbursements are:
  • expenses for conducting fund-raising activities, including salaries and overhead costs, promotional materials, campaign supplies, electronic data processing, and year-round office expenses directly related to fund-raising;
  • expenses for promoting the charity and its activities to the community primarily for fund-raising purposes;
  • fees the charity paid to outside fund-raising consultants or agencies (or amounts retained by them); and
  • postage costs for direct-mail canvassing.
Some charities produce publications intended both to help them raise funds and to achieve an educational objective. For example, a charity may produce a pamphlet that advises those at risk of contracting a particular disease and requests funds to support the charity's research. In such cases, it becomes a matter of judgment how to allocate the costs of producing the publication. Many publications, in the view of the CCRA, are essentially fund-raising vehicles designed to attract public interest in the charity. Accordingly, they should report their entire cost on line 123. On the other hand, a charity may have reasonable grounds to report the entire cost of a pamphlet on line 120, "Expenditures on charitable work". For example, the charity could report the entire cost if:
  • the material is clearly educational;
  • the publication is distributed to those who could benefit from the information rather than simply to potential donors; and
  • the request for financial support is contained in the pamphlet but is not the pamphlet's primary purpose.
Line 124 - Political advocacy, activities: On line 124, the charity should report disbursements made for political advocacy and other political activities. These are activities that are intended to influence public opinion on an issue or to pressure elected or government officials on legislative or policy matters. Both the common law and the Income Tax Act allow charities to conduct political activities. The law recognizes the historical and continuing role of charities in providing informed contributions in the development of public affairs and policy. However, charities are not political bodies. Thus, they face limits on the type and extent of political activities they can pursue. There are three important restrictions:

  1. The activity must be entirely non-partisan in nature. The charity must not support or oppose political parties or candidates for public office. A charity, for example, cannot purchase tickets to a fund-raising event held by a political party.
  2. These disbursements are allowed only as additional expenditures after the charity has satisfied the requirement that it devote substantially all its resources to charitable programs. As a guideline, we suggest charities devote no more than 10% of their disbursements to political activities.
  3. The activities relate directly to the charity's own purposes. Charities are not permitted to commit their resources to campaigning on issues, policies, and laws that are unrelated to their formal purposes. For example, a charity established to protect the environment may press a government on its environmental policies, but not on an unrelated issue such as prison reform.

The CCRA accepts that a charity is not necessarily engaging in a political activity when it addresses a government body or the public at large on legislative and policy matters. Instead, the activity can sometimes form a normal part of its charitable or administrative activities. If so, the related disbursements should be reported on line 120 or line 122. Usually, the CCRA would not question the exclusion from line 124 of disbursements for:
  • conducting day-to-day business with government agencies (e.g., the costs to a hospital of preparing reports for or meeting with officials of a Ministry of Health);
  • providing governments or the public with specialized information at the charity's disposal; and
  • expressing the charity's views to a governmental body on an issue affecting its ability to carry out its charitable mandate.
For more information, see Information Circular 87-1, Registered Charities - Ancillary and Incidental Political Activities.

Lines 125 to 127 - Other disbursements: Lists any other disbursements on these lines and briefly explains their nature. The charity can group disbursements when appropriate. The CCRA will accept a category labelled "other" to cover small, miscellaneous amounts. However, the charity must be sure to separately identify any category representing more than 5% of the charity's disbursements so the reader understands how the charity has used its funds.

Among the items eligible for inclusion are:
  • the premiums the charity paid to maintain life-insurance policies that donors have given to the charity;
  • the costs of rental property the charity does not use to operate its charitable programs (line 120), administration (line 122), or fund-raising (line 123);
  • the costs of producing and selling goods and services, which the charity does not use, produce, or sell in the context of its charitable work (line 120); and
  • amounts that the charity has previously accumulated with our permission (see the discussion at line 120).

Section E - Further Information on Amounts Received

Line 150 - E1. Total of amounts received: If the charity's total amounts received from all sources, as reported on line 118, were $30,000 or less, no should be checked. It is not necessary for the charity answer any more questions in this section.

If the charity's total amounts received from all sources were more than $30,000, yes should be checked and the rest of section E should be completed.

Notes: Questions E2 and E3 ask about goods and services that the charity provides regularly and frequently and for which it charges a fee, or resources that it actively exploits to earn money (as opposed to passive investments). The charity obtains revenues because people are buying something from it. Sometimes, the activity in question is a charitable program (e.g., the renting of adapted housing to seniors); sometimes the activity is a related business (e.g., the operation of a cafeteria in a hospital).

Questions E4 to E8 focus on occasional fund-raising events and active solicitations for gifts. The charity obtains revenues because people are responding to a special request to give, or they are buying something from it, but on an infrequent, irregular basis.

Lines 151 to 169 - E2. Fees and other revenues: The organization will examine the list and check either yes or no, depending on whether the charity sought to obtain revenues by providing or using the item mentioned.

The answer will be yes if the charity sought revenues from an item even if the people working for the charity were volunteers or if the item was provided as part of a charitable program.

Line 169, reports any line of goods the charity sold, any services it provided for a fee, or resources and facilities it used to generate revenues which are not listed earlier. It should also briefly explain the nature of the revenue sources, including any item the charity made a deliberate effort to use to generate revenue.

Lines 170 and 171 - E3. Gross and net revenue: If all the items in question E2 are checked no, "0" should be entered on lines 170 and 171.

In all other cases, the organization should add the gross amount the charity received for each of the items checked yes and enter the total on line 170.

Then, the charity deducts the costs of earning this revenue and enters the resulting net revenue on line 171. If there is a loss, there will be brackets around the figure on line 171. The organization should allocate shared overhead and other indirect costs on a reasonable basis.

The amount reported on line 170 would normally appear in the statement of receipts on one or more of lines 109, 110, 111, 112, 116, and 117.

Lines 201 to 215 - E4. Fund-raising methods: The remaining questions in this section deal with fund-raising activities, events, or campaigns.

The organization will go through the list and check either yes or no, depending on whether the charity used the particular fund-raising method.

Line 215, briefly identifies any additional means the charity used to raise funds.

Note: Fund-raising activities do not include regular offerings of religious congregations.

If the organization answered no on all of lines 201 to 215, they will skip to questions E8 and E9.

Line 230 - E5. Gross amount raised: If the charity checked yes for any of lines 201 to 215, it will add the total money it raised using the methods and enter the gross amount on line 230. It should not deduct any expenses the charity incurred in the fund-raising activity.

The amount reported on line 230 would normally appear in the statement of receipts on one or more of lines 101, 102, 113, 116, and 117.

Lines 231 to 234 - E6. Use of professional fund-raisers: Line 231 asks whether the charity hired outside professional fund-raisers to help design or conduct its fund-raising activities. A professional fund-raiser is a person or company specializing in the field of fund-raising. The answer No on line 231 indicates that the charity relied entirely on its own staff or volunteers. The answer will also be no if a professional fund-raiser helped the charity on an unpaid basis.

If the answer on line 231 is no, the charity will skip to question E7.

If the charity used outside fund-raising services, they will answer yes on line 231. Then answer yes or no on lines 232 and 233, depending on how it paid (or will pay) for these services. A professional fund-raiser is retained on a commission basis if the individual or organization receives a percentage of the funds raised. In a straight-fee arrangement, the charity pays the professional fund-raiser a set amount which does not vary according to the success of the campaign.

On line 234, the amount entered is the total of amounts the charity paid to professional fund-raisers, or of amounts the professional fund-raisers retained before giving the balance of the funds to the charity.

E7. Main fund-raising activity: This area describes the charity's main fund-raising activity, event, or campaign during the fiscal period. Main activity means the fund-raising activity that earned the most revenue before expenses.

The CCRA wants to know:
  • what the activity was (e.g., bingos, mail campaigns, telethons);
  • how often it took place (e.g., only once during the course of the year, twice weekly);
  • the estimated percentage of the people working for the event who were unpaid volunteers;
  • whether a professional fund-raiser was involved and, if so, how much the individual or organization received; and
  • the net proceeds (or loss) to the charity on the activity after it paid all associated expenses.
Lines 235 to 239 - E8. Planned-giving program: Planned giving is a fund-raising program that involves arranging donations to serve the interests of the charity and to best suit the personal, financial, and tax situation of the individual donor. Through a planned-giving program, a charity seeks to attract significant gifts by identifying potential donors and helping them with information and advice. Yes or no should be checked, depending on whether the charity had staff and policies in place to encourage planned giving.

The CCRA lists four common components of a planned-giving program. They offer donors a way to make deferred gifts to a charity. Deferred gifts all result in the charity receiving money or property at a future date, although it can issue a tax receipt to donors when they make the deferred gift.

The organization will go through the list and check yes or no, according to whether the charity offered advice to people interested in making a gift using any of the listed means. They will not check yes if the charity simply became aware of, for example, a bequest in its favour but took no active steps to attract, help, or counsel the donor.


Section F - Remuneration and Benefits

Line 300 - F1. Number of compensated positions: Line 300, provides the number of compensated positions the charity had on average during the fiscal period. The number represents the usual number of positions the charity had on a given day, including both managerial positions and others. Charities with a labor force that changes in size during different seasons should report the average number of positions at their peak periods. If the charity had part-time positions, it should add these together and report the equivalent number of full-time positions (e.g., two half-time positions should be reported as one).

If the charity is entirely operated by volunteers and did not compensate anyone, they will enter "0."

Line 301 - F2. Compensated managers: Managers are the senior administrators or executives who are in charge of the charity's everyday affairs. Managers usually hire staff, plan, draw up the charity's accounts and its budget, prepare reports for the board of directors or government agencies, and establish administrative policies for the charity's operations.

Some charities have difficulty deciding whether an employee is a manager, especially in smaller charities where employees often have several functions. If, however, they pay one or more people who devote at least part of their time to carrying out management responsibilities, they should answer yes to this question.

If the charity had no compensated managers, they will go to question F3.

Lines 302 to 309 - Five most highly compensated managers: If the charity employed managers, report the remuneration and benefits of the five most highly compensated by indicating where their compensation packages fall within the ranges on the return.

Charities with fewer than five compensated managers should report the compensation given to all their managers.

Compensation includes all forms of salaries, wages, commissions, bonuses, fees, and honoraria, plus the cash value of benefits. In general terms, it includes all amounts that form part of the recipient's income.

Not included are the employer's portions of payments to an employee's pension, medical, or insurance plan. Also, not included are any payments that are reimbursements for expenses the individual incurred while working on the charity's behalf, such as travel claims.

They should not identify the names or positions of the individuals.

Examples
A charity's top five managers were one chief executive officer earning $75,000, and four department heads earning $50,000 each. The completed question should look like this:

___    $1 - 29,999
___    $30,000 - 49,999
    4   $50,000 - 69,999
    1   $70,000 - 89,999
___    $90,000 - 109,999
___    $110,000 - 129,999
___    $130,000 - 149,999
___    $150,000+

  • Another charity had exactly the same response even though its chief executive officer earned $85,000, and it had ten department heads earning $55,000. This charity includes only four of the ten department heads, since the question only asks for information on the compensation of the five most highly compensated managers.
  • A small charity had only two employees, one performing purely clerical functions, and one whose responsibilities include the organization's daily management. If these two earned $22,000 and $35,000 respectively, then the question is answered as follows.
___    $1 - 29,999
    1   $30,000 - 49,999
___    $50,000 - 69,999
___    $70,000 - 89,999
___    $90,000 - 109,999
___    $110,000 - 129,999
___    $130,000 - 149,999
___    $150,000+

Note: The organization will not report the clerical worker's salary because this person did not perform a management function.

Line 310 - F3. Compensated directors/trustees: This question applies only to directors, trustees, and other similar officials who are members of the charity's elected or appointed governing body.

Provincial law determines the circumstances under which a charity's directors/trustees can receive compensation. In general, the charity cannot pay them simply for occupying the position, nor can directors/trustees profit from the decisions they make guiding the charity's operations. Some provinces permit a charity to have governing documents allowing for reasonable and justifiable compensation for services that directors/trustees provide to the charity.

The organization will not answer yes to the question if the only payments the charity made to directors/trustees were repayments of amounts they spent to carry out their duties (e.g., an out-of-town director's accommodation and travel expenses while attending a board meeting).

If the charity compensated its directors/trustees, they will check yes and attach a statement specifying:
  • the reason that the director/trustee received compensation (e.g., the charity employed director X as a teacher, hired director Y to provide accounting services, or paid director Z an honorarium for attending board meetings);
  • any special provisions in the charity's governing documents on compensating directors/trustees; and
  • the total amount of compensation the charity paid to all directors/trustees.
If only one director/trustee received compensation, they will round the amount the charity paid to the nearest $10,000. If the charity paid only a small amount to this individual, they will simply say "less than $500," "less than $1,000," or "less than $5,000," whichever amount applies.

They will not identify the individuals involved by name or position. Instead, identify them in terms such as "director X" and "director Y" or "one trustee" and "a second trustee."

Lines 311 to 316 - F4. Transfer of income or assets: This question asks about other ways (i.e., apart from compensation for services provided) that a charity may have transferred its income and assets to individuals and organizations with ties to the charity. These transactions may have taken such forms as gifts, free use of equipment or facilities, loans at no interest or below market-rate interest, or purchases at above-market rates.

The Income Tax Act requires a registered charity to ensure that none of its income is used to personally benefit such people or organizations. There may, however, be occasions when a payment or other transaction is justifiable because it helps the charity carry out its charitable purposes (e.g., small gifts to encourage volunteers to contribute their services or to recognize the extraordinary efforts of certain staff members).

The organization will go through the items on lines 311 to 316 and check yes or no, according to whether the charity transferred any part of its income and assets to the persons or organizations listed.

Directors/trustees include directors, trustees, and other similar officials who are members of the charity's elected or appointed governing body.

If they answered yes on any of lines 311 to 316, they will attach a statement giving the amounts involved and explaining the purpose of the transaction. Private foundations should note the discussion of non-qualified investments at line 740 in the guide.


Section G - Political Activities

All charities must complete section G. If the charity did not try to influence public opinion or to affect legislation and government policy, check the no boxes on lines 400 to 408 and line 420.

For more information on political activities, see line 124 in the guide.

Lines 400 to 408 - G1. Attempts to influence opinion, legislation, or policy: They will go through the list and check yes or no, depending on whether the charity sought to influence public opinion, or to support or oppose legislation or government policy-at the federal, provincial, or municipal level-by using the means listed. On line 408, they will briefly explain any additional means the charity used.

G2. Relationship of political activity to the charity's purposes: If they answered yes in any of the boxes in question G1, they will explain here the relationship of these activities to the purposes for which the charity was created, as set out in its governing documents. What were the issues or policies at stake? Why did the charity consider it important to its charitable objectives to rally public support or to lobby on the issue? How would a change in a particular law or government policy help the organization carry out its charitable purposes?

Line 420 - G3. Support the charity gave to others for political activities: Sometimes a charity hires a lobbyist to make representations to government on its behalf, or it supports another organization already engaged in a campaign to influence law, policy, or public opinion. Its support could include:
  • giving money;
  • purchasing services;
  • sending its staff or volunteers to help;
  • making its mailing list available; or
  • letting the other organization or individual use the charity's office spaces or telephones.
If the charity lent support to an individual or another organization to carry on political activities, they will check yes on line 420. Then, in the space provided, list the name, location, and BN/registration number (if the other organization was also a registered charity) of these persons or organizations.

Included are the disbursements to these persons and organizations in the amount recorded on line 124.


Schedule A - Checklist

All charities have to complete Schedule A.

This schedule, like Schedules B and C, deals primarily with the more technical requirements for registration as a charity under the Income Tax Act. We treat the information we request on all three schedules as subject to the confidentiality provisions of the Act.

Schedule A is intended to remind charities of various provisions in the Income Tax Act and to cover a few areas not dealt with elsewhere on the return. It indicates where there may be problems or potential problems. By reading the information we provide in the guide, the charity may be able to resolve the matter on its own. For more assistance, contact the Charities Directorate. The CCRA will try to help by offering information and advice so that a minor infraction of the Act's rules does not develop into a major difficulty.

Line 700 - 1. Changes to governing documents: Governing documents are the documents that formally established the charity and govern its operations (e.g., letters patent, certificate of incorporation, memorandum or articles of association, constitution, trust document).

If there have been any changes to these documents, such as a change in the charity's name, its purposes, or the rules governing its operation, attach an official copy of the new documents.

What constitutes an official copy depends on whether or not the charity is incorporated.

If the charity is incorporated, the appropriate provincial or federal incorporating authority usually has to approve changes to the charity's governing documents. If this is the case, we want a photocopy of the amending documents displaying the stamp or other approval mark from the incorporating authority.

If the charity is not incorporated, the CCRA requires a photocopy of the new documents showing the date the documents came into effect and carrying the original signatures of two people who are presently directors/trustees of the charity.

Line 701 - 2. Receipts and services: A gift involves a voluntary transfer of property for which the donor receives or expects nothing in return.

While property is a broad term-it covers, for example, cash, real property (such as buildings and land), interests in property, and life insurance policies-it does not include services.

Thus, a contribution of services (i.e., time, skills, and effort) does not qualify as a gift, and the charity should not issue any tax receipts to acknowledge the services that volunteers provide.

Note: Volunteers sometimes make payments out of their own pockets while working for a charity. Some charities have a policy of reimbursing their volunteers for certain costs. If so, the volunteer can return the reimbursement to the charity and receive a tax receipt for the equivalent amount.

Line 702 - 3. Types of receipts: Many charities find it useful to have two kinds of receipts available. The first type is a tax receipt to use in acknowledging gifts; it contains a statement that it is an official receipt for income tax purposes, along with the other information the law requires. The second type is used to acknowledge payments and contributions that are not gifts (e.g., payments made to the charity to buy services it is offering), or for gifts when the donor does not want or need a tax receipt (e.g., a gift from another charity). The second type does not use words that indicate it is an official receipt for income tax purposes.

If the charity did not receive any non-gift payments or if it did receive such payments but issued no receipt for them, they will check N/A (not applicable).

Line 703 - 4. Date of donations: This question refers to donations the charity received in January or later and for which it issued tax receipts showing the previous year's date. Official receipts for cash gifts should normally show at least the year in which the charity actually received the gift. (A receipt for a gift of property other than cash should show the exact date-day, month, and year-the charity received the property.) However, an exception applies to cheques that are dated and mailed before the end of the calendar year which the charity receives after December 31. In this case, the charity can use the postmark date as the date of the gift for the purposes of the tax receipt.

Lines 704 to 706 - 5. Non-cash gifts: Cash gifts include not only money but cheques, money orders, other negotiable instruments, and payments using credit cards. Non-cash gifts are sometimes called gifts in kind and cover gifts of such items as artwork, equipment, and land.

If the charity issued tax receipts for non-cash gifts, yes will be checked on line 704 and the total amount for which the charity issued such receipts will be entered on line 705.

Among all the tax receipts the charity issued for non-cash gifts, line 706 focuses on the one issued for the most highly valued gift. On line 706, they will enter the amount of the gift as it appeared on this tax receipt. Then, if the amount is more than $1,000, they must identify:
  • the nature of the gift in enough detail to enable us to assess the value placed on it (e.g., instead of simply saying "property," a more helpful entry would read "10 hectares of undeveloped land on the outskirts of Saint John"); and
  • how the charity established the fair market value of the item.
Line 707 - 6. Return of donations: A gift involves transferring ownership, with the donor usually having no claim on the property after he or she gives it to the charity. Once the charity receives the gift, it is bound by its governing documents to apply the property to its charitable purposes. These would not allow the charity to give property away to a private individual, even if that individual was the original owner of the property.

However, in a few rare cases, a charity may find itself under a legal obligation to return the donation. Please contact the Charities Directorate for advice if the charity is in this situation.

Charities that have returned gifts to donors without previously contacting the Directorate should attach a statement explaining:
  • the reasons for the return;
  • how many donors were involved; and
  • the amounts returned.
The statement should also state whether the charity was handed back the tax receipt it issued when it originally received the gift.

Line 708 - 7. Designated gifts: The charity should not issue tax receipts if donors direct the charity either to use the contribution for the benefit of a specific person or family whom the donors have selected entirely on their own initiative, or to transfer the contribution to another organization. In effect, such donors are not making a gift to the charity, but rather to the person, family, or organization they have chosen.

However, a charity can issue tax receipts to donors who want their gifts used to support a particular program of the charity (e.g., a gift to endow a university chair or to buy new equipment for a hospital's radiology department). The charity must still be responsible for selecting the specific beneficiaries of its programs (the professor, students, or patients who will benefit from the gift).

If the charity has issued official donation receipts for contributions the donor has designated to benefit specific individuals or other organizations, they should:
  • check yes on line 708; and
  • attach a statement explaining the type of designation the donor made and why the charity issued a tax receipt for the contribution.
Line 709 - 8. Designated gifts from charity to other organizations: The charity should not transfer an amount to a qualified donee when they both agree that the qualified donee will give this amount to a third organization, unless this third organization is also a qualified donee. In effect, the charity is not making a gift to the qualified donee, but to the third organization.

In the view of the CCRA, it is inconsistent with the provisions of the Act for any registered charity to make gifts to organizations that are not qualified donees.

Charities that transferred amounts to qualified donees that were designated to benefit one or more other organizations should:
  • check yes on line 709; and
  • attach a statement identifying the third organization, whether it is a qualified donee, and the reason for making the designation.
Lines 710 to 712 - 9. Gifts or fees to religious or religious-and-academic schools: School refers to an institution for children at the elementary or high school level. It does not include post-secondary institutions like universities and colleges, or summer camps, nurseries, or pre-school programs.

If the charity did not operate a religious or religious-and-academic school, they will check no on line 710 and go to question 10.

If the charity did operate such a school, they will check yes and enter on line 711 the total amount of all tuition fees the charity received on behalf of children attending the school.

The CCRA may accept that a part of the total amount recorded on line 711 represents gifts to the school. Please see Information Circular 75-23, Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools, and the information letter that supplements the circular.

If the charity issued tax receipts for any part of the amount on line 711, they will enter the total for which it issued receipts on line 712. They will enter "0" on line 712 if the charity did not issue any tax receipts.

Lines 713 to 715 - 10. Gifts or fees for fund-raising events: In some circumstances, the CCRA may consider admission fees to a dinner, ball, concert, show, or similar fund-raising function as covering two payments: one a gift to the charity, and the other a payment for the fair market value of the services offered at the function. For more information, see Interpretation Bulletin IT-110, Gifts and Official Donation Receipts.

If the charity did not hold a fund-raising function of this type, they will check no on line 713 and go to question 11.

A charity that did hold such a fund-raising function should check yes and enter the total amount it received in admission fees to these events on line 714. If the charity issued tax receipts for any part of the amount on line 714, they should enter the total for which the charity issued such receipts on line 715. They will enter "0" on line 715 if the charity did not issue any tax receipts.

Lines 716 to 718 - 11. Gifts or sponsorship fees from businesses: The CCRA will use your answer to this question to build an estimate of how much business in Canada is contributing to the charitable sector.

A business is a firm that is run to make a profit. It can be a company, or an unincorporated entity, trust, or partnership. For the purposes of this question, they will not include a gift in the form of a cheque drawn on the account of an individual, even if that person is engaged in commercial activity.

Sponsorship fees are the amounts paid to a charity that are not gifts because the sponsor receives something in exchange. They are usually paid to support a charity event in return for advertising or some other consideration.

If the charity did not receive a gift or sponsorship fees from a business, they will check no on line 716 and go to question 12.

If the charity did receive a gift or sponsorship fees from a business, they will check yes and enter on line 717 the total amount of the gift(s) or fees received.

If the charity issued tax receipts for any part of the amount on line 717, they will enter the total for which it issued receipts on line 718. They will enter "0" on line 718 if the charity did not issue any tax receipts.

Lines 719 and 720 - 12. Cultural gifts: A cultural gift is a gift of cultural property, that is, objects the Canadian Cultural Property Export Review Board (CCPERB) certifies as being of outstanding significance and national importance. For more information, see the pamphlet P113, Gifts and Income Tax, and Interpretation Bulletin IT-407, Dispositions of Cultural Property to Designated Canadian Institutions. The Income Tax Act provides that, if recipients of cultural property dispose of it inappropriately, they are subject to a tax equivalent to 30% of the property's fair market value on the date of its disposition. In such cases, the charity must file a return (Form T913) and pay the tax within 90 days of the end of its fiscal period.

The charity will not be subject to the tax if it has held the object for at least five years, or if it disposes of the object to an institution or public authority that the CCPERB has designated as capable of receiving it.

If the charity has never received a cultural gift, they will check no on line 719 and go to question 13.

A charity that has received a cultural gift at some point in its existence should check yes and then answer yes or no on line 720, indicating if, during the fiscal period, it disposed of any cultural property, which it had received as a cultural gift within the last five years, to an institution the CCPERB had not designated as capable of receiving it.

Lines 721 and 722 - 13. Ecological gifts: Ecological gifts are gifts of ecological property, that is, of land or of restrictive covenants, easements, or servitudes attached to land, that the Minister of the Environment has certified as ecologically sensitive and whose conservation and protection is, in the Minister's opinion, important to Canada's environmental heritage.

The Income Tax Act provides that, if recipients of ecological property dispose of it or change its use without authorization from the Minister of the Environment, they are subject to a tax equal to 50% of the land's value on the day they disposed of it or changed its use. A charity subject to this tax must file a return (Form T913) and pay the tax within 90 days of the end of its fiscal period.

If the charity has never received an ecological gift, they will check no on line 721 and go to question 14.

A charity that has received an ecological gift at some point in its existence should check yes and then answer yes or no on line 722, indicating if, during the fiscal period, it disposed of any ecological property or changed its use without the permission of the Minister of the Environment.

Line 723 and 724 - 14. Gifts of charitable remainder trusts: A charitable remainder trust involves placing assets into a trust. The trustee ultimately passes ownership of the assets to a charity. Before that point, however, another person can benefit from the use of the assets, either for a specified period or during his or her lifetime. Charitable remainder trusts can be created under a will or while the donor is alive. A typical example has the donor's spouse enjoying the income from a capital sum for life and then the capital sum going to charity when the spouse dies.

A charity that will ultimately receive the assets of a charitable remainder trust can issue a tax receipt if certain conditions are met. The amount on the receipt is the value of the charity's remainder interest, rather than the value of the assets themselves. For more information, see Interpretation Bulletin IT-226, Gift to a Charity of a Residual Interest in Real Property or an Equitable Interest in a Trust.

If the charity did not receive gifts by way of charitable remainder trusts, they will check no on line 723 and go to question 15.

If the charity did receive gifts by way of charitable remainder trusts, they will check yes on line 723 and enter on line 724 the total of amounts shown on tax receipts that it issued for gifts of remainder interests.

The charity will enter "0"on line 724 if the they did not issue any tax receipts.

Line 725 - 15. Non-qualifying securities and use of charity's property: A non-qualifying security (NQS) is a share in a corporation with which the donor does not deal at arm's length and which is not listed on a stock exchange; or a debt obligation (such as a promissory note) issued by a company or individual that is not at arm's length to the donor. A common kind of NQS is a share in a privately held company.

A charity can acquire a NQS either by receiving one as a gift or by buying one (or otherwise giving something in exchange for it).

When a charity receives a gift of a NQS, it should note the security's fair market value. However, the charity cannot issue a tax receipt to the donor unless one of two things happens in the following five years:
  • the charity disposes of the NQS; or
  • the security ceases to be a NQS. For example, if a privately held company goes public and its shares become listed on a stock exchange.
If neither of these two events occurs in the five-year period, the charity can never issue a receipt for the NQS. However, if the charity does dispose of the NQS or the security ceases to be a NQS within the five-year period, the donor is treated as having made a gift on the date the event occurred, and the charity can then issue a tax receipt. The value of the gift which the charity records on the receipt is the lower of two amounts:
  • the fair market value of the NQS when the charity first received it; or
  • what the charity obtains for the NQS when it disposes of the security, or the security's fair market value on the day it ceases to be a NQS.
Some NQSs are exempted from this provision. If a NQS is exempted, a charity can issue a tax receipt for it just as it would for any other gift. A NQS is exempted if it meets all the following criteria:
  • it is in the form of a share;
  • the charity that receives the NQS is a charitable organization or public foundation;
  • the donor is at arm's length to the charity; and
  • the donor is at arm's length to each of the charity's directors/trustees.
When a charity buys or otherwise gives something in order to acquire a NQS, special rules apply if the charity is acquiring the NQS from a company or individual that has previously made a donation to the charity. These rules do not affect the charity directly. It issues a receipt for the donation in the usual way. However, the donor is obliged to reduce the amount claimed as a tax credit or deduction by the amount the charity gives to acquire the NQS from the donor.

Special rules also apply if a donor is allowed to use the charity's property under the following circumstances:
  • the donor is not at arm's length to the charity;
  • the donor uses the charity's property at any time within five years of making a gift to the charity; and
  • the property in question is property that the charity is not using to deliver its charitable programs.
Again, these special rules do not affect the charity directly. However, the donor is obliged to reduce the amount claimed for a tax credit or deduction by the value of the property used, even if the donor is paying rent or otherwise giving the charity something in exchange for the right to use the property.

For more information, see RC4108, Registered Charities and the Income Tax Act.

Line 735 - 16. T4 slips for remuneration and benefits: If the charity did not have any employees, they will check N/A (not applicable) on line 735.

Line 736 - 17. T4A slips for scholarships and bursaries: If the charity did not award scholarships or bursaries, they will check N/A on line 736.

When a charity makes payments that are taxable in the hands of the recipient, it has to report the payments to the Canada Customs and Revenue Agency and withhold taxes at source when required.

Payments that may be taxable include wages, salaries, benefits, fees, honoraria, scholarships, and bursaries.

For more information, contact any tax services office.

Line 737 - 18./19. Books and records: No matter where the charity carried out its activities, it must have books and records available at an address in Canada that would enable an audit to verify:
  • the official donation receipts it issued;
  • the income it received and the expenditures it made;
  • that the organization meets all the requirements for continued registration set out in the Income Tax Act (the necessary information will vary from charity to charity, but could include other financial records, copies of minutes of meetings, correspondence, publicity brochures, and any other documents that provide details about the charity's programs); and
  • source deductions and taxes payable.
General information on retaining and destroying records can be found in Information Circular 78-10, Books and Records Retention/Destruction.

20. Person preparing the return: Provide the requested information on the person who prepared the return.

For public and private foundations only

Charitable organizations should not answer questions 21 and 22.

Note: This guide provides information on the charity's designation (charitable organization, public foundation, or private foundation) at line 003.

Line 738 - 21. Control of a corporation: The Income Tax Act does not permit public and private foundations to acquire control of any corporation. However, the Act allows one exception: when the control is the result of a gift of shares to the foundation, and the foundation had not previously purchased or otherwise acquired for consideration more than 5% of the issued shares of any class of the capital stock of the corporation.

Control usually means that the foundation owns, or the foundation plus persons not dealing with it at arm's length own, more than 50% of a corporation's issued share capital with full voting rights under all circumstances.

If the foundation has acquired control of a corporation, they will check yes and attach a statement giving details of the transaction. The statement should indicate the percentage of shares the foundation acquired by gift and by purchase.

Line 739 - 22. Debts: The Income Tax Act usually does not permit public and private foundations to acquire debts. However, the Act does allow three kinds of debts:
  • those for current operating expenses;
  • those incurred in connection with the purchase and sale of investments; and
  • those incurred in the course of administering charitable activities.
An example of an allowable debt is an amount owing to a stockbroker in the course of purchasing shares. However, borrowing money to buy these shares is not an allowable debt.

If the foundation incurred debts that do not fall within the three permitted types, they will check yes and attach a statement describing the debt and the purposes for which it was incurred.

For private foundations only

Charitable organizations and public foundations should not answer this question.

Line 740 - 23. Non-qualified investments: A non-qualified investment is:

1. a debt, other than a pledge or an undertaking to make a gift, owing to the foundation by:
a) a person, other than an excluded corporation, who:
  • is a member, shareholder, trustee, settlor, officer, official, or director of the foundation;
  • has, or is a member of a group of persons who do not deal with each other at arm's length who have, contributed more than 50% of the foundation's capital; or
  • does not deal at arm's length with any person described in i) or ii) above; or

b) a corporation, other than an excluded corporation, controlled by:
  • the foundation;
  • any person or group of persons referred to in a) above;
  • the foundation and any other private foundation with which it does not deal at arm's length; or
  • any combination of the preceding three categories.

2. a share of a class of the capital stock of a corporation, other than an excluded corporation, referred to in 1 above that the foundation holds. However, the law excludes from the category of non-qualified investments any share listed on one of the stock exchanges named in Regulation 3200 or 3201 of the Act or which is a prescribed share (see Regulation 6203(1)) of the capital stock of a taxable Canadian corporation.

3. a right the foundation holds to acquire a share described in 2 above. An excluded corporation is:
  • a limited dividend housing company of the type identified in paragraph 149(1)(n) of the Act;
  • a corporation whose issued shares are all held by the foundation; or
  • a corporation whose operations are confined to holding property a registered charity uses for its administration or charitable activities.
If during the year the foundation held debts or shares (or rights to acquire shares) that were non-qualified investments, they will check yes and attach a statement describing:
  • the debts, shares, or rights, including the date of issue and, if applicable, of sale;
  • their cost amount to the foundation;
  • their fair market value on April 21, 1982, if last acquired on or before this date; and
  • the amount of interest or dividends the foundation received on them for the fiscal period.
Non-qualified investments (whether in the form of debts, shares, or rights to a share) may give rise to a tax payable by the debtor if the private foundation receives interest or dividends on them falling short of an amount based on the prescribed rate (Regulation 4301). For more information about this tax, and for copies of Form T2140, Part V Tax Return - Tax on Non-Qualified Investments of a Registered Charity, contact the Charities Directorate or any tax services office.


Schedule B - Statement of Property Accumulated

Only charities that have received the permission to accumulate funds from the CCRA should complete this schedule. See line 833 for more information.

Lines 749 and 750 - Amount, expiry date and specific purpose for accumulation: The CCRA letter granting permission to accumulate specifies the amount the charity can accumulate, the expiry date of the accumulation period, and the purpose for which the charity can retain the money or other property.

Line 751 - Continuing to accumulate for this specific purpose: If the charity still intends to apply the amounts it is accumulating for the specific purpose the CCRA has approved, they will check yes.

They will check no if the charity has decided not to use the accumulated property for this purpose. The Income Tax Act provides that the charity has to treat the amount it has so far accumulated, and any income it has earned on this amount, as if they were tax-receipted donations the charity received in the year it decides not to use the property for the approved purpose. When this occurs, the charity must spend the accumulated amount plus interest on its charitable programs in the fiscal period after it makes the decision.

If they checked no, they will include the amount from line 756 on line 901 of this year's return.

Line 752 - Balance from previous year: Enter the amount the charity reported on line 756 of last year's return.

Line 753 - Amount accumulated during the year: Report the total amount the charity set aside for the specific purpose during the fiscal period. Include any income the charity earned on amounts it set aside in previous years.

Line 755 - Amount spent for the specific purpose: Sometimes charities start their projects before the end of the accumulation period. If the charity did make any such expenditures during this fiscal period, they will be reported on line 755.

Line 756 - Balance still to be disbursed: The charity must spend the whole accumulated amount before the end of the accumulation period. They must contact the Charities Directorate if they need to extend its accumulation period.

If the charity does not use the whole accumulated amount before the period expires, it must spend what remains on its charitable programs during the fiscal period following the expiry date. The Act treats the unused part as if it were a tax-receipted donation the charity received in the final year of the accumulation period. The amount consequently figures in the charity's disbursement quota in the fiscal period after the end of the accumulation period.

If the accumulation period has expired and an unspent accumulated amount remains, this amount will be included on line 901 of this year's return.


Schedule C - Disbursement Quota

All charities have to complete this schedule.

The disbursement quota is an expenditure test. To keep their registration, charities have to spend a minimum amount (the quota) on their charitable programs, including gifts to qualified donees.

The purpose of the disbursement quota is to ensure that, as much as possible, charities actively use their tax-assisted donations to help others according to their charitable purposes. These donations are not meant for the most part to accumulate in a bank account, or to be spent on activities like administration or fund-raising which may be necessary but which do not directly accomplish the charity's purposes.

To help charities plan their expenditures, the quota is largely based on what happened in previous years. Consequently, at the end of one year, a charity should have a fair estimate of how much it will need to spend on its charitable programs during the following year.

Schedule C has six parts:
  • Part I calculates the charity's disbursement quota.
  • Part II adds together the charity's qualifying expenditures to determine whether it met the disbursement quota.
  • Parts III and IV identify the extent to which the charity had a disbursement excess or disbursement shortfall. The charity completes either Part III or Part IV.
  • Part V is optional. It will help the charity keep track of disbursement excesses. These are useful items, since they can help a charity meet its quota in years when it might otherwise fall short.
  • Part VI gathers together information (some of it already given elsewhere in this year's return), which the charity will need next year to calculate the disbursement quota for that year.

Part I - Finding out the minimum amount the charity should have spent on charitable programs this fiscal period:

Charitable organizations complete the first two sections of this Part, while public and private foundations complete all four sections.

Note: The disbursement quota for newly registered charities which are designated charitable organizations is set at $0. If this return covers a charitable organization's first year of operations since it was registered, skip Part I. Instead, start at Part II and enter "0" on line 835.

Newly registered foundations should do the same, providing that they had no investment assets before their registration. Those that held investments before they were registered should complete section 4 (lines 820 to 828) below.

Section 1: Charitable organizations and foundations have to complete section 1.

This section covers the first element of the disbursement quota. It is based on the amount of tax-receipted gifts the charity received last year.

Included on line 801 are the accumulated amounts that the law treats as tax-receipted gifts for the previous year. See the discussion at lines 751 and 756 in the guide dealing with property accumulated with the permission of the CCRA.

The charity does not have to include three types of tax-receipted gifts in the disbursement quota:
  • gifts of capital the charity received under a will ("bequests");
  • gifts subject to a direction that the charity keep the property (or any property substituted for it) for at least 10 years; and
  • gifts from other registered charities. (If, as should have been the case, the recipient charity had not issued a tax receipt to the donor charities, you would not need to first include and then exclude these gifts in calculating this element of the disbursement quota.)
Note: Because they do not have to be expended, these three types of tax-receipted gifts together constitute one of the main ways a registered charity can build up a capital sum.

They must enter amounts for excluded gifts on lines 802 to 804, and then add them together on line 805. Subtract line 805 from the total of receipted gifts (line 801), and then enter the remainder on line 806. Finally, they multiply line 806 by 80%. The product, which is entered on line 807, forms the first element in the quota.

Section 2: Charitable organizations and foundations have to complete section 2.

This section covers the second element of the quota. It deals with bequests and 10-year gifts which were excluded from the quota at some earlier time but which the charity has spent this year.

Note: The charity needs to keep track of each bequest and 10-year gift so that when it makes the decision to spend such a gift, its expenditure is a reminder to include the amount in the year's disbursement quota. This provision applies to all 10-year gifts, regardless of when the charity received them. However, it only applies to bequests the charity received after 1992.

Section 2 asks for the total of these previously excluded, but now expended gifts (line 808). This total is multiplied by 80% (line 809) to determine the second element of the quota.

Charitable organizations add the first two elements (lines 807 and 809) together to establish their disbursement quota on line 810. They then go to Part II.

Foundations also make the addition on line 810, but then go on to sections 3 and 4 for the two further elements of the quota that affect them.

Section 3: Only foundations should complete section 3.

This section covers the third element and is based on the amount of gifts the charity received last year from other registered charities. It covers all such gifts, whether or not the recipient charity issued a tax receipt for them, with the one exception of specified gifts.

In section 3, enter the total gifts from other charities that the charity received last year (line 811) and the total specified gifts (line 812). After subtracting the specified gifts from the total (line 813), enter the result on line 814 for private foundations. However, for public foundations, multiply the amount on line 813 by 80% and enter the product on line 814. The amount on line 814 represents the third element of the disbursement quota for foundations.

Section 4: Only foundations should complete section 4. This section covers the fourth and final element of the quota for foundations and asks, after certain adjustments, for the foundation to enter 4.5% of the value of its investment property.

Line 820 - Investment property: Is any real estate or personal property, or part of such property, that:
  • was not used directly for charitable programs or administration; and
  • the foundation owned at any time in the 24 months immediately before the fiscal period covered by the return (e.g., a foundation filing a return for its 1999 fiscal period reports on the value of its investments in 1997 and 1998).
The value of investment property is an average value. Foundations divide the 24 months preceding the fiscal period into two to eight equal periods (e.g., two periods of 12 months each or four periods of 6 months each). Once it has started reporting using a given number of periods, a foundation must not change this number on a later return without our authorization.

The foundation chooses how many periods it wants to use. The number it chooses will depend on the accounting procedures the foundation has in place and the type of investments it holds. For example, if a foundation only calculates the value of its investments once a year, it will have to rely on two 12-month periods to establish an average value.

To establish the average value, it determines the value of all the foundation's investments at the end of each period, adds these values together, and divides by the number of periods.

Example 1: Foundation ABC has two investment assets: a building not used for administration or program activities, plus shares in a publicly traded company. The value of the former is the fair market value of the property, while the value of the shares is set by the closing price (or the average of the bid and asked prices) on the stock exchange for the day on which the period ended. See Regulation 3702 for details on how to establish the value of assets.

ABC elects to arrive at the average value of its investments by using four 6-month periods.

It should calculate the average value to enter on line 820 as follows:


  Value of
building


Value of
shares


Combined
value


End of 1st period $50,000 $10,000 $60,000
End of 2nd period $52,000 $12,000 $64,000
End of 3rd period $48,000 $8,000 $56,000
End of 4th period $51,000 $9,000 $60,000
Total for all periods     $240,000
Divide by the number of periods     ÷       4
Average value (line 820)     $60,000


The building's value as an investment property will be less if ABC used part of it for charitable programs. In the above example, if the foundation used one-quarter of the building for charitable or administrative activities during the first period, then it should reduce the $50,000 by about one-quarter.

Example 2: Foundation XYZ was established in 1998 but registered as a charity effective January 1, 1999. It is now filing its first annual return since it was registered, reporting on its 1999 fiscal period. In 1997, it did not exist as an entity and thus had no assets. However, the following year it was incorporated and received a gift of securities. XYZ has selected two periods of 12 months each as the basis for calculating the average value of its investments.

  Value of securities
End of 1st period (1997) $0
End of 2nd period (1998) $100,000
Total for all periods $100,000
Divide by the number of periods ÷     2
Average value (line 820) $50,000


Lines 821 to 825: Do not count again assets that you already entered into the disbursement quota calculations. Therefore, from the total of investment property on line 820, subtract:
  • receipted gifts (line 806);
  • previously excluded gifts that the foundation expended during the year (line 808); and
  • gifts from other registered charities (line 813).
The remainder is entered on line 825. If it is a negative amount, it is entered as "0."

Line 826: If for some special reason the fiscal period of the return is not equal to 365 days, they will then adjust the quota on investment property proportionately on line 826.

Line 827: To determine the amount to include in the disbursement quota, they multiply the amount on line 825 (or, if the return covers a non-standard fiscal period, the amount on line 826) by 4.5% and enter the product on line 827.

Line 828: Foundations determine their total disbursement quota by adding together lines 810, 814, and 827.


Part II - Finding out whether the charity met the minimum spending requirement

This calculation determines whether the charity has spent an amount this year that is at least equal to its disbursement quota.

Note: They use only expenditures the charity made during the fiscal period to which the return applies.

Line 830 - Total spent on charitable work: Transfer the amount from line 120.

Line 831 - Gifts to qualified donees: Transfer the amount from line 501.

Line 832 - Deemed expenditure: Special relief amount: A charity can apply for approval to have us treat a specified amount as if it was money that the charity had spent on its charitable programs. This provision is available to a charity whose expenditures on charitable programs are reduced by circumstances beyond its control. However, we will only consider giving approval in extraordinary circumstances.

To apply for approval, they must use Form T2094, Registered Charities: Application to Reduce Disbursement Quota, which is available from the Charities Directorate or any tax services office.

Line 832 must only report the amount for which the charity has received our prior approval to treat as an expenditure for this fiscal period.

Line 833 - Deemed expenditure: Accumulated property: A charity can apply for permission to accumulate money or property for a specific purpose. If we approve the application, we will treat any amount the charity retains as if the charity had spent it on charitable programs during the year it was accumulated, and not in any other year (including the year the charity actually spends the retained amount).

If we have given the charity permission to accumulate, it must complete Schedule B. This will help both the charity and us to keep track of amounts being set aside for future use.

On line 833, the amount entered is from line 753 of Schedule B.

Line 834 - Total qualifying expenditures: They add lines 830 to 833 and enter the total amount on line 834.

Line 835 - Comparison with disbursement quota: Charitable organizations enter the quota amount from line 810.

Public and private foundations enter the quota amount from line 828.

If the expenditures are more than the quota, the charity spent more than the required amount. Go to Part III to calculate the disbursement excess.

If the expenditures are less than the quota, the charity spent less than the required amount. Go to Part IV to calculate the disbursement shortfall.


Part III - Calculating the charity's disbursement excess

Line 840 - Amount of excess: This is determined by subtracting the quota (line 835) from the qualifying expenditures (line 834).

Line 841 - Portion of excess applied to previous year's shortfall: A charity that has a disbursement excess can use it to remedy a disbursement shortfall in its immediately preceding fiscal period. By doing this, it removes the possibility that we will revoke its registration as a charity for failing to meet the disbursement quota.

The amount to place on line 841 depends on whether the shortfall recorded on line 847 of the previous year's return is more or less than the current year's excess.

If the previous year's shortfall is more than the current year's excess, the full amount of the excess from line 840 will be entered on line 841.

If the previous year's shortfall is less than the current year's excess, an amount equivalent to the previous year's shortfall will be entered on line 841.

Example:
Shortfall more than current year's excess
1998 disbursement shortfall $5,000
1999 disbursement excess $2,000
Amount to place on line 841 $2,000


The charity has still not managed to meet its 1998 disbursement quota and may need to apply for special relief, as explained at line 832 in the guide.

Shortfall less than current year's excess
1998 disbursement shortfall $5,000
1999 disbursement excess $10,000
Amount to place on line 841 $5,000


The charity has now successfully met its 1998 disbursement quota.

Line 842 - Net excess available for carry-forward: If you entered an amount on line 841, subtract it from the amount on line 840 to determine the charity's net disbursement excess for the year. If there is no entry on line 841, the amounts on lines 840 and 842 should be the same.

Besides applying a disbursement excess back one year, the charity can also draw on it, if necessary, for up to five years to help it meet its disbursement quota. The table in Part V below will help you keep track of any disbursement excesses from year to year.

Part IV - Calculating the charity's disbursement shortfall

Line 845 - Amount of shortfall: Subtract the qualifying expenditures (line 834) from the quota (line 835).

Line 846 - Previous years' excesses applied to shortfall:

If the charity is drawing on its previous years' disbursement excesses, enter on line 846 the amount it is using to make up this fiscal period's shortfall. Do not enter more than is needed to reduce the shortfall to zero.

Line 847 - Net disbursement shortfall:

If there is an entry on line 846, it is subtracted from the amount on line 845 to determine the charity's net disbursement shortfall for the year. If there is no entry on line 846 (i.e., the charity had no previous years' excesses it could use), the amounts on lines 845 and 847 should be the same.

Note: Shortfalls can lead to our revoking the charity's registration.

Part V - Keeping track of disbursement excesses

Completing the table in Part V is optional. Its purpose is to help you keep track of the charity's disbursement excesses.

The first two columns list the excesses by the year in which they occurred. The middle column identifies which disbursement excesses they are using, in whole or in part, to compensate for a disbursement shortfall in this fiscal period. The right-hand column reports the unused excesses still available for future years.

Because any particular year's excess is only available for five years, a charity that is drawing on its excesses should use up its oldest excesses first.

Example:: In its first year after registration (1996), a charity manages to spend $10,000 on its charitable programs. Since its disbursement quota for its first year is zero, it will record a disbursement excess for that year of $10,000. In 1997, it expands and has a disbursement excess of $20,000. The next year it does even better, with an excess of $30,000. However, in 1999 there are problems, and it is facing a disbursement shortfall of $40,000. Accordingly, it draws on its excesses to meet the quota. The table for its fourth year would look like this:

Disbursement Excesses::
Fiscal period Available for carry-forward at end of last fiscal period   Minus amount applied to current shortfall   Available for carry-forward to next year
19     (5 years ago)                                           
19     (4 years ago)                                           
1996 (3 years ago) $ 10,000   $ 10,000   $         0
1997 (2 years ago) $ 20,000   $ 20,000   $         0
1998 (1 year ago) $ 30,000   $ 10,000   $ 20,000
Total $ 60,000 848    $ 40,000 *   $ 20,000
Net disbursement excess of this fiscal period (from line 842 above)     $         0**
Total available for carry-forward   849    $ 20,000


* This is the amount that you should enter on line 846 of the charity's return.
** The charity did not have a disbursement excess in its fourth year. Rather it was facing a shortfall.


PART VI - Preparing for next year

Charitable organizations should complete lines 901 to 907 and, if they received specified gifts this fiscal period, line 912.

Foundations should complete lines 901 to 914.

Part VI is similar to sections 1 and 3 of Part I. In Part VI, you gather together the figures from this year's return that you will need next year. The form states where you will find these figures. Part VI also asks for more details on gifts the charity received during the fiscal period on lines 902, 903, and 912.

Line 902 - Tax-receipted bequests received this fiscal period:: This is the total amount of tax-receipted bequests or inheritances the charity received during the fiscal period.

Line 903 - Tax-receipted 10-year gifts received this fiscal period:: This is the total amount of tax-receipted gifts the charity received during the fiscal period which are subject to a trust or direction that the charity retain the gift (or any property substituted for it) for at least 10 years.

Line 912 - Specified gifts:: This is the total amount of gifts the charity received from other registered charities during the fiscal period that were specified gifts. For more information on specified gifts, see lines 501 to 503 in the guide.

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