How a Canadian church can easily stay in the good books of the CRA

Faith Today dove into the question of “what if?” a church loses their charitable status in the Jan/Feb issue of the magazine. John Pellowe is chief executive officer of the Canadian Council of Christian Charities, and is interviewed in that story. We asked him to go even deeper on this subject, and share what churches most commonly do wrong, and how they can get it right.

By John Pellowe

It is always an unfortunate and disruptive event when a charity has its registered status revoked by the Canada Revenue Agency (CRA). Fortunately, the situations which result in revocation are virtually always avoidable.

Faith Today asks why churches might lose their charitable status, and what they can do about it in our latest issue.

Some stats

Canada Revenue Agency (CRA) statistics show that in any given year about 500 to 700 charities will have their registered status revoked for “failure to file” their T3010. Most commonly, this is caused when charities don’t file, even when reminded by CRA reminders to do so. Less commonly, revocation is due to an incomplete filing that is not fixed as requested by CRA. A much smaller number of revocations, several hundred in number, happen for other reasons, including failing a CRA audit. Preventing these situations requires a bit of diligence on a charity’s leadership’s part, but staying compliant isn’t hard.

#1 prevention tip

To avoid the main revocation issue, boards should set a standard item on the agenda of a board meeting about four months after fiscal year end to approve the T3010 for submission to CRA. Board approval is not required, but this is one way to ensure that the T3010 is not overlooked. If it isn’t ready, there will still be enough time to complete and submit it. It must be in CRA’s hands by six months after the charity’s year end.

Another standard “to-do” should be scheduled sixty days after the T3010 submission date for the treasurer or other staff to check CRA’s Charities Listing website  to see that the information was received and then transcribed accurately by CRA. It might take more than 60 days for it to be online, but most are posted within 60 days.

Other tips for compliance

Most of the other revocations are related to two issues: 1) books and records, and 2) foreign activity.

  • Maintain proper books and records and issue official donation receipts with all the correct information (inadequate records and incomplete receipt information are the most common issues discovered in CRA charity audits).
  • Canadian registered charities may only make gifts to “qualified donees” (e.g. other Canadian registered charities). This national boundary can be an issue when supporting foreign missions, or when foreign missionaries make appeals for Canadian churches to support their non-qualified donee ministries. The church cannot make gifts in response to these solicitations.
    • One way to handle this situation is to have a cross border legal agreement with the foreign charity that is acceptable to CRA. Alternatively, the Canadian church’s denominational office could have one agreement with the foreign charity that allows all their Canadian churches to support the foreign charity through the denominational office. Finally, congregation members can make their gifts directly to these foreign charities and forego the tax receipt.

Duty to know

The other reasons (aside from deliberate fraud) for losing charitable status all come down to the requirement that a charity’s board and staff be aware of the various laws and regulations affecting charities. The Canadian tax regime is built on voluntary self-compliance, which means taxpayers and charities are expected to know and abide by the law and regulations. Governments audits are only spot checks to sample 1% taxpayers and charities for compliance.

It is up to the board and staff to be informed about the rules and regulations affecting charities and to stay up-to-date with changes. There are three helpful resources charities can use to fulfill this responsibility:

  1. The Canadian Council of Christian Charities provides resources (explanations of the rules, templates, policies etc.) specifically for Christian churches and agencies.
  2. Charities can access the CRA website and helpline for information.
  3. Charities should refer to their own professional counsel to be sure they are applying the rules correctly to their own situations.

Aside from just not knowing the laws and regulations, charities get in trouble when they choose to deliberately do something offside, believing that if it is “for the Lord” they should be able to do it. That is a very poor Christian witness! Whether it is political activity or foreign activity or anything else, if you want the benefit of donation tax receipts, you have to play by the rules.

Regaining charitable status

If a charity loses its registered charitable status, it can appeal, and if status was lost because of a late T3010 filing, it can also apply for charitable status again.

However, both the appeal and application processes are time-consuming, require professional counsel, and do not guarantee a positive outcome. These realities and a desire to comply with the laws of the land should inspire all ministry leaders to follow the biblical directives to be good citizens and obey governmental authorities.

John Pellowe is chief executive officer of the Canadian Council of Christian Charities. He was interviewed for “Canadian Churches and their charitable status: would we survive without it,” in the Jan/Feb Faith Today. A subscription to Faith Today means you won’t ever miss important articles like this one. 

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