2016-0632811E5 NPO - Filing Requirements - T2 and T1044

Principal Issues: 1. If an NPO did not file any T1044 information returns since incorporated and the total assets of the NPO exceeds $200,000, how many years of outstanding T1044 forms must be included in a voluntary disclosure? 2. CRA document # E2007-0243291C6 indicates that “the CRA’s administrative policy is not to apply the penalty when form T1044 is late-filed for the first time.” Will this include 10 years of T1044 information returns filed at the same time?

Position: 1 & 2. See below.

Reasons: See below.

Author: Mahendran, Ananthy
Section: 149(1)(l), 149(12), and 162(7)

2016-063281

From: Mahendran, Ananthy
Sent: June 24, 2016 01:29 PM
To: XXXXXXXXXX
Subject: Your email request of February 17, 2016

Dear XXXXXXXXXX:

Further to our reply in response to your email of February 17, 2016, we have performed a search through our research database to determine whether the issues raised in your email have previously been addressed. Our search has identified the following publications and documents which may be of assistance:

1)   Should the NPO register with Canada Revenue Agency (“CRA”)?

a) If yes, what type of registration?

b)  Why need to register?

c) What are the consequences if the NPO did not register with CRA?

d) CRA website states “no registration process for income tax purposes”

Information on whether an NPO should register for a business number and program accounts can be found at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/bn-ne/menu-eng.html.

Income Tax Guide to the Non-Profit Organization (NPO) Information Return (T4117) - Distinguishing a non-profit organization from a charity, which can be found at the CRA webpage at: http://www.cra-arc.gc.ca/E/pub/tg/t4117/README.html. This guide states “An NPO does not have to register federally or provincially to acquire its tax-exempt status.”

2)  Is a business number required?

a)  If so why?

b)  How to apply if needed

c)  What type of BN would be issued, for example a T2 is …RC0001 and HST is …RT0001.

   For Question # 2, please refer to the following publications:

1.    Pamphlet RC2, The Business Number and Your Canada Revenue Agency Program Accounts, which can be found at the CRA webpage at: http://www.cra-arc.gc.ca/E/pub/tg/rc2/README.html.

2.    Form RC1, Request for a Business Number, which can be found at the CRA webpage at: www.cra-arc.gc.ca/E/pbg/tf/rc1/README.html.

3.    Information regarding Business Registration Online – Overview can be found at: www.cra-arc.gc.ca/tx/bsnss/tpcs/bn-ne/bro-ide/menu-eng.html.

3)  T2 Corporation tax return (CTR):

a)    Should NPO file an annual CTR?

Please refer to the following documents:

*     Corporation income tax return at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rtrn/menu-eng.html.

*     Who has to file a corporation income tax return at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rtrn/fl-eng.html.

*     Also, refer to paragraph 15 (Filing Requirements) of (Archived) Interpretation Bulletin IT496R, Non-Profit Organizations, at: http://www.cra-arc.gc.ca/E/pub/tp/it496r/it496r-e.html.

*     News release from the CRA in 2012 - Canada Revenue Agency to ease burden on tax exempt corporations at http://www.cra-arc.gc.ca/nwsrm/fctshts/2012/m04/fs120425-eng.html

b)    What are the penalties for not filing a CTR?

For information relating to non-filing penalties, please refer to the section named “Penalties” in the following CRA publication: T4012, T2 Corporation - Income Tax Guide at http://www.cra-arc.gc.ca/E/pub/tg/t4012/t4012-02-e.html#P504_37235.

c)    If the NPO did not file any CTR since incorporated, how many years should they go back and file a CTR?

Please refer to the information provided at the CRA webpage named Voluntary Disclosures Program, under the section named “A second chance to correct your tax affairs – Myth vs. fact about voluntary disclosures – Myth # 2” at http://www.cra-arc.gc.ca/voluntarydisclosures.

d)    What are the consequences if they did not file any CTR and they will not file any CTR in the future?

For information regarding various consequences, please refer to T4012, T2 Corporation - Income Tax Guide 2015 at http://www.cra-arc.gc.ca/E/pub/tg/t4012/t4012-02-e.html#P504_37235.

e)    Is the corporation eligible to file the T2 Short Return?

      Please refer to the criteria provided at the CRA webpage named “The T2 Short Return” – Who can use the T2 short return? at: http://www.cra-arc.gc.ca/E/pbg/tf/t2short/t2short-15e.pdf

4) T1044 – NPO information return

a)  Should NPO file an annual T1044?

   Please see the criteria listed in the following documents:

1.    Form T1044, Non-Profit Organization (NPO) Information Return – http://www.cra-arc.gc.ca/E/pbg/tf/t1044/t1044-14e.pdf

  2.    Income Tax Guide to the Non-Profit Organization (NPO) Information Return (T4117) – Please refer to the section named “Does the organization you represent have to file a Non-Profit Organization (NPO) Information Return?” under Chapter 1-http://www.cra-arc.gc.ca/E/pub/tg/t4117/t4117-e.html#guide_for_you

b)   When was the form introduced and when was the first year it was needed to be filed?

Please refer to the following publications:

1.    Income Tax Guide to the Non-Profit Organization (NPO) Information Return (T4117)-   Please refer to the section named “Does the organization you represent have to file a Non-Profit Organization (NPO) Information Return?” at http://www.cra-arc.gc.ca/E/pub/tg/t4117/t4117-e.html#guide_for_you. The first paragraph of this section states that “under subsection 149(12), an organization may have to file Form T1044, Non-Profit Organization (NPO) Information Return, for a fiscal period ending after December 31, 1992, if it is a non-profit organization described in paragraph 149(1)(l).”

2.    Paragraph 16 (Filing Requirements) of (Archived) Interpretation Bulletin IT496R, Non-Profit Organizations, at: http://www.cra-arc.gc.ca/E/pub/tp/it496r/it496r-e.html. Paragraph 16 states “…for fiscal periods ending after 1992, subsection 149(12) requires a tax-exempt association to file Form T1044, Non-Profit Organization (NPO) Information Return” if one of the conditions stated in this paragraph is met.

c) What are the penalties if the NPO did not file a T1044?

Please refer to Income Tax Guide to the Non-Profit Organization (NPO) Information Return (T4117) -When does an organization have to file its annual return? - http://www.cra-arc.gc.ca/E/pub/tg/t4117/t4117-e.html#C1_NPO_return.

d) If the NPO did not file any T1044 since incorporated and the total assets exceed the $200,000, how many years should they go back and file a T1044?

Please refer to the information provided at the CRA webpage named Voluntary Disclosures Program, “A second chance to correct your tax affairs - Myth vs. fact about voluntary disclosures - Myth # 2” at http://www.cra-arc.gc.ca/voluntarydisclosures. For more information on the ten-year limitation policy, please refer to paragraphs 13 and 14 of Information Circular IC00-1R4 – Voluntary Disclosures Program, dated March 21, 2014, at http://www.cra-arc.gc.ca/E/pub/tp/ic00-1r4/README.html.

e) What are the consequences if they did not file any T1044 and they will not file any T1044 in the future?

Please refer to the following documents:

*     Income Tax Guide to the Non-Profit Organization (NPO) Information Return (T4117) -When does an organization have to file its annual return? - http://www.cra-arc.gc.ca/E/pub/tg/t4117/t4117-e.html#C1_NPO_return.

*     Information Circular IC00-1R4 – Voluntary Disclosures Program, dated March 21, 2014, at http://www.cra-arc.gc.ca/E/pub/tp/ic00-1r4/README.html. Please refer to paragraphs 8 and 9.

*     The CRA has addressed certain misleading statements regarding taxes and this information can be found at: http://www.cra-arc.gc.ca/nwsrm/myths/menu-eng.html. Please see Myth # 3.

f) CRA document # E2007-0243291C6 indicates that “the CRA’s administrative policy is not to apply the penalty when form T1044 is late-filed for the first time.” Will this include 10 years of T1044 filed at the same time?

Please refer to the CRA webpage named Voluntary Disclosures Program at http://www.cra-arc.gc.ca/voluntarydisclosures. If you have questions about the program, please see Information Circular IC00-1R4 – Voluntary Disclosures Program, or call the general enquiry line for businesses at 1-800-959-5525.

5) The NPO wants to change its year end from XXXXXXXXXX to XXXXXXXXXX to simplify the financial reporting and not have the deferred revenue.

a) Do they need to get permission from CRA?

b) If they have not yet filed a return, can they pick a new year end desired?

Please refer to the following CRA webpage for information with respect to changing tax year end: www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/rtrn/whn/yr-eng.html

6) The organization has fund raising activities and sells XXXXXXXXXX. Are these taxable sales?

      For income tax implications on the income earned from fund raising activities, please refer to CRA document # E2014-0518841E5, 149(1)(l) – Fundraising.

If you wish to consider any GST/HST implications with respect to this request, please refer to the CRA website at:
http://www.cra-arc.gc.ca/E/pub/gm/1-4/1-4-e.html.

Although, the above information does not confirm the income tax treatment of your particular situation, it is intended to assist you in making that determination.

We trust that this will be of assistance.

NPO and Aboriginal Issues Section
Income Tax Rulings Directorate
Canada Revenue Agency
Place de Ville 11th Flr., Tower B
112 Kent Street, Ottawa ON K1A OL5

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