If the Canada Revenue Agency Comes Calling, Will You be Ready?

The Canada Revue Agency (CRA) may select a charity for audit for many reasons:

  • random selection
  • referral from another area of the CRA
  • complaints from the public
  • articles in the media or other publicly available sources
  • review of specific legal obligations under the Income Tax Act
  • information from the charity’s T3010 annual information return
  • follow-up on a previous compliance agreement

To ensure that your congregation is in compliance with CRA requirements, be sure do to the following:

Know your charitable purposes. Your congregation will have stated its charitable purposes when it applied for charitable status. The official document may be called “articles of incorporation” or “letters patent,” depending on your province or territory, and it is the standard against which the CRA will assess your compliance. All activities you undertake should fall within the parameters of your charitable purposes. For an example, see the CUC’s statement of purpose, at the beginning of its bylaws.

Know the difference between charitable and political activities. Under the Income Tax Act, a charity may conduct nonpartisan political activities. However, it must not use more than 10 percent of its resources for this, and its political activities must help further its charitable purposes. The CRA’s website has information on the basic requirements for political activities and how to distinguish between charitable and political activities. Use its self-assessment tool to help ensure that your political activities are within permissible limits.

Do not engage in partisan political activities. While charities can engage in political activities, partisan activity is strictly forbidden. A charity may support or oppose a policy or legislation, but not a particular political party or politician. Use the CRA’s policy statement and its recorded webinar on political activities to guide you.

Report your activities accurately. On your annual T3010 Registered Charity Information Return, provide an accurate accounting of your charitable and political activities. If you think a previous return might have been inaccurate, amend it. Be sure to file on time; some charities have lost their status for not doing so.

Be careful about your donations. Charities may give money only to organizations that the CRA considers qualified donees. This means that sending money to an organization outside of Canada requires special care. See Canadian Charities Operating outside of Canada: What You Need to Know, an article from Canadian International Lawyer, and contact the CUC’s executive director for more information.