financial accounting dave ludwick, p.eng, mba, pmp module 11 charitable designation requirements
TRANSCRIPT
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
Module 11Charitable Designation
Requirements
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
What is a charity? Charitable Designations• For an organization to be registered, its purposes have to fall
within one or more of the following categories:– the relief of poverty;
– the advancement of education;
– the advancement of religion; or
– the provision of social services
• When applying for charitable status, the CRA will want to know which general designation your agency falls into and how the organization will accomplish this purpose.
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
What are the charity’s obligations?• Once it is registered, an organization must:
– devote its resources to charity; – continue to meet any other requirements of registration (outlined in this
Module) – file Form T3010, Registered Charity Information Return, within 6
months of the organization's year-end.
• If it does not meet these obligations, the charity may lose its registered status.– After losing its registered status, a charity can no longer issue tax
receipts for donations. – Also, the charity will be liable to pay a revocation tax equal to the full
value of any remaining assets.– Registered charities that are revoked for failure to file are liable for a
$500 penalty.– It can apply for re-registration though
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
General Requirements of Registration• Registered charities are required to carry out the following
activities– Take donations and issue tax receipts as appropriate to donors
– Ensure they manage to their disbursement quota
– Submit required reporting forms within the appropriate time frame from their year end
– Register for GST and PST tax collections and payments if they meet the requirements
– If a charity is also incorporated, it will need to complete other forms which corporations complete
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
What are gifts?• A gift is defined as a voluntary transfer of property without
valuable consideration. To qualify as a gift, all three of the following conditions must be met:– Some property, either in the form of cash or a gift-in-kind, is
transferred by a donor to a registered charity.
– The property is given voluntarily.
– The donor is transferring the property to the charity without expecting anything in return.
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
What payments do not qualify as gifts?• the payment of a basic fee for admission to an event or to a program
(e.g., fees for day-care or nursery school facilities);
• the payment of membership fees– However, membership fees are considered as gifts if they confer no more
than the right to vote at a meeting
• any portion of the purchase price of a lottery ticket or other chance to win a prize
• the payment of tuition fees
• contributions of services (i.e., time, skills, effort).
• a payment from a business for which the business receives a material advantage
• a gift subject to a direction by the donor that the charity transfer the funds to a specified person or family.
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
Disbursement Quota• A registered charity must spend a specific amount each year
on charitable programs. This amount varies according to a registered charity’s designation and is called its “disbursement quota”.
• The purpose of the disbursement quota is:– to ensure that most of the registered charity’s funds are used to further
its charitable purposes and activities; – to encourage registered charities not to accumulate excessive funds– to keep other expenses at a reasonable level.
• To help registered charities plan their expenditures, the quota is largely based on what happened in previous years. – Consequently, at the end of one year, a registered charity should have
a fair estimate of how much it will need to spend on its charitable programs the following year.
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
Charitable Information Return• An information return includes:
– Registered Charity Information Return, Form T3010A;
– Registered Charity Basic Information sheet, Form TF725;
– the list of directors/trustees or like officials, with all the required information, Form T1235;
– the list of qualified donors, with all the required information (if applicable), Form T1236; and
– a copy of the registered charity’s own financial statements
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
T3010• A key form that needs to be submitted is T3010. This
form contains:– Charity identification information
– List of directors, trustee and other officials
– Programs details
– Fundraising and payment methods
– Details of expenses, such as wages
– Detailed financial information
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
TF725• Another main form is TF725 which is the Registered
Charity Basic Information Form
• On this form, the charity reports information such as– Name, address, contact information
– Its charitable designation, registration date, registration number and fiscal year end
– Program areas and field codes to codify the programs the agency is carrying on
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Financial AccountingDave Ludwick, P.Eng, MBA, PMP
GST• Registering for GST is not the same as registering as a charity for
income tax purposes. – For example, a registered charity will be either a "charity" or a "public
institution" for the purposes of GST/HST.
• Guidelines for GST Registration– An organization does not have to register for GST/HST if it is in its first
fiscal year.
– In addition, an organization will not have to register for GST/HST if its gross income was $250,000 or less in either of its two previous years.
– If the organization's gross revenue exceeds $250,000, it will only be required to register if its sales of taxable goods and services are greater than $50,000 in the current fiscal quarter, or over the four previous fiscal quarters.
– If the organization provides taxable goods and services, it can register voluntarily for GST/HST, even if its total taxable sales are below the $50,000 and $250,000 limits explained above.