Industry, trade and professional associations, condominium corporations and other entities that Canada Revenue Agency (CRA) classifies as non-profit organizations may be called on to report more information about their finances, activities and leadership beginning with filings for the 2026 tax year. The Canadian government is currently accepting public comment on draft amendments pertaining to several tax measures first outlined in the 2024 Fall Economic Statement, including new efforts to enumerate a segment of the tax-exempt sector that has been largely unquantified.
Proposed amendments to the Income Tax Act would lower the threshold that triggers when non-profits are obligated to file an annual information return with CRA, and would introduce a new “short form” of required information for all entities not captured in the first case. The 2024 economic statement allocates $28 million between 2025-26 and 2029-30 to implement this initiative, with $11 million of that expenditure earmarked for this fiscal year.
Knowledgeable observers theorize the new reporting criteria are tied to a broader agenda than just traditional concerns that organizations could be holding undue cash stockpiles that have grown via tax-free interest. There’s now a thrust for closer monitoring.
“The 2024 Fall Economic Statement also announces the government’s intent to launch interdepartmental dialogues with non-profit organizations to deepen awareness, enhance communication and better combat money laundering, terrorist financing and sanctions evasion risks,” it states.
Under current rules, non-profits that accumulate more than $10,000 in passive income in a fiscal period or hold total assets surpassing $200,000 in value must file an information return with details about:
- revenues earned;
- assets and liabilities;
- remuneration paid;
- organizational activities; and
- record-keeping practices.
It’s proposed that they would additionally have to report if their total gross revenues surpass $50,000 per year.
“Canada Revenue Agency has the Charities Directorate, but the not-for-profit sector doesn’t have a specific oversight body within the CRA that has a sole mandate, like the Charities Directorate with respect to registered charities, to ensure this sector’s money is properly used and not misused or subverted,” explains David Tang, a partner who specializes in charities and not-for-profit law with Miller Thomson LLP. “There would be greater transparency with these proposed new filings to allow Canada Revenue Agency to look into these organizations if there is any need for investigation or enforcement.”
Redundant reporting for condominium corporations
However, drilling down to the sub-sector of condo corporations, some accountants characterize both the existing and contemplated enhanced requirements as burdensome duplication for incorporated entities that are already mandated to file annual tax returns. Stephen Chesney, a partner with YalePGC Chartered Professional Accountants, confirms more than 50 per cent of the roughly 700 condo corporations for which his firm provides auditing services currently file annual information returns with CRA. That would jump to more than 99 per cent under the proposed new reporting threshold.
“A lot of non-profits, if they’re not incorporated, do not have to report to the government now so that’s likely why they are looking for this information,” Chesney speculates. “We file a corporate tax return for every condo. So why do they need this?”
Nor does he see much differentiation between the proposed elements of the new short form and what’s currently required in the information return. “To me, it looks like it’s a new long form,” he observes.
Notably, the existing information return does not ask for details about an organization’s directors, trustees or officers, but both the 2024 Fall Economic Statement and the government’s recently released consultation document list this information as an element of the proposed new short-form document for non-profits with more modest revenues and asset holdings. That may also be a hint of future modifications to information requirements for wealthier entities, which would be a new information-gathering exercise for accountants serving the condo sector.
“Condos in Ontario already report the names and addresses of their boards of directors to the Condominium Authority of Ontario (CAO) and that information has to be updated annually,” Chesney says. “So it would be more duplication, but it would also be more work for the people preparing the CRA forms because they would have to put all those names in.”
Specifications for tax-exempt status
Non-profits are defined in the Income Tax Act as clubs, societies or associations that are organized and operated for reasons other than making profit, such as social welfare, civic improvement or educational, cultural and recreational pursuits. Tang notes that such organizations are expected to largely “run flat” with incoming revenues balancing out their operating expenses. Beyond that, there is a stipulation that the income a non-profit generates cannot flow through to the organization’s members as direct payouts or other kinds of financial benefits.
There are separate rules to govern registered charities and charitable foundations, which, like corporations, are required to file annual tax returns. A more rigorous level of oversight is associated with providing donors and federal and provincial/territorial governments that grant tax credits with assurance that charitable organizations are fulfilling their missions, whereas non-profits that aren’t incorporated and don’t meet the current threshold for submitting an annual information return are essentially invisible to CRA.
“The proposed new reporting requirements create the capability to understand that part of the sector,” Tang says. “For example, the simplified form will identify who the directors and trustees of these organizations are because, otherwise, there’s not necessarily any way to know at all.”
It’s proposed the new short form for smaller non-profits would also ask for: the organization’s name, mailing address and business or trust number; its total assets, liabilities and annual revenues; a description of its activities and whether those occur solely within Canada or further afield; and other potential information that might be prescribed in the future.
“We don’t know yet, but presumably there’s not going to be any real enforcement activity for really, small informal organizations that don’t conduct enough business to warrant a business number,” Tang muses.
On the flipside, many of Canada’s more prominent industry, trade and professional associations are incorporated and most will already be submitting the annual information return. Some may also earn significant revenue from membership fees and other programming products, but this is where the second prong of tax-exempt status — prohibition on flow-through financial benefit to members — comes into play, as revenues are invested back into operational activities.
“Associations do a whole lot of things, including setting standards, undertaking research and providing education so that the members of an industry or profession can deliver a higher level of service, knowledge and professionalism that is a benefit to the public,” Tang says. “That’s the idea behind the tax-exempt status — that this is a benefit not just to members, but to society as a whole.”
Enforcement mixed messaging
Meanwhile, Chesney suggests that philosophy has not been so clear-cut in the condo sector, where tax-free revenues are often applied to offset operating expenses that condo fees would otherwise have to cover. This can be construed as a financial benefit to unit owners and an unfair advantage over single-family homeowners who would have to pay tax on similar types of income.
To date, CRA has conveyed mixed messages about the fairly ubiquitous ways condo corporations generate extra revenue, through rents from rooftop telecommunication installations, guest suites and party rooms, or even from the sale of common space, such as a superintendent’s unit. Following a past random audit of non-profit organizations, Chesney recalls that numerous condo corporations received cautionary letters about identified inappropriate income, but there was no follow-up action.
“I am not aware of any condo corporation in this country that has ever been assessed any type of penalty for earning income that it shouldn’t be earning,” Chesney says. “I get dozens of calls from my clients every year asking about the tax implications of these kinds of things and whether it will affect their non-profit status. My answer is: I don’t know because that’s never happened yet. It seems the only thing CRA has used the information returns for is to fine condo corps when they don’t file them on time.”
The public can submit comments on the proposed new reporting requirements until Sept. 12, 2025.
