Although it is not news many Canadian charities would be surprised that CRA is not prepared to disclose which charities received funds from countries listed as supporters of terrorism, namely Syria and Iran.  This is perhaps not the most important piece of information for donors and charities to be aware of, but as we have noted in the past on this blog and in our submissions on transparency relating to charities – there is lots of room for improvement relating to charities and transparency in Canada.

Here is the ATIP question and CRA answers from February 2014 on the disclosure of foreign donors:

 

Question

Can you please provide a list of Canadian charities who accepted donations from a foreign state listed as a support of terrorism for the purposes of the State Immunity Act or from an agency of such a state in the past 10 years? (i.e A list of the charities and the states or agents that donated to them and during what year).

Answer
As part of their annual filing requirements, and under certain conditions, registered Canadian charities must provide the CRA with specific information about donors that are not resident in Canada.

For each gift of $10,000 or more that a charity receives from a donor who is not resident in Canada, the charity must report on Schedule 4 the identity of the donor, the amount of the gift, and whether the donor is an individual, organization, or government body.

The information on schedule 4 is considered confidential data and cannot be released to the public. The information is for the CRA’s use and may only be shared as permitted by law (for example, with certain other government departments and agencies).

 

In another CRA ATIP they provide further information:

Security Level
For Internal Use Only

Foreign Funding

  • There are no prohibitions in the ITA regarding sources of funding for charities. Charities may receive funds from domestic and foreign sources.
  • Regardless of the source of a charity’s revenues, all resources received are subject to the same rules with respect to how they can be used (primarily on charitable activities).
  • In addition, as of January 1, 2009, charities are required to make certain disclosures on their annual T3010 information return regarding foreign funding.

Public information related to foreign funding:

  • Charities must identify whether donations of gifts of any kind at $10,000 or more were received from a non-resident donor who was also not:
  • A Canadian citizen,
  • Employed; in Canada,
  • Carrying on a business in Canada, or
  • A person having disposed of taxable Canadian property.
  • Smaller charities (generally defined as having revenues under $100,000 and assets not used in charitable programs of less than $25,000), must identify the total non tax-receipted revenue from outside Canada.
  • All other charities must identify the total revenue from outside Canada.

Confidential information related to foreign funding:
For donations of $10,000 or more, the charity must disclose:

  • the name of donor,
  • the value of the donation; and
  • whether the donor was an organization, government, or individual.

Possible Qs and As

1 – Why can’t the confidential information related to foreign funding be made public?

The non-resident donor questions on the T3010 were introduced in response to the “designated donor” provisions of, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act, S.C. 2006, c.12, relating to information sharing with FINTRAC, the RCMP, and CSIS. So the original purpose behind adding non-resident donor information was fairly narrow.

The confidential information in Schedule 4 relates to individuals, organizations, and governments. The sense at the time this schedule was introduced was that naming names publicly, particularly for individuals, could create donor chill as well as difficulties on the privacy front.  Also, in general, the donor information of Canadian residents is specifically protected under the Act. While non-resident donors don’t receive this protection, the statutory basis for disclosing their information is very difficult to apply. Charities aren’t in a position to determine whether a donor is actually a non-resident, i.e. someone who is not a citizen and has never been subject to Canadian tax due to employment in Canada, carrying on a business in Canada, or the disposing of taxable Canadian property.

If the Directorate were to change the form to make this information public, we would have to assess the legal implications of accidentally disclosing donor information of Canadian residents solely on the basis of what charities report in their T3010s.  We cannot say how many active audits or reviews have been generated as a result of this confidential information but what we can say is that it is rare that information from the T3010 return alone would give rise to an audit. We normally would have multiple risk indicators suggesting the need for additional scrutiny.

2 – Can you provide a $ range or number to define “substantial costs”?

It’s very difficult to give the committee a precise number or even dollar range without having done a detailed analysis of what is being proposed.  We would always look at a range of options for implementing greater transparency, which would have an impact on cost – particularly if they involve system changes. For example, depending upon how the information is captured and whether it is displayed or simply made available to the public upon request, and whether the CRA or charities themselves would be required to provide the information to the public, are all factors that will influence cost. Overall, we would need to know what information we will be disclosing and how we intend to disclose it before we could provide a realistic estimate of cost and timeframe for implementation.

If pressed:

Revising the T3010 Registered Charity Information Return, capturing the information in the Charities database, and displaying the information on the CRA’s website could run as high as $3 million.
Scanning the information into a separate schedule independent of the T3010 return, and then displaying the scanned (pdf schedule on CRA Web site, rather than in a database, would likely cost somewhere between $1.2 and $1.4 million.

A third option would be to create a legislated obligation for charities to provide information to the public (the US model). There would be no change to the T3010 information return, and nor any capturing, keying or display of the data by CRA.  CRA could develop an electronic form outlining the prescribed information that charities are to make available and that form could be posted to our Web site. The cost to develop and post a standalone form would be minimal.  Note that these are development costs alone – do not include any additional resources for additional compliance activities that we might want to undertake to verify the accuracy of information.

3 – Is there a need for additional disclosure requirements?

Considering that question from the regulatory framework of cost, burden, transparency and risk, we would offer the following comments:

Cost: While we would need to understand the specifics of any proposed change before we could provide cost estimates, we can say that any change to the information return that would require alterations to our data capture and display systems is likely to require a substantial financial investment.

Burden: Some charities have alerted us to the fact that in some cases publicizing the names of foreign donors could raise concerns over individual safety – religious persecution as an example.

Transparency: Additional disclosure would clearly support our goals relating to transparency.

Risk: One concern is that additional disclosure is not required to enforce the provisions of the ITA – since there are no restrictions on sources of funding.   Another concern relates to the potential for CRA to inadvertently violate the confidentiality provisions of the ITA. Essentially, s. 241 of the Act protects the donor information of any non-resident who was taxable in Canada for this or any other year. A charity would arguably have no way of knowing whether a particular foreign donor was ever taxable in Canada. The CRA would be forced to try and make this determination without the benefit of date of birth or social insurance information.  Unless we were certain that the foreign donor was not protected under s. 241, we would not be able to publish the name.

2010 statistics on foreign funding:

  • Of the close to 83,000 registered charities that had filed an information return as of December 2011, 1,986 (just over 2%) reported receiving funds from foreign donors. The total value of foreign contributions was $831,916,553.
  • Of the 1,986 registered charities reporting foreign funding, the top 25 accounted for 67% ($557,000,000) of all contributions, the top 5 for 36% ($303,000,000), and the top 2 for 22% ($188,000,000).
  • Note also that while the T3010 asks charities to report on donations valued at $10,000 or more, 1,029 of the 1,986 charities reporting actually received donations of under $10,000. The total valued of donations under $10,000 reported by those 1,029 charities was $2,595,278.  The total value of donation over $10,000 received by the 966 charities reporting was $829,321,275.