Natasha Barrett
Associate
Article
2
On December 16, 2024, the federal government released its annual Fall Economic Statement (“FES”) which provided Canadians with an update on the performance of the economy and the government’s economic plan. The FES contained proposals to amend the Income Tax Act (Canada) (the “Tax Act”) to change the current reporting obligations imposed on paragraph 149(1)(l) organizations (“NPOs”).
It is unknown whether these provisions will come into effect with the prorogation of Parliament and the impending federal election.
Typically, an NPO is a club, society or association that is organized and operated exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose, and it cannot be operated for the purpose of earning a profit. An NPO cannot be a registered charity under the Tax Act and cannot issue tax donation receipts. Generally, NPOs are not required to pay income tax; however, they may be required to pay property and capital gains taxes, as well as GST/HST.
Currently under the Tax Act, NPOs are required to file the following returns with the Canada Revenue Agency (“CRA”):
The Form 1044 requires applicable NPOs to disclose:
The FES proposed two amendments to the Tax Act that will impact NPOs. The first proposes to amend the Tax Act to require an NPO to file an annual return (Form 1044) if its total gross revenues are over $50,000.
The second amendment to the Tax Act would require any NPOs that are not required to file an annual return (Form 1044) to file a new “short-form” return that will require disclosure of the following information:
These new reporting requirements for NPOs align more closely with the reporting obligations currently in place for qualified donees (e.g., registered charities).
These amendments are intended to apply to the 2026 and subsequent taxation years, however, the FES is not currently law and, given the prorogation of Parliament, these amendments will need to be re-introduced to enact them into legislation. This is not likely to happen before the federal election in 2025.
If you have any questions about the potential impact of these amendments on your organization, Gowling WLG's Charities & Not-for-Profits Group is ready to assist. You can also reach out to any of this article’s authors.
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