Over the past few years, the department of Finance has updated rules around trust reporting and increased the disclosure requirements for trusts as well as expanded the definition of entities that must file trust income tax returns. The changes impact year ends after December 30, 2023. Where not-for profits (“NFPs”) and Charities are concerned, any required trust returns would have a deemed year end of December 31st, regardless of the normal fiscal year of the organization. The first filing(s) will be due on March 30, 2024, which is 90 days after the deemed December 31, 2023 year end.

The new legislation requires a trust income tax return, or T3, to be filed for “express trusts”. Such trusts are those that are created with the settlor’s express intent, either in writing, or verbally. In a NFP or Charity context, restricted funds, endowment funds and special purpose funds, among others may fall under the definition of “express trust” resulting in a filing obligation for the organization for one or more T3’s each year. A T3 is not required for most organizations as a whole but may be required for sub-sets of assets within the organization. An exemption from filing does exist for trusts that hold less than $50,000 in certain assets throughout the year (such as cash).

In addition to reporting the assets and income of the trust, Finance now requires detailed disclosure of the name, address, date of birth, jurisdiction of residence and taxpayer identification number for trustees, beneficiaries and settlors as well as for those who have the ability to exert influence over trustee decisions. These reporting requirements may be extremely onerous for organizations that hold multiple funds in trust, or who have funds that are a result of the contributions of many donors. As well, it may be problematic for organizations to obtain the necessary information for the disclosure for funds that have been in existence for a long time. For example, a charity may be managing a restricted fund that was created 20 years ago through a donor’s bequest to the organization. Obtaining the required information regarding the donor may be difficult, if not impossible 20 years after the donation. Or, a Foundation may have dozens, or hundreds, of different restricted funds that qualify as express trusts, each of which would require a separate T3 filing.

At this time, it is recommended that Not-For-Profit Organizations and Charities review their statements of financial position for funds that may fall under this new reporting requirement. A conversation with your legal advisor and accountant now will be very important to determine your organization’s reporting responsibilities for 2024 will be very important. As this is the first year of application of these rules, it is possible that Finance will provide further guidance for organizations to which these changes apply. We will monitor Finance communications and provide updates as soon as any are available.

Don’t get caught scrambling in March 2024! Contact your advisor at Hendry Warren LLP today to discuss how these changes might apply to your organization.