Technology sometimes produces unanticipated consequences.  Witness Canada Revenue Agency.  To its credit, CRA has implemented secure, mostly user-friendly technology over the past 20 years.  For charities this includes online accounts and user-friendly “checklist” tools for charities. Unfortunately, these features sometimes create a special set of challenges for registered charities and testamentary private foundations.

My Business Account for Charities

Since 2019, CRA has encouraged registered charities to establish an online “My Business Account” or “MyBA”.  The promise is to “make it faster and easier to handle your charity’s tax (sic) matters.”  The account is required for registration of new charities – including an application status chart – but its primary utility comes post registration.  MyBA enables changes to records and filing the annual charity return or T3010.  The promise is T3010s will be posted within a day of submission, rather than after three months for paper submissions.  Online services are simpler and more efficient than paper-based to use, but they create an inter-connected logic for voluntary organizations that may create difficulties over time.

Who can get in?

After a MyBA is established for a charity, there are two types of people with access: 1) Directors/Trustees; 2) Authorized Representative.  To gain access, Directors/Trustees must be Canadian taxpayers with a personal CRA account.  In theory, all they need to do is sign into My Business Account and add their charity using its business number.  Again, in theory, all charity directors will be recognized because their SIN number is filed with the T3010.  I tried to connect to three charities for which I am a volunteer director, but with no success.

If you are management of a charity or a lawyer representing the entity, you sign in through the “Represent a Client” function.  Again, a SIN is needed.  This category makes sense for lawyers; less so for charity staff.  CRA’s core systems are designed for taxpayers and adapted for tax-exempt charities.  The majority functionality rules, and the software barely acknowledges charities.

CRA is currently in transition with its systems.  It still supports T3010 and updates on paper, but with time that functionality will inevitably diminish.  Fast forward, the system will become entirely digital.  Director registration will be limited to Canadian taxpayers, even though non taxpayers can serve.  Should all volunteers have access?  Who decides?  And how do we ensure online access is retained for the charity when directors change?

Estates and Policy in a Checklist

CRA offers checklists for standard functions like registering a charity.  This is helpful, in most cases, for the average user.  But, at least in one case, the list contains a policy statement that is not posted communicated elsewhere.  If you are trying to register private foundation that is established by will –  that is a testamentary charitable trust – after 12 questions you will get the following checklist results. This page lists required documents, including “Letter signed by the current estate trustee confirming that the estate has been settled and that all other bequests have been paid and claims against the estate have been satisfied.”

This requirement, which appears without rationale, creates a few issues.  First, the estate trustee can’t legally “settle” an estate without all bequests being completed, and residual bequests are distributed in tranches to all residual beneficiaries.  Second, the foundation needs to be registered before any donation tax receipts can be issued.  If the assets are transferred to the trust before it is registered all tax savings will be lost.  Third, if an estate donation is not made within 60 months after death there will be no tax receipt.  Administrative delays can be expensive. Finally, this policy doesn’t seem to be articulated anywhere else on the CRA site and has no basis in tax law.

Creating a private foundation via a testamentary charitable trust is an admittedly an outdated method.  And this CRA position, which I understand is under review by the Charities Directorate, will only make private foundations established by will even less viable.  In this instance, the bigger issue is how an online tool buries a key piece of planning information.  Technology is helpful, until its not.