Federal Government Expands Tax Reporting Requirements for Non-Profit Organizations

The Department of Finance has released draft legislation that if implemented would result in more non-profit organizations (“NPOs”) having to file an annual information return, effective from the start of the 2027 taxation year.

Currently, NPOs that claim an exemption from income tax are only required to file an annual information if their passive income exceeds $10,000, their total assets exceeded $200,000 at the end of a fiscal term, or they were required to file an information return for a preceding fiscal period. Draft legislation seeks to expand these requirements.

Under the newly proposed legislation, NPOs will also have two additional conditions for reporting requirements. The first category, NPOs with an annual revenue of $100,000 or more, will be required to file an annual information return. The second category, small NPOs that do not meet the threshold requiring filing an annual information return but earn more than $10,000 of revenue, will need to file a new annual short-form information return. Small NPOs whose revenue and passive income in a year do not exceed $10,000 will still be exempt from filing any information return.

These changes will result in NPOs with over $100,000 of revenue who did not meet the previous existing thresholds having to file information returns, and many more small NPOs having to file short-form information returns.

The Department of Finance has requested feedback on the draft legislation by February 27, 2026.

The Current Law

Section 149(1)(l) of Canada’s Income Tax Act (“ITA”) provides that clubs, associations, and societies that meet certain requirements are not required to pay income tax, these entities are known as non-profit organizations. Section 149(12) of the ITA sets out the current requirements for when an NPO must file an annual form T1044 “Non-Profit Organization (NPO) Information Return”. Under the current legislation, an NPO must file an information return if:

  • they received income in excess of $10,000 stemming from interest, rentals, or royalties;
  • the value of all of their assets exceeded $200,000 at the end of the fiscal period; or
  • they were required to file an information return for a preceding fiscal period.

Proposed Changes to Threshold

The 2026 draft legislation retains the above requirements while adding provision 149(12)(d), which requires the filing of an information return by any NPO which receives total revenue amounts exceeding $100,000 during the fiscal period (even if they don’t meet the existing thresholds of passive income or assets). This threshold has been increased from the $50,000 limit proposed in the 2025 draft legislation.

Proposed Changes for Small NPOs

Under the 2026 draft legislation, an NPO that is not required to file a return under section 149(12) is required to file a short-form information pursuant to the newly proposed section 149(13), unless certain exemptions apply. The short-form information includes:

  • a description of the NPO's activities, including whether it conducts activities outside Canada;
  • the total assets, total liabilities and total amounts received by the NPO for the period; and
  • the name of each director, officer or trustee of the NPO.

NPOs that would otherwise have to file a short-form information, under section 149(13), but whom do not have a yearly revenue in excess of $10,000 are exempt from the requirement to file a short-form information, under the newly proposed section 149(14).

Implications and Considerations

Many NPOs previously did not meet the current thresholds to require the filing of an information return. The changes to reporting requirements will likely result in substantially more NPOs having to file information returns or short-form information returns, which should result in the federal government gaining a greater understanding of the entities claiming to be tax-exempt NPOs across Canada. This additional information may be used to evaluate future enforcement action, income tax policy and legislative reform.

An NPO that claims an income tax exemption but does not currently file an information return should consider whether it would be required to file a regular or short-form information return if the proposed changes take effect, and be prepared to gather the necessary information.

Risks to NPOs

The risk for NPOs is that in order to qualify as a NPO an entity must not be engaged in any activities which are for the purpose of profit. This has been interpreted by the CRA and courts to be extremely restrictive and there could be an argument that many entities claiming to be NPOs are not actually meeting this requirement. For example, many NPOs hold investments or engage in profitable activities to support their non-profit activities which might not meet these requirements.

The additional filing requirements could be used by the CRA to start audits of NPOs which could potentially result in them losing their NPO status.

We recommend that NPOs not only determine whether they may need to file under the proposed legislation, but carefully review whether their organization is properly meeting the no profit requirement. If there is a risk that certain activities may be profitable, it would be prudent to address this prior to any CRA audit.

Next Steps

If you have any questions or would like to discuss how these proposed changes may impact you or your organization, please reach out to any member of our Tax Group.