Tax Insights: Finance releases draft legislation to expand information reporting for non-profit organizations

Issue 2026-05

In brief

What happened?

On January 29, 2026, the Department of Finance released draft legislation to implement various 2025 federal budget, 2024 Fall Economic Statement and other measures. The legislation includes proposals to broaden the number of non‑profit organizations (NPOs) that are required to file an annual information return.¹ Effective for the 2027 and subsequent taxation years, the proposals will:

• extend the requirement to file an annual information return to an NPO if the total of all amounts received by the NPO in a fiscal period exceeds $100,000
• require certain “small” NPOs that otherwise do not meet the thresholds for filing the annual form T1044 “Non‑Profit Organization (NPO) Information Return,” to file a new annual short‑form information return that contains basic information about the organization

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

Why is it relevant?

These proposed changes are intended to improve transparency in the NPO sector. If they are enacted, many more NPOs that claim an income tax exemption for federal tax purposes will be required to file either a regular NPO information return or a short‑form information return.

Actions to consider

An organization that currently claims an income tax exemption as an NPO, but does not currently file an NPO information return, should review the proposed changes to determine whether it will be required to file an annual regular or a short-form information return. If there is a filing requirement, the NPO should start developing procedures to ensure that it can gather the required information to meet these new tax reporting requirements.

In detail

Background

Paragraph 149(1)(l) of the Income Tax Act (ITA) provides an exemption from income tax for organizations that meet the conditions described therein (generally, any club, society or association that is organized for any other purpose except profit and does not make income available to its members for personal benefit).² These organizations are referred to as NPOs. Registered charities are exempt from income tax under separate rules and therefore, are not subject to these particular tax reporting requirements for NPOs.

Currently, subsection 149(12) of the ITA requires an NPO that claims an exemption from income tax to file an annual information return if:

• the total of all passive income in the fiscal period exceeds $10,000
• the organization's total assets at the end of the preceding fiscal period exceeded $200,000, or
• an information return was required to be filed by the organization for a preceding fiscal period

Because many NPOs did not meet the above identified thresholds, only a limited number of NPOs were required to file an annual information return.

Changes to the annual return filing requirement

The January 29, 2026 draft legislation proposes to extend the requirement to file the annual NPO information return to an NPO if the total of all amounts received by the NPO in the fiscal period exceeds $100,000. This new threshold will require many more NPOs to file an annual information return.

New filing requirement for small NPOs

The January 29, 2026 draft legislation also proposes to require NPOs that do not meet the thresholds for filing the regular annual NPO information return (see above) to file a new short‑form information return that contains basic information about the organization, including:

• the NPO’s name, mailing address and business (or trust) number
• the names of the NPO’s directors, officers, trustees or similar officials
• a description of the NPO’s activities, including whether it conducts activities outside Canada
• the NPO’s total assets and liabilities and total amounts received by the NPO
• other prescribed information

However, a small NPO will be exempt from filing the new short‑form information return if:

• the total of all amounts received in the fiscal period does not exceed $10,000
• it is not an organization (whether incorporated or not), or
• it was required to file the annual form T1044 “Non‑Profit Organization (NPO) Information Return” for the same fiscal period

This new filing requirement for small NPOs will mean that many more NPOs will be required to file an annual information return with the Canada Revenue Agency.

The takeaway

We understand that the federal government is motivated to better understand this subsector of tax‑exempt organizations, because it represents a diverse and varied group of organizations. The enhanced collection of data about these organizations is intended to help the government determine whether it needs to pursue legislative reform of the current tax rules that govern NPOs. Parliament has not made any substantial changes to the tax legislation governing NPOs since its introduction in 1917.