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Basic Guidelines for Maintaining Charitable Registration
9-23-2014
Engaging in allowable activities
A registered charity must be created for charitable purposes and must devote its resources (funds, personnel, and property) to charitable activities. A registered charity is permitted to carry out its charitable purposes, both inside and outside Canada, in only two ways: by carrying on its own charitable activities and by gifting to qualified donees.
What is charitable?
To qualify for registration as a charity, an organization must have purposes that are exclusively charitable and charitable activities that support those purposes. The purposes (also called objects) describe the aim or main intent of the organization. The activities describe how the organization will accomplish its purposes.
The term charitable is not defined in the Income Tax Act, so CRA consider common law (court decisions) to determine what is charitable.
The courts have identified four categories of charity:
· relief of poverty
· advancement of education
· advancement of religion
· certain other purposes that benefit the community in a way the courts have said is charitable
An organization's purposes must fall within one or more of these categories to be considered for registration as a charity.
Charitable activities
Activities are an organization's programs or how it accomplishes its purposes. Charitable activities are activities carried out to fulfill a charitable purpose. Without a charitable purpose, an organization cannot have charitable activities.
To qualify for registration, an organization must show in its application that it devotes all of its resources (funds, personnel, and property) to charitable activities that directly further its charitable purposes. Therefore, it should explain, in detail, the specific activities it will undertake to achieve each of the formal purposes stated in its governing document(s) (its incorporation documents, constitution, trust document, or other establishing documents). For example, the purpose “to relieve poverty by operating a food bank for the benefit of the poor,” has to be accompanied by a statement of activities showing how the organization will accomplish this purpose.
Public benefit test
To be registered as a charity, an organization's purposes and activities must also meet a public benefit test. To qualify under this test, an organization must show that:
· its purposes and activities provide a measurable benefit to the public; and
· the people who are eligible for benefits are either the public as a whole, or a significant section of it. The beneficiaries cannot be a restricted group or one where members share a private connection—this includes social clubs and professional associations.
An organization that wants to limit its beneficiaries unreasonably, or offer an unreasonable benefit to a group or individual, will not qualify for registration.
Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. It is always recommended that you consult a qualified tax professional beforeembarking on any of the suggestions outlined above. Mohammed Yasin, CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C. For more information on this topic or any other taxation matters, please contact taxes@alameen.ca.
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