Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law, New corporate non-profit acts
The CRA has just posted a new guidance which will be very helpful for Canadian charities. It is called CG-019, How to Draft Purposes for Charitable Registration. Also the CRA has updated their model purposes. The purposes or legal objects of a charity are very important. This guidance will be helpful to those considering setting up new charities. Also with so many Canadian charities needing to do corporate changes under the CNCA or ONCA this provides an opportunity for some charities to update objects which may not be helpful to the organization. If you are a registered charity and considering updating your objects this guidance will be helpful. You may also want to obtain legal counsel as you will need to discuss the changes with CRA. The objects are vital to the scope of the work conducted by a charity and CRA in order to review any revised objects will require a detailed description of activities because the Charities Directorate does not look at objects by themselves.
Here is the summary of the document from CRA:
The purposes (sometimes referred to as “objects”) of an organization are the objectives that it is created to achieve. Each of an organization’s purposes must be clearly stated in its governing document, such as letters patent, articles of incorporation, trust, or constitution.
To help organizations that are applying for registration, as well as registered charities that want to change existing purposes, the Canada Revenue Agency (CRA) provides examples of charitable purposes on our Web page Model purposes. While these examples can be helpful to many organizations, they may not include purposes that meet all needs. As a result, it is often necessary to draft purposes specific to an organization. This guidance is a resource to support that process.
This guidance provides a recommended approach to drafting purposes for organizations intending to apply for charitable registration under the Income Tax Act, and for registered charities that are amending their existing purposes. While the format described in this guidance for drafting purposes is recommended by the Canada Revenue Agency, purposes prepared in a different way may also be acceptable for charitable registration.
To be registered as a charity under the Income Tax Act, Canadian law requires that an organization’s purposes be exclusively charitable and define the scope of activities that can be engaged in by the organization. Subject to limited exceptions, all of a registered charity’s resources must be devoted to these activities. The assessment of the purposes and activities of an organization is referred to as a “two-part test.”
An organization’s governing document must contain a clear statement of each of its purposes. If the wording is broad or vague, a purpose is not likely to meet the legal requirements for registration as a charity. To be eligible for registration under the Income Tax Act, a purpose should generally identify three elements either expressly or implicitly through its context:
•the charitable purpose category (relief of poverty, advancement of education, advancement of religion, or certain other purposes beneficial to the community in a way the law regards as charitable);
•the means of providing the charitable benefit; and
•the eligible beneficiary group.”
Here is the full CRA guidance: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/drftprpss-eng.html. We have also created a PDF of this document here: How_to_Draft_Purposes_for_Charitable_Registration_-_Guidance.pdf
The model purposes have also been updated and you can see them at:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/pplyng/mdl/mdl-bjcts-eng.html We have created a PDF of this document here: Revised_model_objects.pdf
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.