This brief article discusses the Charitable Goods Policy of the Canada Revenue Agency.
As a general rule Canadian charities can only gift or grant resources (money and equipment or anything of value) to a qualified donee including another Canadian registered charity. Canadian charities operating abroad should maintain ownership and control over all of their assets. In general, the Canadian charity can only sell these assets at fair market value or transfer them to another Canadian qualified donee. Except for example in the case of the charitable goods policy and a few other exceptions, a Canadian charity cannot just transfer assets to a foreign charity or NGO that is not a qualified donee. In other words the charitable goods policy is a narrow exception to the general rule stated above..
CRA has a charitable goods policy, which allows certain limited types of goods to be transferred to a foreign organization or given away, in some cases without the need for a written agreement. Frequently cited examples include food in a famine situation or prayer books. However, there are limits to CRA’s charitable goods policy, and CRA is very concerned that the charitable goods may be used for non-charitable or private purposes. In those cases, it is important that the charity impose controls on the use of the goods.
The basis of the ‘charitable goods policy’ is a CRA Staff Memo produced in 1985 and cited in the Canadian Magen David Adom case (hereafter “CMDA”), which provides:
Equally acceptable are transfers of goods and services that are directed to a particular use by the very nature of the goods and services so transferred. Examples of such
• transfers, by a research organization, of books and scientific reports to anyone interested (including foreign governments, libraries, schools, etc.),
• transfers of books,
• on a subject of particular interest to an educational charity,
• to public libraries in major cities all over the world,
• transfers of medical supplies to a refugee camp,
• transfers of food, blankets, etc., to a charity coping with a natural disaster,
• transfers of drugs, medical equipment, etc., to poorly equipped hospitals,
• transfers of personnel to schools or hospitals (on loan).
The CRA Staff Memo also provides that:
Transfers of goods or services can more easily be viewed as charitable activities per se. The transfer of a piece of equipment that is meant to be used only for charitable purposes to an organization that will clearly use it for such purposes is likely to be a charitable activity. [emphasis added]
In Registered Charities Newsletter #20, CRA advises:
…the Charities Directorate will consider a transfer of property reasonable where the nature of the property means that it can only be used for a charitable purpose. For example, it is generally reasonable to assume that a copy of the Bible will be used for religious activities, that medical equipment will aid the sick, and that student books will be used for educational purposes in a school. In some cases, where the property could be used for something other than charitable purposes, it may none-the-less be unreasonable to expect the charity to maintain control of assets. The Charities Directorate will consider such situations on a case-by-case basis when requests are received in writing.
As can be seen from the italicized parts of the above two quotes, the charitable goods policy in the CMDA case or Newsletter #20 is anything but a foundation upon which to base charitable operations abroad, unless you have requested in writing consent from CRA and CRA has agreed in writing to that request. When could the charitable goods policy be useful? Perhaps it may be appropriate in the provision of a small amount of a clearly charitable product such as food in a country experiencing a famine, where it is an emergency, and the charity involved is dealing with a reputable agency that is non-political, non-sectarian, and the agency is acting as the charity’s representative in distributing the food.
Most items are “dual use” - they can be used for charitable purposes and they can be used for private gain or business or other purpose. When large amounts of anything are being transferred it is best to have an agreement in writing, wherever possible, that documents what is supposed to happen with the goods.
GlobalPhilanthropy.ca was created by Mark Blumberg, a lawyer at Blumberg Segal LLP in Toronto, Ontario, Canada. If you require legal services with respect to non-profit (tax exempt) organizations or charities in Canada he can be contacted at or at 416-361-1982 x. 237. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit the Blumbergs’ Non-Profit and Charities page at http://www.blumbergs.ca/non_profit.php or http://www.globalphilanthropy.ca
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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.