Blumbergs Professional Corporation is involved with many charity applications each year. In this series, CRA Charity Application Graveyard, we aim to provide groups considering charitable status applications with insights into common issues the CRA encounters, based on our analysis of access to information documents, CRA letters, and the CRA’s Charities and Giving website. These reasons given in the Charity Application Graveyard are not presented in order of importance.
CRA identifies the following issues:
Broad and vague language
A charitable purpose needs to show why the organization is being set up (for example, to relieve poverty), how it will accomplish its goal (by providing a soup kitchen), and who will benefit (poor people in Halifax).
The organization must state this purpose in clear terms that define the scope of its activities. For more information, go to canada.ca/charities-giving, select “Registering for charitable or other qualified donee status” then, “Policies and guidance” and see “How to Draft Purposes for Charitable Registration, CG-019.”
CRA notes, for example, in a letter to an organization applying for charitable status:
We reviewed the applicant’s purposes set out in Article 6 of its Letters Patent filed under the Corporations Act of Ontario on ___________. It is our opinion that the applicant’s purposes are too broad and vague to qualify for charitable registration. Broad means the purpose may allow for activities that do not further a charitable purpose or may deliver unacceptable private benefit. Vague means the purposes could be interpreted in different ways.
Specifically, wording such as “promote understanding of the diverse nature of the [XYZ community]” and “in lobbying government on issues that concern to the [XYZ community]” is broad in that it could allow for the pursuit of noncharitable activities. Also, it is vague, in that it lacks the degree of certainty and clarity required to sufficiently define exactly what the applicant means.
Another related point of concern for CRA is when there is a mix of charitable and non-charitable purposes:
It is our opinion that the applicant is established for a mix of charitable and non-charitable purposes. For example, we advise that while to “provide tutorial programs” could be considered charitable, wording such as “to provide highly structured recreational sports programs in particular basketball, soccer, football and track” would not be considered an exclusively charitable purpose.
Sometimes the broad and vague object clause comes from people using standard objects from provincial-level authorities for non-profits that are not charities. For example, CRA notes:
Alberta Societies Act – Standard object clauses
The applicant is using some of the standard object clauses provided on the Application to Form a Society, under the Societies Act of Alberta. The purposes in these clauses are broad and vague and do not restrict the applicant to exclusively charitable activities. Also, most of these purposes are not charitable at law because they mainly allow for social, recreational, and fraternal activities.
Not everything is charitable, and sometimes, for some groups, depending on what they want to accomplish and what their sources of revenue are, it may not even be desirable to be a registered charity. One thing is clear – CRA spends a lot of time and resources reviewing charity applications, and unless your application meets all of the charity law requirements under the Income Tax Act and common law, they will not be able to register your organization as a charity.
If you require assistance with your charity application, you may be able to retain our law firm, and you can contact us here. It is best to contact us before establishing the entity and making an application to CRA, as this will minimize costs, changes and delays..