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 issue:
Activities outside Canada – Agency agreement not sufficient
The applicant submitted a written (or agency) agreement with its application. Although the CRA recommends that a charity enter into a written agreement with any intermediary it intends to work with, this alone is not enough to prove the charity will be carrying on its own activities.
From the cases, The Canadian Committee for the Tel Aviv Foundation v Canada and and Bayit Lepletot v Canada the court founded that for a program to be considered its own activity, a registered charity must be able to show that it has a real, ongoing, active relationship with its intermediary and that it will sufficiently direct and control its resources and the activities carried on. In Public Television Assn. of Quebec v. Minister of National Revenue, the courts have held that the onus is on an applicant to prove that it is carrying out its own activities and that it is not operating as a conduit established to fund the pre-existing programs of a non-qualified donee. A conduit is a registered charity that receives donations from Canadians, issues tax-deductible receipts, and funnels money without direction or control to an organization that is not a qualified donee. An applicant that operates as a conduit would be contravening the Act and would not qualify for registration as a charity.
We reviewed the written agreement the applicant provided and it is our opinion that the applicant failed to demonstrate it will be carrying on its own activities. Rather, despite the terms of the written agreement, we conclude that the applicant is operating as a conduit, established and operated to fund the programs and activities of a non-qualified donee.
In addition, an applicant entering into an intermediary relationship with a non-qualified donee, must be able to show that its intermediary can deliver the services required, by virtue of their reputation, expertise, or years of experience. We reviewed the materials the applicant provided; however, they do not give us enough information to show that the intermediary will have the ability to deliver its services. As explained earlier, if an applicant does not give us enough information to support its application, we can deny its registration.
For a large amount of information on Canadian charities carrying out foreign activities, see our directory on Global Giving.
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.