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 relating to social activities and purposes:
Social Activities and purposes
The courts in Maisonnee de Hauterive Inc. v. Canada held that social activities are not considered charitable at law. However, an organization established for exclusively charitable purposes may devote some of its resources to social activities as long as these activities are ancillary and incidental (that is, secondary and subordinate) to its charitable purposes. Because of the emphasis on and frequency of the applicant’s social activities, our position is that those activities are not ancillary and incidental to its charitable purposes and that they prevent its registration as a charity.
CRA identifies the following issue with respect to expenditures on social activities:
Expenditures on social activities
The court in Maisonnee de Hauterive Inc. v. Canada held that social activities are not considered charitable at law. However, an organization established for exclusively charitable purposes can devote some of its resources to social activities, as long as these activities are ancillary and incidental (that is, secondary and subordinate) to its charitable purposes.
According to the applicant’s proposed operating budget, we noted that a large amount of its resources are devoted to social activities. Therefore, our position is that the applicant’s social activities are not ancillary and incidental to its charitable purposes and that they prevent its registration as a charity.
Here are some other references to social activities on the CRA’s website and elsewhere:
Other acceptable activities permitted within certain limits
…
Social activities
As a rule, social activities are not charitable at law. However, a registered charity that is established for exclusively charitable purposes can devote some of its resources to social activities as long as the activities are either:
- held to raise funds for its charitable purposes and are not so frequent to be considered as a primary purpose themselves
- incidental to the charity’s charitable purposes. Generally, a registered charity should not devote more than 10% of its resources (funds, personnel, and property) to social activities
A registered charity that engages in frequent social activities is putting its registered status in jeopardy for failing to devote its resources to charitable activities.
Social activities
Summary policy
Date
June 9, 2003Reference number
CSP-S05Key words
Social (activities) – Charitable (activities)
Policy statement
Social activities, in and of themselves, are not charitable at law.
An organization that is established for exclusively charitable purposes can devote some of its resources to social activities provided these activities are ancillary and incidental to its charitable purposes.
References
- Guidance CG-020, Charitable purposes and activities that benefit youth
- Summary policy CSP-R13, Resources
- Maisonnée de Hauterive Inc. v. Canada (Minister of National Revenue) (2001 FCA 171), 2001-05-29
Social Activities
A charity must devote substantially all of its resources (funds, personnel, and property) to charitable activities. Social activities are not charitable at law and are only allowed on an occasional basis. For more information, contact our Client Service Section.
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.