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:

Lack of information

 

Section 149.1(1) of the Income Tax Act requires that a charitable organization devote all of its resources to charitable activities. Activities are considered charitable when they are carried on to advance a charitable purpose.

When an applicant plans to carry on activities either inside or outside Canada, it must show how those activities further its stated charitable purposes. In this regard, an applicant needs to give us all of the following:

• a clear, complete, and detailed description of the activities it will carry out (this description can include supporting documents about an applicant’s activities and programs, such as financial statements, meeting minutes, business plans, written agreements, or contracts, brochures and pamphlets)
• the location where the activities will be carried on (that is, physical address, and town or city)
• details about how it will carry out its activities: that is, through its employees or volunteers, through an intermediary, or by making qualifying disbursements through gifts to a qualified donee or grants to a non-qualified donee (a grantee)
• details explaining the applicant’s or its intermediary’s or the grantee’s ability to carry out the applicant’s activities
• the intended beneficiaries of those activ

As previously mentioned, it is not enough to just express the organization’s goals. Even if the organization is not operating yet, it must describe its proposed activities in as much detail as possible. For more information on describing the applicant’s activities, go to canada.ca/charities-registration and click on “Apply for registration” followed by “Describing your activities.”

Here is some information from the CRA website:

When examining an applicant’s statement of activities, we look for a detailed description of its programs as they relate to each of its purposes. An applicant cannot simply express its goals. It must give detailed and real plans for its current and proposed activities and show that they further its charitable purposes. Failing to provide enough information, or failing to show that it devotes all of its resources to activities that further its charitable purposes are grounds to deny registration.

In the section on Purposes and activities of the Application to be a registered charity under the Income Tax Act, you must describe in clear detail each charitable activity you will undertake to achieve each of your stated charitable purposes and show how it provides a benefit to the public. You will be asked to name the activity, describe it, answer specific questions about it, and provide any supporting documentation. This includes any public policy dialogue and development activities that you may have since they are also considered charitable activities.

When describing a charitable activity, keep the following points in mind:

• what you want to achieve
• how you’re doing it – detailed plans
• who the beneficiaries are and how they are selected
• any fees charged
• frequency and length of the activity
• involvement of employees and volunteers
• how you maintain direction and control over activities and resources
• other logistics (transportation, facilities, etc.)

In addition to your description of the activity, you will also be asked to provide the following information:

• activity start date
• details of intermediaries and other partnerships
• location(s) of activity
• anticipated expenditures for this activity
• purpose the activity supports

Finally, you will be asked to provide all relevant supporting documentation, such as minutes of meetings, newspaper articles, website information, videos, CDs, fundraising materials, pamphlets, brochures, and any other documents/media that will allow the Charities Directorate to determine if your activities are charitable.

Note

Don’t include your fundraising activities and related business activities in the section on Purposes and activities. You should report them in the section on Gifts and other income generating activities.

Example of an activity description

Activity: Classes on employment life skills

The Northern Education Society is focused on providing job-skills training to individuals in isolated Northern communities, in an effort to relieve poverty.

The Society will host a two-hour class every Monday and Wednesday evening, at the Northern Community Centre. Classes will consist of lesson plans focusing on life skills to assist participants to obtain and to maintain employment, such as effective time management and budgeting. Participants will also have access to the centre’s computers and will be introduced to Microsoft Word, Excel, and Outlook, to learn computer skills. Examples of course material are attached. Each class will be facilitated by two volunteer instructors who currently work in the education field.

The classes will be offered to anyone in the community at no charge, but will be limited to 10 participants per session. The training will be advertised throughout the community, and participants will be selected on a first-come, first-serve basis.

In addition, each Tuesday and Thursday evening, volunteers will be available at the Northern Community Centre to provide one-on-one assistance with resume building and job interview preparation. The Society will focus on recruiting volunteers who have experience in human resources and/or management, and this service will be available to residents of the community at no charge.

 

The CRA’s concern about a lack of information is probably the most common CRA concern with charity applications.  Even if you provide a lot of information, that may not be the solution, and it may not provide CRA with the type of information that it requires.  We find that when preparing to incorporate, organize, and apply for charity registration, at least half the work involves providing a detailed statement of activities.    If you don’t want to do this level of work, which is understandable, then you might want to be a foundation with only one purpose, ie, to give funds to qualified donees, and then you would not be able to undertake charitable activities with your staff, volunteers, intermediaries and grantees.  If your foundation becomes a registered charity, you can go back to CRA in the future and ask to expand your purposes with their review and permission.  However, keep in mind that currently CRA has a delay of 10-12 months in reviewing such purpose changes, and you will then have to provide a detailed statement of activities.  Therefore, it makes sense that if CRA has this concern and you have an interest in carrying out charitable activities, you respond in detail to CRA about your 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.