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:
Public Benefit
Charitable purposes must have certain essential characteristics, particularly public benefit, rather than private benefit. Public benefit is a direct and measurable benefit to the community as a whole or to a sufficient section of it. A private benefit is directed toward the interests of a narrowly defined group, rather than the public as a whole. Any organization that provides benefits to members of a particular group cannot be registered as a charity
Based on the information we have, we conclude that the applicant has been established for the benefit of its members, as shown by [Insert examples of purposes or activities]. Since those members are a narrowly defined group and not a sufficient section of the community, we believe the applicant has been established to provide an unacceptable private benefit. For more information on meeting the public benefit requirement, go to canada.ca/charities-giving, select “Registering for charitable or other qualified donee status” then, “Policies guidance” and see Guidance “Guidelines for Registering a Charity: Meeting the Public Benefit Test, CPS-024.”
The CRA Guidance on meeting the public benefit, from 2006, is a bit dated and probably a cure for insomnia. Try reading a few pages and see if you don’t fall asleep. But it makes it clear that it is not good enough to have charitable purposes, but you must also have a public benefit for a sufficient section of the community. The CRA guidance goes into much more detail about this, including the following topics:
- 3.0 The test for public benefit
- 3.1 The meaning of benefit
- 3.2 The meaning of “public”
- 3.2.1 What constitutes a sufficient segment of the community?
- 3.2.2 Restricting or focusing benefit to a specific group of beneficiaries
- 3.2.3 Public benefit and member organizations
- 3.2.4 Private benefit: To what extent may individuals benefit privately?
- 3.2.5 Is the issue of public benefit affected by charging fees?
- 3.3 Proof of public benefit
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.