User:Canadiancharitylaw/Canadian charity law

Introduction
There are 85,225 registered Canadian charities. They are registered under the Income Tax Act (Canada) as either a "charitable organizations", "public foundations" or "private foundations". Although these distinction were more important in the past, there are now few practical differences between the three types of registered charities.

There are many advantages of being a registered charity under the Income Tax Act (Canada) including: 1) being able to issue "official donation receipts" for gifts to the registered charity which may assist a Canadian donor in reducing the amount of federal and provincial tax payable. For a donor in a high marginal tax rate in Canada, their donation can result in a reduction in taxes of between 40-60% of the donation depending on the province of the taxpayer and type of property donated. 2) it is easier to receive funds from certain entities such as other Canadian registered charities (eg. foundations) or being a registered charity may be a condition of applying for grants etc. 3) there are reputational advantages to being a registered charity. 4) there are certain other advantages including reductions in property tax, exemptions and rebates under the GST/HST system.

In light of the substantial advantages of being a registered charity there are some restrictions, limitations and obligations of being a registered charity which are discussed below.

Federal Regulator of Charities
The Charities Directorate of the Canada Revenue Agency is the regulator of registered Canadian charities.

The mission of the Charities Directorate is as follows:

"Our mission is to promote compliance with the income tax legislation and regulations relating to charities through education, quality service, and responsible enforcement, thereby contributing to the integrity of the charitable sector and the social well-being of Canadians."

The Charities Directorate of the Canada Revenue Agency is responsible for: 1) determining which organizations will be granted registered charity status, 2) providing information to registered charities on legal compliance issues, 3) receiving and maintaining a database of Canadian registered charities with copies of the T3010 registered charity information return, 4) auditing charities to check compliance with their responsibilities and obligations, 5) providing general information to the public on donations to registered charities.

Definition of Charity in Canada
The Income Tax Act does not define "charity" and Canada uses a common law definition namely purposes that fall within the four "heads" of charity: 1)the relief of poverty; 2)the advancement of education; 3)the advancement of religion; or 4)other purposes that benefit the community in a way the courts have said are charitable.

This definition comes from the English case Commissioners for Special Purposes of Income Tax v. Pemsel commonly referred to as Pemsel.

The organization's purposes must be exclusively and legally charitable. In addition the organization must be established and resident in Canada.

Furthermore, there is a public benefit test ie. the charity must benefit the public or a sufficient segment of the public to be a registered charity. See Guidelines for Registering a Charity: Meeting the Public Benefit Test

Basic Requirements for Maintaining Registered Charity Status in Canada
According to the CRA the basic requirements for a Canadian registered charity to maintain its status are as follows:

1) Conduct allowable charitable activities and avoid prohibited activities 2) Keep adequate books and records 3) Properly issue official donation receipts 4) Meet the annual spending requirement called the disbursement quota 5) File T3010 Registered Charity Information Return 6) Maintain status as a legal entity 7) Inform CRA of certain changes

Charitable Activities
Canadian registered charities can carry out charitable activities by either gifting funds to a qualified donee or by carrying on its own activities through employees, volunteers or intermediaries.

Canadian charities can also, within certain limitations, carry out fundraising activities, business activities, political activities and social activities.

The Charities Directorate provides a Glossary of terms relating to charity law and compliance for Canadian charities.

Canadian charities can conduct charitable activities in Canada and abroad. There are numerous legal and ethical issues with Canadian charities conducting foreign activities.

Other Regulators of Canadian charities
In addition to the federal Income Tax Act regulation of registered charities, charities that operate in a particular province are subject to the jurisdiction of the public guardian and trustee of that province. The provinces and territories have varying degrees of involvement with charities. For information on different resources from the provincial and territorial governments see http://www.cra-arc.gc.ca/tx/chrts/dnrs/rgltn/5-eng.html Of all the provinces, the Ontario Public Guardian and Trustee has been most active in the regulation of charities.

The Department of Finance Canada is responsible for the Income Tax Act (Canada), its regulations and any amendments to the Act.

If there is a dispute between a federal or provincial regulator and a registered charity then that registered charity may go to court in which case the courts will have the final say in determining the outcome of the dispute.

Other government departments are also involved with regulating charities. For example, if a charity is incorporated it is subject to the rules of the incorporating statute. Therefore, an Ontario non-profit corporation must look in part to the Ontario Corporations Act and a federal non-share capital corporation is governed under the Canada Corporations Act. Different types of charities are subject to sectoral regulation - for example universities, hospitals, daycares etc.

Misuse of Charitable Resources
There have been some concerns expressed about misuse of Canadian charitable resources from the media, government, and the public. Recently the OECD published a report highlighting concerns about Canadian charities being used for tax evasion and money laundering entitled "Report on Abuse of Charities for Money-Laundering and Tax Evasion". The Charities Directorate of the CRA has a number of web pages alerting donors to avoid abusive tax shelter donations schemes and fraud involving charities.

Academic Resources on Charity Law in Canada
The primary academic resource for charity law in Canada is The Philanthropist. In 2009 The Philanthropist was converted from a quarterly subscription model to a free online resource.