Introduction - Segment 1
Welcome to Segment “Introduction”, part of the Community Economic Development Activities and Charitable Registration (Guidance CG-014) webinar.
My name is Jean Pierre Bernard and I am from the Charities Directorate at the Canada Revenue Agency.
In today's presentation, we will review the major changes that resulted from the revision of the RC4143, the Community Economic Development guide and we will provide an overview of the recently published Guidance CG-014, entitled “Community Economic Development Activities and Charitable Registration”. This new guidance which was released on July 26, 2012, replaces the old guide RC4143.
Why undertake revisions?
There were three major reasons to undertake revision to the RC4143.
The first, RC4143, Community Economic Development Programs (1999) was not originally intended as a policy paper, but more so as a discussion paper.
Secondly, the sector's interest in social enterprise continues to grow and clarification on “the rules” was required.
Third, we wanted to clarify how Community Economic Development (CED) activities fit within the charity law framework and what key factors will influence registration for organizations that engage in these types of activities.
Now, before getting into the specific changes, I'll just go over the three key concepts that underpin the guidance document.
First, the Canadian law does not recognize CED as a charitable purpose in and of itself.
Second, even though CED is not a recognized purpose, CED activities may be charitable when they directly further a recognized charitable purpose. We will discuss this further into the presentation.
Third, we've clarified the concept of “Community” for this guidance. Community can refer to either:
- a geographic location, or
- a group of eligible beneficiaries that share a common characteristic which result in economic disadvantage.
In some cases, it can refer to both characteristics.
As well, organizations that conduct CED activities must make sure they meet the public benefit requirement, which prohibits private benefits. As a general rule, a private benefit is a charitable or non-charitable benefit provided to a person, entity or organization that is not a charitable beneficiary, or a benefit provided to a charitable beneficiary that exceeds what is considered to be charitable.
The next four slides highlight some of the specific changes that we made as part of the revisions. We will also discuss some of them in more detail later in the presentation.
We removed of the “Hard-to-employ” criteria. The emphasis is now on ensuring that the eligible beneficiary group (those that the charity is trying to assist) is broad enough to meet the public benefit requirement. It is up to the organization to show us how they define the eligible beneficiary group and how that group meets the public benefit requirements.
The next important change is the removal of the restriction on Individual development accounts (IDA's) and micro-enterprises to the relief of poverty purposes only. If an organization can demonstrate how IDA's and micro-enterprises further other charitable purposes, the organization may be eligible for registration.
Specific Changes - Program related investment
The biggest change to the guidance is the expansion of the program related investment section. The section now provides a more detailed explanation on how and when PRIs are acceptable, and we've also added more examples.
As part of the expansion of this section, we also lifted the restriction that required PRIs to be made to qualified donees only.
This is significant because charities will now be able to work with any type of organizations to further their charitable purposes, including private and for-profit companies, rather than the limited pool of organizations that are qualified donees.
Specific Changes – Other
Other changes to the RC4143 include:
The removal of the section on relieving poverty through the operation of stores. This concept is generally covered by the related business policy.
The elimination of some criteria for social businesses that were irrelevant to furthering charitable purposes.
And we've attempted to clarify the fourth category of charitable purposes, promoting commerce or industry as it relates to Community Economic Development Activities.
Specific Changes - Clarity
Finally, we changed the term “economically challenged community” to areas of social and economic deprivation. This is to give some additional recognition to the social issues or concerns that can accompany economic challenges.
We've also clarified and shortened the guidelines on what constitutes a “deprived” area.
This now concludes the specific changes section.
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