Introduction and registered charities - Segment 1
Welcome to segment 1 called "Introduction and registered charities", part of the "How to donate wisely - Information for donors" recorded webinar.
Hi. My name is Jean and I am from the Charities Directorate at the Canada Revenue Agency. Thank you for participating in this webinar. Today's webinar will cover, How to donate wisely – Information for donors.
What will I learn today?
Today you will learn:
- What a registered charity is?
- The CRA's role in regulating registered charities.
- Information about donations and how to research a charity.
- How to use your donations to save at tax time.
- The first-time donor's super credit.
- Tax shelters and why you should avoid them.
- And how to avoid fraud.
What is a registered charity?
A registered charity is an organization in Canada that is registered under the Income Tax Act, that is designated as a charitable organization, public foundation, or private foundation and that is dedicated to exclusively charitable purposes.
The term charitable is not defined in the Income Tax Act, so we consider common law (court decisions) to determine what is charitable.
The charitable purposes as identified by the courts are separated in four categories of charity:
- relief of poverty;
- advancement of education;
- advancement of religion; and
- certain other purposes that benefit the community as a whole in a way the courts have said is charitable
An organization's purposes must fall within one or more of these categories to be considered for registration as a charity.
For example, under relief of poverty:
The purpose could be as follows: To relieve poverty by operating a food bank for the benefit of the poor.
Registered charities are:
- Regulated by the Canada Revenue Agency (CRA). A registered charity receives a registration number and has to follow a set of rules.
- They are also exempt from paying tax on their income and may issue official receipts for income tax purposes for the gifts that they receive.
- They are also part of a larger group of organizations known as "qualified donees." All qualified donees are authorized to issue official donation receipts for income tax purposes. Other examples of qualified donees include Registered National Arts Service Organizations and Registered Canadian Amateur Athletic Associations.
- Registered charities must also file an annual information return with details about their finances and activities. Portions of the information return are available to the public.
- Registered charities are required to devote their resources to exclusively charitable activities. Charities are permitted to spend funds on administrative and other items to support their charitable activities.
A non-profit or not-for-profit organization is not a registered charity. Under the Income Tax Act, a non-profit organization is an association, club, or society operating exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit, and that is not a charity. A non-profit organization is exempt from paying tax on its income but cannot issue official receipts for income tax purposes.
Registered charities in Canada
As of October 2013, there were 86,610 registered charities in Canada.
- 76,181 are charitable organizations. So charitable organizations carry out their own charitable activities. They may also make gifts to qualified donees, but this is not their main activity.
- 5,140 are public foundations. Public foundations are primarily funders where they gift over 50% of their resources to other qualified donees.
- 5,289 are private foundations. Private foundations are categorized based on the structure of their board and/or the source of their funding. We look at whether an organization's governing officials and its major donors are at arm's length; if not, we designate it a private foundation.
The term "at arm's length" describes a relationship where persons act independently of each other or who are not related. The term "not at arm's length" means persons acting in concert without separate interests or who are related. Related persons are individuals who are related to each other by blood, marriage or common law partnership, or adoption. Related persons also include individuals or groups and the corporation in which they have controlling interest.
Only qualified donees can issue an official donation receipt
Qualified donees can include:
- a registered charity;
- a registered Canadian amateur athletic association;
- a listed housing corporation resident in Canada constituted exclusively to provide low-cost housing for the aged;
- a listed Canadian municipality;
- a listed municipal or public body performing a function of government in Canada;
- a listed university outside Canada that is prescribed to be a university, the student body of which ordinarily includes students from Canada;
- a listed charitable organization outside Canada to which Her Majesty in right of Canada has made a gift;
- Her Majesty in right of Canada or a province; and
- the United Nations and its agencies.
For a complete list of qualified donees, or if you are thinking about supporting one of these organizations and are not sure if your donation will be eligible for a tax credit, please visit CRA's website.
The CRA's role in regulating registered charities
So what role does the federal government, CRA, play in regulating charities?
As the regulator of charities, the CRA is responsible for:
- processing applications for registration;
- education and outreach;
- monitoring; and
- verification and audit activities.
The CRA shares the public information of the charity annual returns with the public and provides information about donating wisely. The public portion of the returns are available on our website under List of Charities.
Charities are also regulated by provincial and territorial legislation.
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