Introduction; What is fundraising; Fundraising activities; Key messages - Segment 1
Welcome to the CRA's Updated Fundraising Guidance webcast. This webcast is a recording of a webinar that occurred in March 15, 2012. This session is no longer live so if you have a question, please call our Client Service at 1-800-267-2384 and an agent will be happy to help you. Thank you very much and we hope you enjoy this webcast.
My name is Zachary Euler. And I am from the Charities Directorate at the Canada Revenue Agency. Now we are ready to start the session.
As I mentioned in the previous slide, I work for the Charities Directorate, which is the government body responsible for the federal regulation of charities in Canada. The Charities Directorate itself is part of the much larger Canada Revenue Agency or CRA, which is responsible for applying and enforcing the Income Tax Act, and the Income Tax Act is the legislation that allows for the registration of charities at the federal level and gives them a number of advantages, such as the ability to issue tax-deductible receipts for donations, and exemption from income tax. Along with these advantages, however, the income tax also sets limits around how charities may use their resources, and these limits also apply to the resources a charity devotes to fundraising.
I'm going to move on to the next slide, "CRA Guidance on Fundraising by Registered Charities." The CRA released the guidance document Fundraising by Registered Charities on June 11, 2009, in order to explain the restrictions the Income Tax Act places on a charity's fundraising. The version of the guidance released in 2009 had gone through extensive consultations with the charitable sector, and as part of these consultations, the CRA committed to monitor the implementation of the guidance, accept feedback and to revise the guidance as necessary. During this implementation period, we received both internal and external feedback and began revising the guidance. The revised guidance will be published on our website very soon and this webinar provides an advanced look at the updated version of the guidance and provides its key messages about how a charity can fundraise without overstepping the boundaries of the Income Tax Act. Now also, it should be noted that the CRA's key messages regarding fundraising have not changed with the updated guidance. The main difference between the original guidance and the updated guidance is that the updated guidance has been rewritten and reorganized to make it easier and more intuitive to use.
Now I'm going to move on to the next slide, and that is "What is Fundraising?" Before we begin discussing in any detail what charities can and can't do under the Income Tax Act when they fundraise, I'd first like to explain what the CRA means by "fundraising." The CRA defines fundraising as an activity that includes a solicitation of present or future donations for cash or gifts in kind. "In kind" means any property other than cash, including the sale of goods and services. As a rule, this means asking for money or other property from individuals or companies. Obviously this is a very wide net that captures many different kinds of activities, but there are still a few activities that generate revenue and that the CRA doesn't consider to be fundraising. These are listed in Section D of the guidance and include, for example, activities such as applying for government grants or applying for funding from other registered charities. These types of activities may result in the charity ultimately receiving money or funding, but the CRA treats them separately from contacting the general public to generate financial support.
Now I'm going to move on to the next slide, "What Are Fundraising Activities?" As I mentioned, the CRA's definition of fundraising casts a wide net and can include activities that directly and indirectly solicit funds. For example, a direct activity would include a door-to-door canvassing campaign where charity sends volunteers into a neighbourhood to ask for money from residents. An indirect or related activity could be all the research and planning that goes into organizing a door-to-door canvassing campaign, such as researching the demographics of a city's neighbourhoods to find the best areas to fundraise in, or coordinating the shifts of volunteers who will go through the neighbourhood. Although the research and planning does not itself directly result in fundraising, does not result in revenue for the charity, it is still connected to the overall fundraising effort and must be treated as fundraising.
Now we're going to move on to the next slide, the Charities Directorate's position on fundraising by registered charities. One of the challenges in discussing what restrictions the Income Tax Act places on a charity's fundraising is that there are no provisions of the Income Tax Act that directly and explicitly refer to fundraising. There's nothing that lists, for example, what fundraising activities a charity may use, when they may fundraise, or how much they may raise. There are, however, several provisions of the Income Tax Act that regulate or restrict how a charity may use its resources in general, and a charity must comply with all of these requirements when carrying out fundraising. Much of what the guidance discusses is how a charity can comply with these requirements for the use of a charity's resources when it is carrying out fundraising activities.
We're going to move on to the next slide, and this is the guidance's key messages. There is a lot of information in the original and the updated guidance, but the core message of both is probably best distilled into these four main points. On this slide, they are listed in the same way they are presented in the updated version of the guidance. Points one and two deal specifically with ensuring that a charity's use of resources for fundraising complies with the requirements of the Income Tax Act. Section F of the guidance lists the ways a charity's fundraising can run afoul of the Income Tax Act. Section G deals with the signs or indicators a charity may be carrying out unacceptable fundraising. The third point, Appendix B, discusses how to report fundraising costs on a charity's Form T3010, Registered Charity Information Return, and the last point, Appendix C, recommends some best practices a charity might follow to reduce the risk of carrying out unacceptable fundraising. Please note that the best practices in Appendix "C" are recommendations as opposed to requirements under the Income Tax Act, which are described in section F. And this list of key messages is not meant to imply that the other section in the guidance are unimportant. They provide scenarios and more detail on what kinds of activities are considered fundraising.
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