Charitable work and ethnocultural groups – Information on registering as a charity

Guidance

Reference number
CG-003

Issued
January 25, 2008


1. Purpose of this guide

The purpose of this guide is to help ethnocultural organizations that want to apply for charitable status. The guide puts important general information together in one place.

Each group has to consider how the information here applies to what it wants to do. To learn more about being a registered charity, a group may also want to talk to people with more experience managing charities or to lawyers who work in charities law.

The Canada Revenue Agency (CRA)'s Policy statement CPS-023, Applicants assisting ethnocultural communities, has more detailed information. The CRA's guidance for Canadian registered charities carrying out activities outside Canada, has information for organizations that want to carry on charitable activities overseas.

The CRA must follow the law in the Income Tax Act and the interpretation of the law by the courts. This guide does not replace the law.

CRA policy statements and guidelines are available for the public to read, and can be ordered from the Charities Directorate or found at this webpage: Policies and guidance.

2. Some facts about charities

Canada has over 80,000 registered charities.

A registered charity does not have to pay income tax – the government offers this privilege if a charity's work is for the public good and does not make a profit for individuals.

A registered charity can issue tax receipts for donations that are true gifts – people who donate money to a charity can use a tax receipt to reduce the personal income tax that they owe.

All Canadian charities must obey the rules in the law and file annual returns, including records of income and expenses, with the Canada Revenue Agency.

NGO

A non-governmental organization (NGO) is not the same thing as a charity. However, an NGO can apply for charitable status and be registered as a charity if it meets all the requirements.

3. The role of the Charities Directorate

The Charities Directorate is an organizational subdivision of the Canada Revenue Agency. Officers in the Charities Directorate review all applications for charitable status. The officers must apply all the rules fairly and consistently, following the law and any court decisions interpreting the law. The officers can only register a charity that meets all the legal requirements.

Charities Directorate officers can also monitor organizations that already have charitable status. The officers can check the annual reports of organizations and make sure that their activities continue to meet the legal requirements.

Enquiries officers in the Charities Directorate are trained and ready to answer questions from the public, and to provide information to help applicants and registered charities. They can help people to understand their options, and to know where to look for more information. See the telephone numbers listed at the end of this guide.

Some of the positives and negatives of being registered as a charity

Positives

A registered charity can:

Negatives

A registered charity must:

4. Definition of ethnocultural

An ethnocultural group shares characteristics that are unique to, and recognized by, the group. Characteristics may include:

A group may have its origins in many countries or link its distinct identity to a geographic region within a country.

Religion may also be a defining characteristic because, in some cases, it may be completely tied into a group's racial or cultural identity.

Activities that seek to eliminate disadvantages experienced by members of ethnocultural groups and to end discrimination may be charitable.

The Charities Directorate may register an ethnocultural organization as a charity when all the work the organization does has a public benefit and the work fits into one of the charitable categories described in this guide.

Aboriginal peoples have a unique legal and constitutional position in Canada. The CRA's policy CPS-012, Benefits to Aboriginal peoples of Canada, concerns charitable status for organizations that serve Aboriginal peoples in Canada.

5. First steps

How do charities get started? Often a few people in a community recognize there is a need and decide that they want to do something to help to meet that need. They may begin to work helping others, and after a time they may feel that it would be beneficial to become a registered charity.

To ask for charitable status, go to Apply to become a registered charity, where you can complete and submit the application for registration.

The application for charitable status

The application for charitable status must include:

Governing documents and charitable purposes

To be registered as a charity, an organization has to have a formal structure and a clear purpose.

Structure

The structure may be as:

Purpose

The object or purpose statement is the main statement that an organization makes about the reason it exists. To qualify to register as a charity, this statement must be clear, precise, and include some details on the organization's charitable activities. It is not good enough to say "to help immigrants" or "to build community spirit." The organization must describe what it plans to do and how it plans to do it in its purpose statement.

The following is an example of an acceptable purpose statement for a group that is planning to provide support services to newcomers to Canada:

"To provide education, counselling, and other support services for immigrants and refugees in need, including language instruction, employment training, job-search activities, translation services, and information programs on Canadian culture and life."

The foregoing statement gives a clear idea of the organization's charitable purpose and what activities it will do to achieve that purpose. The organization does not restrict activities to one ethnic group or immigrants from one country. Its stated purpose is to benefit all immigrants and refugees in need.

The sample statement includes many purposes, but an organization may be a charity with only one purpose. For example, if the organization only plans to provide language training for refugees, then its purpose statement may just say that:

"To provide language instruction for refugees."

The more purposes included in the governing documents, the more work the organization must do to show how it will achieve those purposes. The organization must provide a complete description of the activities that it will do to achieve each purpose.

To receive charitable status, all of an organization's purposes must be charitable.

It is best to think through the charitable characteristics of an organization's purpose before applying for incorporation. Otherwise, the group may end up with a purpose in its governing documents that is not charitable and that makes it impossible for it to be registered as a charity. The organization would then have to amend its governing documents and send the changes to the Canada Revenue Agency. This takes time and adds to expenses.

Already incorporated organizations with a charitable project idea

Sometimes an organization that is incorporated and does not have charitable status decides that it wants to become a registered charity. It may, for example, want to take on a new project and fund it by receiving donations and issuing tax receipts. It has to do one of the following:

If an organization has any non-charitable purpose, the Canada Revenue Agency cannot register the organization as a charity.

To be registered

To be registered as a charity, an organization must:

6. Public benefit

All the work that a charity does must benefit the public.

The benefit must:

Every application for charitable status has to pass this public benefit test. However, just because an organization's work passes the public benefit test does not mean it is charitable. The work must also fall into one of the four charitable-purpose categories.

Benefit and community

7. Charitable purposes

To be registered as a charity, all of an organization's purposes must fall into at least one of the following categories:

(i) the relief of poverty

(ii) the advancement of education

(iii) the advancement of religion

(iv) other purposes that benefit the community in a way that the law says is charitable

An organization may be registered with a purpose that fits under just one category, or under more than one category.

(i) The relief of poverty

What are the basics that people need in order to live? Necessities of life include food, shelter, and clothing. Activities are charitable when they provide the poor with the necessities of life. For example, an organization that operates a food bank or provides low-cost housing for people with limited income is acting to relieve poverty.

To fit into the relief-of-poverty category, an organization's purpose must focus on providing help to people who have little or no income. If an organization's purpose includes helping people who are not poor, then the purpose is not only for the relief of poverty and it is no longer a charitable purpose.

Examples of ethnocultural group activities that could qualify for the relief-of-poverty category

  • helping refugees
  • paying for medical services for new Canadians who are not yet eligible for health care coverage
  • providing support to immigrants who are poor
  • helping people from an ethnocultural community who are hard to employ
  • undertaking community economic development activities for a community whose members are poor

(ii) The advancement of education

Education is all about helping people to learn, and includes:

Providing information, or providing information on only one side of an issue, does not qualify as a charitable purpose under the advancement-of-education category. To advance education, there has to be a learning process through which people are given facts from which they can draw their own conclusions.

Examples of ethnocultural group activities that could qualify as the advancement of education

  • teaching new immigrants or refugees to speak English or French
  • providing training to new immigrants or refugees on how to find employment
  • educating the public about a culture (but not programs to preserve a language or culture)
  • training on cultural sensitivity or cross-cultural awareness

(iii) The advancement of religion

It is a charitable purpose for an organization to teach the religious tenets, doctrines, practices, or culture associated with a specific faith or religion. The religious beliefs or practices must not be subversive or immoral.

Teaching ethics or morals is not enough to qualify as a charity in the advancement-of-religion category. For example, a website that states the opinions of an individual or group about what they think is right or wrong does not qualify as advancement of religion. There has to be a spiritual element to the teachings, and the religious activities have to serve the public good.

Examples of ethnocultural group activities that could qualify as the advancement of religion

  • teaching a religion
  • running a religious school
  • establishing a mosque, church, temple, or other place of worship for religious uses
  • repairing a place of worship

(iv) Other purposes that benefit the community

Generally, purposes that fit under the relief-of-poverty, the advancement-of-education, and the advancement-of-religion categories are considered to benefit the community even if they are focused on an ethnocultural group. For example, any activity to relieve poverty is socially useful, even if the activity is not focused on the whole community.

The fourth category under which a purpose can qualify as charitable is more complex. It may apply to a variety of different types of organizations that have been recognized by the courts as having charitable purposes—such as libraries, community centres, and medical clinics.

As explained in Part 6, an organization that bases its request for charitable status on the benefit-the-community category must show that the purpose is:

Examples of ethnocultural group activities that could qualify under the benefit-the-community category

  • offering employment assistance to members of ethnic groups who face unique barriers to employment and have similar training needs
  • helping people who have faced a similar disadvantage, such as recent immigrants who face social isolation and who need support to become established in Canada
  • providing mental-health services to members of an ethnic group who otherwise would not receive adequate services
  • running a charitable residence for senior citizens that focuses on a particular ethnic group because seniors from this group lack English or French language skills, and have unique customs and dietary needs that are not met in other seniors' residences

Four categories

To be registered as a charity, all of an organization's purposes must fit into one or more of these four categories:

8. Other rules that affect ethnocultural groups

Groups that promote multiculturalism

Multiculturalism is a vague term that has not been clearly defined by the courts. The promotion of multiculturalism does not fall into any of the four charitable categories.

An organization applying for charitable status will be turned down if promoting multiculturalism is one of its purposes.

An organization applying for charitable status will also be turned down if promoting or preserving a culture is one of the organization's purposes. This is because promoting or preserving a culture is seen to benefit only some members of the community, not all. However, a charity can do a variety of activities that may contribute to a more multicultural community, such as:

Cultures and multiculturalism

Social or cultural events

A group's social events or cultural celebrations do not qualify as charitable purposes. For example, banquets, picnics, and Canada Day celebrations are not considered charitable purposes.

Nonetheless, a charity can carry on social activities to help achieve its charitable purposes and to help raise funds. However, the charity can only write a charitable donation receipt for the true gift it received. A person buying a ticket and attending an event may enjoy something in return, such as free food and entertainment. The charity can only give the person a charitable receipt for the gift part of the ticket. For example, if a ticket to an event costs $100, and the food and entertainment is worth $75, the charity can only write a charitable donation receipt for the eligible amount of $25.

Limits on who receives services

To be a registered charity, an organization does not have to allow everyone in the community to access its services. The organization may have a good reason for focusing its services on a group (for example, an ethnic group), but the services must still be available to anyone whose needs are within the charity's official purposes.

Charitable work outside Canada

A charity registered in Canada may support charitable work outside Canada if the work is directly and clearly linked to the Canadian organization's charitable purposes.

A Canadian charity can only transfer sums of money or other resources to foreign charities that are considered qualified donees. Qualified donees include:

Most foreign charities are not qualified donees, even though they may be recognized as charities in their home country.

Planning to give sums of money or other resources to an individual or to an organization that is not a qualified donee can result in the Canadian charitable organization losing its registered charitable status.

Charities involved in work outside Canada are subject to intensive review and extra requirements.

A Canadian charity can work in a foreign country either by doing the charitable work itself with its own employees or volunteers, or by arrangements to do work through representatives. When a Canadian charity uses representatives, it must be sure that:

Organizations should also make sure that they have realistic purposes and goals for the work they want to carry out outside Canada. Charitable work outside Canada is very complex, and extensive information and documentation is required with applications for registration by organizations working in foreign counties.

The Canada Revenue Agency must be assured that all of a Canadian charity's money is being spent for a charitable purpose. Many special rules apply when a Canadian charity works abroad or partners with others to do charitable work in a foreign country.

Examples of acceptable charitable work outside Canada:

Operational capacity

Operational capacity means having the necessary financial and human resources, expertise, experience, and networks (such as contacts with established local partners) to carry out proposed activities effectively. It is best to have reachable goals and not try to do too much.

For example, it may be possible for a new or small charity to set up one irrigation system in one village. A goal of setting up 15 irrigation systems in 15 villages in three different countries may not be a realistic goal.

For more information, see Canadian registered charities carrying out activities outside Canada.

Checklist for work outside Canada

Social advocacy and public policy dialogue and development activities

A charity cannot engage in any activities that directly or indirectly support, or oppose, a political party or a candidate for public office.

However, a charity can conduct social advocacy and public policy dialogue and development activities carried on in furtherance of its stated charitable purposes. 

Example of an acceptable social advocacy activity for an ethnocultural group

  • advocate for disadvantaged individuals to help them to gain access to a service to which they are entitled

Examples of acceptable public policy dialogue and development activities for an ethnocultural group

  • have a representative on a government advisory panel
  • distribute research to the media and to politicians
  • speak publicly about the difficulties that members of a community are having, if the speaker's statements are based on research

9. Other materials

More information about Canada Revenue Agency policies

The Canada Revenue Agency publishes policy statements and guidelines to help applicants for charitable status understand the policies that apply to their application. These statements and guidelines are available from the Charities Directorate and on the CRA website at Policies and guidance. This is a list of some of the publications that may be especially relevant to ethnocultural groups.

10. Reasons an application for charitable status will not be successful

These are the 10 most common reasons why an application for registered charitable status will not be successful:

  1. the organization has one or more purposes that are not charitable
     
  2. the application does not have enough information about the organization's activities
     
  3. the organization's activities do not support the organization's purpose. For example, an organization states as its purpose that it will relieve poverty by running a food bank for the poor. In the activity section of the application there is no mention of a food bank, and it appears that the organization is operating a school instead
     
  4. the application does not include a clear statement that the organization's activities are open to everyone
     
  5. the organization does not seem to have the operational capacity (such things as people, structures, and materials) to carry out its activities in Canada or outside Canada
     
  6. the application lacks financial information, as well as details to support the organization's purpose and activities
     
  7. the organization's focus is on social or cultural activities
     
  8. the application does not include supporting documents such as Web addresses, brochures, booklets, newspaper articles, or course content for classes offered that would provide information about the organization's current activities
     
  9. the organization is devoting resources to supporting or opposing a political party or a candidate for public office
     
  10. the application does not include any copy of an agreement with representatives who are supposed to help the organization to carry out its activities outside Canada
     

Officers who work at the Charities Directorate help people who are thinking of applying for charitable status by answering their questions and giving them information about the policies and the process. The officers welcome questions about the application form, requirements to become a registered charity, and Canada Revenue Agency policies that apply to charities.

After an organization has charitable status, Charities Directorate officers continue to be available to answer questions about how the rules apply to charities. If you have any questions, please make use of this service.

More information

For more information, go to www.canada.ca/charities-giving, or call the CRA at the applicable number listed below:

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