Common Pitfalls to Avoid When Applying for Charitable Status

Procrastination:

We’ve seen people who have literally been working on the CRA paperwork for years, working a bit at a time and setting the paperwork aside for long periods. Between times, the person forgets what they have done so far, finds the documentation frustrating and constantly has to repeat learning.

• Solution: Creating a Canadian charity is serious work. If this is something you want to do, work on it, get it completed and move forward. Delegate the task to someone who will complete the form. It could be a Board member or a senior staff member, for example. Check on the status of the application process on a regular basis. Make it an important task or else don’t do it.

Failure to link your objects to programs in Q: 13A on the form.

You are enthusiastic about the work you do and the work you intend to do. The tendency is to provide a long description of the wonderful work of your organization and to forget to link it to your objects.

• Solution: Charities have to stick within their objects. The CRA wants you to connect the dots and let them know how each object is typically going to be met. Everyone knows that you don’t have a crystal ball and you don’t know the future. As best you can, describe the programs that you will create for each of your objects for each object. Some of the programs may not yet be active. That’s OK, you are in a startup mode.

Being sure you want to become a charity:

Do you know if you qualify to become a charity under Canadian law? Is your application something the organization wants to do or has it been suggested by a well-meaning outsider?

• Solution: Read the requirements and information package on what types of organizations are entitled to have charitable status. Know why it is important to your organization to receive charitable status. If the time is not right, then don’t apply until you are ready.

Not enough information submitted:

The first thing that CRA does is check to see that the proper attachments are included with the application. If you have missed anything, the application will be returned to you and you will lose time in the application process.

• Solution: Double check that you have met the checklist of attachments as listed on the T2050 form (at the end of the form). Note that you will need stamped copies of your incorporating documents.

Too much information submitted.

You may have been in operations for some time and you may have a lot of wonderful information about your organization that you like to share. Don’t overwhelm the CRA with every bit of literature you have.

• Solution: Think through the content of your attachments. CRA needs enough information to understand what you do, without being overwhelmed. Remember that the CRA receives hundreds of applications. What would you like to see about your organization if you were the CRA? Double check that you have included the mandatory items on the CRA checklist at the end of the T2050 form.

Lack of knowledge around the requirements for governing documents:

Whether you are incorporated federally, provincially or territorially, you will have followed the jurisdictional regulations for setting up a non-profit agency. How loose are your incorporating documents? Were you incorporated a number of years ago? Have any statutes changed that affect you? Are your documents going to be acceptable to the CRA?

• Solution: Check to see that your incorporating documents fit within the current statutes for both your jurisdiction (i.e. province, territory or federal) as well as the CRA requirements. Read the CRA guideline for setting up a charity. It clearly describes provincial implications to think about. Review these carefully.

Careless completion of application:

Haste can seem expedient and can get something in the mail quickly. Your haste can also cause you more elapsed time being spent compared to filling out the form properly in the first place.

• Solution: Becoming a charity is a serious matter. Please complete the form thoughtfully, answering every question.

Objects are too vague or Incorporating documents are incomplete:

You may have incorporated under your provincial guidelines. The CRA has stringent requirements to become a charity. Have you met the CRA requirements?

• Solution: Take a look at the list of sample acceptable objects published by the CRA. You may have to re-do your bylaws (incorporating documents) to meet the CRA standards. Yes, it takes time. There’s no point in submitting an application to the CRA until your incorporating documents meet the CRA standards. There are no quick fixes on incorporating documents and you may have to change your bylaws before applying for charitable status. To do this, many organizations will have to pass a Special Resolution.

You have a good idea for the short term:

Sometimes people have a charitable cause in mind that fits a short term situation (e.g. a flood relief situation). It’s a lot of work to become a charity. Are you ready to complete the paperwork for a cause that has a short term need?

• Solution: Does your good idea fit as a program under a currently operating charity? Consider approaching a charity whose cause is similar to yours and discussing with them whether your good idea could be implemented as a program under the existing charity. Then, you can get on with the good work while working with tried and true infrastructure.