Requirements of Charities

The decision to apply for registration as a charity is an important one. Once registered, a charity has many obligations to meet each year, such as filing information returns and meeting spending conditions. A charity has obligations to the recipients of its charitable activities, its volunteers, its donors, and to the public. There are also legislative and regulatory obligations a charity must meet.

Minimum Requirements for Charitable Status

• the organization must be established and operated for charitable purposes,



• it must devote its resources to charitable activities,



• the organization must be resident in Canada, and



• its income cannot be used to benefit its members.

Advantages of Being a Registered Charity

• Registration will allow the organization to issue official receipts for gifts it receives



• Once registered, the organization is exempt from paying income taxes



• It will be eligible to receive gifts from other registered charities and is often a pre-condition to receive gifts from non-registered entities such as corporations, government granting agencies and other funders



• Increases its credibility in the community as the organization will have to follow specific rules and guidelines

Disadvantages of Being a Registered Charity

• The organization must follow specific rules and guidelines which may be in conflict with its underlying mission and/or operational style and principles



• If the organization will not be relying of gifts and/or donations which require official receipts for income tax purposes it could register as a non-profit organization and still enjoy tax exempt status;



• An organization will be disqualified from being charitable if it:



• Provided for private benevolence, i.e. to assist a specific person or unique private group e.g. establishing a bank account to assist a neighbour who has lost his house in a fire; assistance for victims of a flood. Donations and assistance in those cases should be channeled through an established charity like the Red Cross.



• Specific political purposes and partisan political activities e.g. a specific political party, cause or doctrine; opposing changes in the law or government policy



• Illegal activities or activities contrary to public policy e.g. terrorism, fraudulent investment schemes, money laundering

Obligations of a Registered Charity

• Devote all of its resources to defined charitable purposes and activities



• File the annual return T3010 which will demonstrate the point noted above



• Maintain adequate and proper books and records and make these available for audit if requested



• Follow the explicit requirements of the Act when issuing official donation receipts. This is a critical requirement!



• Update the Charities Directorate on changes in the organization, e.g. address, directors, bylaws, objects and structure