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Apr 13

Charitable Status with CRA

Posted on April 13, 2018 at 9:35 AM by Josh Yaworski

Chart showing deadlines for each month 
Becoming a Registered Charity

The Canada Revenue Agency (CRA) is the government department in charge of granting organizations charitable status. It is the Charities Directorate that monitors compliance. Adherence to the rules is essential to preserving the public’s confidence in the charitable sector.

An organization interested in becoming a registered charity should study the obligations prior to undertaking the application process. The process is quite in-depth. The application should only be completed when the organization has a clear idea of what it will do and how it will operate.
Applications are processed on a first-in, first out basis. Acknowledgement letters are sent for all applications received. If the application is approved, a Notification of Registration will be sent. Be prepared to wait months, and do not issue donation receipts prior to official registration.

One of the first steps to become a registered charity is to determine if the organization’s objects meet the requirements of the Income Tax Act and the criteria of being “charitable” as defined by common law. Each of the organization’s programs and activities must exist to further the objects.
The courts have classified charitable objects into four categories: the relief of poverty; the advancement of religion; the advancement of education; or other purposes that benefit the community that are charitable.

To qualify for registration as a charity, an organization must be legally established with a governing document and be appropriately set up with capacity to carry out its activities (staff, volunteers, skills, resources, donations). It must have a dissolution clause stating that upon termination of its operations it will transfer its assets to a qualified donee.

You must have sufficient financial resources to carry out the activities of the charity. Part of the application form includes a proposed budget or submission of the organization’s most recent financial statements. Remember, most of the expenditures must reflect charitable activities.

The primary advantages of being a registered charity are to issue official receipts for gifts it receives; be exempt from paying income tax; be eligible to receive gifts from other registered charities; and enjoy increased public trust.

Operating a registered charity is a noble, but sometimes challenging endeavour. If none of these advantages are significant to the operation of the organization, then maybe charitable status is not necessary. Visit the Government of Canada website for complete information about registering a charity at www.canada.ca. Search the key word “charities”.