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Ontario|Business LawOther Business Issues 238 Charities
- Types of Charities
In Canada, there are four "heads" or categories of charities. They are, the relief of poverty, the advancement of education, the advancement of religion and other purposes beneficial to the community. It is not enough for the purpose or activity of an organization to be praiseworthy and worthwhile in and of itself. In order for an organization to be considered charitable, it must be operated for the benefit of the community or a significantly important class of the community. The basic theory for allowing charitable and not-for-profit organizations preferential tax treatment is that they are not meant to make profits but rather are established to provide benefits for the public.
A Canadian charitable organization may be incorporated or unincorporated. There are three types of Canadian charities: charitable organizations, public foundations and private foundations; each of which must meet different requirements.
In order for a not-for-profit organization to obtain charitable status, it must file an application with and receive the approval of Canada Revenue Agency, Charities Division. If the organization wishes to become incorporated, it must also file an application for incorporation either federally or provincially.
- Advantages of charitable registration
The advantages of charitable status are primarily tax based. These include exemption from, and reduced liability for, certain municipal, provincial and federal taxes, and the ability to issue income tax credit receipts for donations.
In addition, charitable status generally provides an organization with a positive image from the public's perspective.
- Registration
To apply for registration as a charity under the Income Tax Act (Canada), various documents must be filed with Canada Revenue Agency. If all of the documentation and information filed is acceptable to Canada Revenue Agency, the organization will receive written notice of its registration as a charity within approximately 8 to 12 months, subject to the discretion of Canada Revenue Agency.
Considering the privileges that charities enjoy in our society, an organization must satisfy a number of conditions before it can be registered and it must continue to meet various obligations in order to maintain its charitable status. Charities must file an annual information return with Canada Revenue Agency. In addition, charities must disburse their funds for charitable purposes in accordance with a specified quota.
All not-for-profit corporations, whether charitable or non-charitable, must have audited financial statements and must be carried on without the purpose of gain for their members.
If you require legal advice or assistance with regard to a not-for-profit or charitable organization, you should consult a lawyer.
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