Types of charities

In Canada, there are four “heads” or categories of charities. They are:

1. The relief of poverty.
2. The advancement of education.
3. The advancement of religion.
4. 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:

1. Charitable organizations
2. Public foundations
3. Private foundations

Each of these 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 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 eight 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 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.

Ontario Not-for-Profit Corporations Act, 2010 (ONCA)

The Ontario Not-for-Profit Corporations Act, 2010 (ONCA) governs how not-for-profits and charities incorporated in Ontario are created, governed and dissolved, including the rights and responsibilities of members and directors, and the requirements for meetings and financial statements (previously governed under the Ontario Corporations Act).

Implementation period

The ONCA came into force in 2021 and existing not-for-profit corporations previously governed under the Corporations Act had a three-year implementation period to become compliant with the new requirements and make any necessary changes to bring them into conformity with the Act. This compliance period ended on October 18, 2024. Some provisions in the by-laws may no longer apply to corporations that have not updated their governing documents to comply with the Act.

The Ontario Guide to the Not-for-Profit Corporations Act, 2010 can be helpful for those wanting to incorporate new not-for-profit organizations, as well identify what has changed from the Corporations Act (CA) for those corporations already in existence and previously governed under the CA.

Ontario Business Registry

The Ontario Government’s Ontario Business Registry is available for organizations, including not-for-profits, that are registered, incorporated, or licensed to carry on business in Ontario.

Not-for-profits and charities can complete over 90 transactions instantly, 24 hours a day, 365 days a year, through the online registry, including:

• start, dissolve and change a not-for-profit / charity
• search for a business or not-for-profit or charitable corporation
• access existing business or not-for-profit or charitable corporation
• file notices and other documents under other business law statutes

Get help

The legal issues which arise with charities can be very complicated and have some unique requirements. For legal advice and help, contact a business law lawyer.

								
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