CRA’s 10 reasons why an application for Canadian charitable status will not be successful
Published under: What's New from the Charities Directorate of CRA | Canadian Charity Law
The CRA recently posted their top ten list of why applications for charitable status will not be successful. It was placed in a Consultation document entitled “Charitable Work and Ethnocultural Groups - Information on registering as a charity “. As an aside the last time I saw a study on the difference between applications for charitable status that were accepted by CRA and those that were rejected the most important factor correlating with acceptance was use of a lawyer. Although one does not need to use a lawyer, the process is anything but straightforward. If one is going to use a lawyer it is important to use a lawyer who is knowledgeable about charity law and especially important if you plan on conducting activities outside of Canada that the lawyer be familiar with CRA requirements for Canadian charities operating abroad. Just one little example they cite for denying an application “The application does not include any copy of an agreement with representatives who are supposed to help the organization to carry out its activities outside Canada.” CRA expects when one files an application that references foreign activities to be carried out under a structured arrangement (agency, joint venture, cooperative partnership, contractor) that in fact the agreement be attached. This comes as a surprise to some including experienced practitioners. Also they don’t mean some nice looking agreement - they mean an agreement that complies with ALL the requirements in RC4106. Some may see this as harsh - however, if an organization takes shortcuts and does not have the resources and advisors to put in an appropriate application for charitable status it is not difficult to imagine that some of those same people may take shortcuts later when the charity is operating.
10 reasons an application for charitable status will not be successful
These are the 10 most common reasons why an application for registered charitable status will not be successful.
The organization has one or more purposes that are not charitable.
The application does not have enough information about the organization’s activities.
The organization’s activities do not support the organization’s purpose. For example, an organization states as its purpose that it will relieve poverty by running a food bank for the poor. In the activity section of the application there is no mention of a food bank, and it appears that the organization is operating a school instead.
The application does not include a clear statement that the organization’s activities are open to everyone.
The organization does not seem to have the operational capacity (such things as people, structures, and materials) to carry out its activities in Canada or outside Canada.
The application lacks financial information, as well as details to support the organization’s purpose and activities.
The organization’s focus is on social or cultural activities.
The application does not include supporting documents such as Web addresses, brochures, booklets, newspaper articles, or course content for classes offered that would provide information about the organization’s current activities.
The organization seems to be devoting too many resources to political activities.
The application does not include any copy of an agreement with representatives who are supposed to help the organization to carry out its activities outside Canada.
It is also interesting to note the following reasons given by CRA in an employee speech delivered in 1997 at http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cs/cs-001-eng.html
“67. If the group appears to qualify and you submit an application, what can you do to smooth its passage?
It is elementary to ensure that the application is complete, yet this is a message which it seems we have to keep repeating. Another thing to keep in mind is the need for examiners to feel comfortable with or to
have trust in the materials they are reviewing. Examiners have highly sensitive antennae for indications that they are only being told part of the story. As well, there are a number of things that alert them to
● The objects for which the organization is established are the same as those used by another organization. Of course, this is not a problem when the two organizations are essentially identical, for example, two congregations of the same faith group. However, we do look at objects carefully (for reasons I will come back to below), and when we see the same wording being repeated constantly in organizations represented by a particular lawyer, the question arises whether this particular set of objects has any meaning for this particular applicant.
● The objects do not match the applicant’s description of its activities or proposed activities. This is a variant of the previous factor. We suspect that the applicant has “borrowed” the objects of an
existing charity, thinking this will facilitate registration. The upshot is the same; we can place no reliance on these purposes as a true statement of the applicant’s goals.
● The directors listed are all members of the same law firm. To speed incorporation and registration, some firms name their partners or legal secretaries the first directors of the organization. If we get
such an application, we are forced to question what weight to attach to its announced statement of activities since apparently its actual governing body has yet to be constituted.
● An incorporated applicant from Ontario does not have Letters Patent stamped with the Public Trustee’s approval. We are forced to wonder why the organization is apparently trying to avoid the
Public Trustee’s office.
● An applicant, previously turned down, which disguises itself (perhaps by a change of name) and promptly re-applies in the hope of finding a more sympathetic examiner. Charity law may be
antique; our computers are not.
● The applicant that is too eager to please or keeps changing its objects and activities on the basis of what it apparently thinks will satisfy us. Again, our problem is that we can have no confidence in
what we are being told.
68. I believe the moral of the story is evident. Short-cuts can lead to long detours.”