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.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.