In the last couple of weeks I have read two separate CRA notes on the importance of maintaining sufficient separation between a registered charity and a non-qualified donee (whether non-profit, foreign charity, for-profit, etc)

Here is an excerpt from a recent Notification of Registration

 

 

Maintaining sufficient separation

As a registered charity, [Name of Charity] must ensure that its operations are kept separate from the operations of [Name of Foreign Charity] (a non-qualified donee). To ensure that sufficient separation is maintained, there are a number of steps that a registered charity can take.

For example:

– keep separate bank accounts

– keep separate books and records

– conduct separate board meetings and keep separate meeting minute records

– operate entirely separate charitable activities that do not resemble or overlap those of the for profit entity

– clearly identify the registered charity as a separate entity when advertising its activities

A registered charity that does not comply with the provisions of the Income Tax Act may be subject to sanctions (penalties and suspensions) and/or revocation of its charitable status.

For more information in this regard, please contact our Client Service Section at 1-800-267-2384.

 

CRA has revoked a number of charities over the last few years for not maintaining adequate separation between the registered charity and the non-qualified donee.  As this is an important topic it would be nice if CRA released a guidance on it.  For now, we have a course dealing with this topic if that is helpful.  We have also helped many charities in structuring their affairs to maintain adequate separation between the registered charity and another organization that is not a registered charity.