The CRA has just released its Consultation on Proposed Guidance on Arts Organizations and Charitable Registration under the Income Tax Act.
The link is here:
The summary from the consultation draft is:
1. The Canada Revenue Agency’s Charities Directorate administers the Income Tax Act as it applies to registered charities. The Charities Directorate decides whether arts organizations can be registered as charities based on the requirements of the Income Tax Act and on relevant court decisions (common law). The Charities Directorate does not regulate artists, the arts community, or the arts industry.
2. This guidance is an interpretation of the applicable law and clarifies the position and practice of the Charities Directorate on matters related to the eligibility of arts organizations for charitable registration. In particular, this guidance will address:
a.The basis for charitable registration: Arts organizations can be registered when their purposes (sometimes called objects) fall under the following categories, or heads, of charity:[Footnote 1]
i.advancement of education (the second category); and
ii.other purposes beneficial to the community in a way the law regards as charitable (the fourth category), by:
?advancing the public’s appreciation of the arts[Footnote 2]; or
?promoting the commerce or industry of the arts.
b.Public benefit: An organization that wants to be registered as a charity under the Income Tax Act must show that it operates for the public benefit. To satisfy the public benefit requirement, a benefit must be delivered to the public or a sufficient segment of the public.A benefit is presumed to exist for purposes under the second category (advancement of education), absent evidence to the contrary. Fourth category purposes (other purposes beneficial to the community in a way the law regards as charitable) must be shown to deliver a benefit to the public.
c.Specific public benefit requirements under the fourth category: Arts organizations advancing fourth category purposes must establish public benefit by satisfying two criteria: art form and style and artistic merit.
i.Art form and style: In this guidance, art form refers to the field or medium in which an artist works, while style refers to the different disciplines or methods of expression within each art form. To meet the art form and style criterion, an arts organization must show a common or widespread acceptance of the form and style of art within the Canadian arts community.
ii.Artistic merit: In this guidance, artistic merit refers to the quality of an artistic exhibition, presentation, or performance. Once an arts organization has established acceptance of an art form and style, it must be able to show that the quality of its exhibitions, presentations, or performances is sufficiently high to be considered charitable under common law.
d.Private benefit: Arts organizations that provide unacceptable private benefits are ineligible for registration under the Income Tax Act. As a general rule, an unacceptable private benefit is one that is not incidental to the achievement of a charitable purpose. A private benefit will usually be incidental where it is necessary, reasonable, and not disproportionate to the public benefit achieved.
3. Appendix A provides a summary of the key characteristics of the main charitable purpose categories described in this guidance.
4. Appendix B gives examples of purposes that may be acceptable for registration under the categories of charity described in this guidance.
5. Appendix C contains a list of art forms and styles that are commonly recognized and will usually be accepted without requiring the submission of more information.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
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.