Prepared by:  Mark Blumberg, Maddy Sawyer, Lynn Gluckman, Ron Segal, and Adam Greco of Blumberg Segal LLP.

Can my registered charity or non-profit provide COVID-19 relief programs and other COVID-19 support?

You will need to review your organization’s official “objects” or “purposes”, as stated in your organization’s governing documents, to see whether or not they cover the programs or activities you wish to carry out.

If they do not, as a non-profit, you should be able to change your purposes to cover your new activities. For registered charities, you may be able to change your purposes to cover your new activities, but you may also require CRA approval of those purposes. CRA’s Charities Directorate is currently closed and therefore cannot presently approve any changes in purposes. Depending upon the organization and the nature of the object changes, in some cases, a registered charity can make the changes and provide the amended corporate documents to CRA along with a detailed statement of activities immediately after making the corporate changes.

If your purposes do not allow for COVID-19-related relief programs, you may still be able to give funds to other groups that are undertaking COVID-19-related relief programs if your purposes include a gifts to registered charity or qualified donee clause. Qualified donees include registered charities, listed municipalities, listed foreign universities, etc.  In many cases, another registered charity may be able to do a particular charitable program or intervention better than your registered charity and you should consider making a gift to that other registered charity.

If you are unsure whether your purposes allow for COVID-19-related relief programs, or need to change your purposes, you should obtain legal advice. You may also find the following resources to be helpful:

How does the COVID-19 crisis affect our registered charity’s filing of the T3010 or our non-profit corporation’s filing of the T2 and T1044?

CRA has announced that it has extended the T3010 Registered Charity Information Return filing deadline for all registered charities that are required to file from March 18, 2020. The extension will allow all registered charities that have a fling deadline between March 18, 2020, and December 31, 2020, to file by December 31, 2020.

Here is more information on that CRA announcement CRA Charities Directorate announces extension of T3010 filing deadlines till December 31, 2020 in response to COVID-19.

As of March 30, 2020, the CRA updated their website to allow an extension for certain non-profits to file  T2 Corporation Income Tax Return and T1044 Non-Profit Organization (NPO) Information Return

Any T2 Corporation Income Tax Return or T1044 that was due from March 19, 2020, to June 1, 2020, can be filed by June 1, 2020.  Also, they announced on May 22, 2020, that corporations that would otherwise have a filing deadline in June, July, or August 2020 can now file on September 1, 2020 for both the T2 and T1044.

See: Further extension for T2 and T1044 filing deadlines for June, July and August 2020 filers

Can my registered charity or non-profit provide funds to other groups providing COVID-19-related relief?

This depends on many factors, including whether you are a charity or a non-profit.

As a non-profit, you likely can support other groups with funds and other resources provided it is within your objects. However, for both non-profits and registered charities keep in mind that any funds that you received under a grant or donor arrangement that is restricted for a specific purpose cannot be re-purposed unless your agreement with the grantor or donor allows for that or you obtain a court order. Always consult any granting agreement and/or any messaging provided to the public in connection with an appeal before spending restricted funds.

As a registered charity, generally you may only make a “gift” to other qualified donees. Qualified donees include other Canadian charities, such as hospitals and universities, as well as municipalities and provincial and federal governments.  In addition, if you wish to transfer funds to an organization that is not a qualified donee then you need to follow CRA’s guidance CG-004 – Using an intermediary to carry out a charity’s activities within Canada.

This guidance discusses how Canadian registered charities can work with non-profits and for-profits and provide them with resources so long as there is appropriate “direction and control”.  There are many thousands of registered charities every year that work with non-qualified donees (such as non-profits and for profits) to help charities implement their charitable programs. If this is not something your organization has had experience with, we would suggest that you review CRA’s guidance carefully and/or seek legal counsel to ensure you are meeting the necessary compliance requirements.

Can I contact the CRA Charities Directorate about my questions around the COVID-19 crisis?

Update on April 20, 2020

CRA Charities Directorate call centre is now operational today  Most of the CRA’s Charities Directorate is operational working remotely.

 

Previously we had noted:

CRA has closed all non-essential departments, including the Charities Directorate and the Charities Directorate call centre. Some call centres at CRA, outside of the Charities Directorate, are still operating at this time (i.e. for businesses or personal tax or for questions about the CRA’s My BA system).

If you need to send something to CRA best to avoid courier or fax and rather use regular mail or the new online CHAMP system.

Here are some helpful resources for registered charities that are available online:

Charities may wish to sign up to the CRA email list or the Blumbergs Charity Law List to receive updates, including when the Charities Directorate of CRA will start up their call centres.

Is my registered charity or non-profit organization still required to hold an annual general meeting of the members (AGM) during the COVID-19 crisis?

Here are updated articles for Federal non-profit corporations and their annual general meeting (AGM).

For Ontario corporations under the Ontario Corporations Act, the declared emergency was over on July 24, 2020, and the provisions dealing with virtual meetings and deferral of the AGM are now found in Part VIII – Special Rules During Emergency and Schedule 2 of the Corporations Act: https://www.ontario.ca/laws/statute/90c38#BK384.   Unless there is a further extension, for some Ontario non-profits this will mean a delay of up to October 22 (90 days after the declared emergency), for others November 21, 2020 (120 days after the declared emergency) and for some others there will be no change in the deadline.

 

Previously we had noted:

This depends on whether you are an incorporated organization and, if so, under which legislation (Federal or the different Provincial acts) you are governed and whether the relevant companies branch maintaining the act has allowed for extensions.

For Federally incorporated non-profits and charities, you may request an extension to the AGM requirement by emailing Corporations Canada at IC.corporationscanada.IC@canada.ca at least 30 business days before sending the notice calling the meeting. More information is available here: Extending the time for calling an annual meeting of members.  Blumbergs is preparing a document to help Canadian Federal non-profit corporations under the CNCA if they need to either request an extension of the six-month timeframe for holding AGM’s and/or also the requirement to provide financial statements to members at least 21 days ahead of the AGM.  These are separate requirements.  Currently, Corporations Canada does not have the ability to provide a blanket extension.

For non-profits and charities incorporated in Alberta, as an example, Service Alberta has recently announced that corporations may postpone their AGMs for up to 3 months (until June 2020).  The Ontario government has passed an Emergency Order that will allow all corporations under the Ontario Corporations Act (OCA) to hold meetings of directors and members virtually (i.e., electronically or by telephone).  As well they have extended the timeframe by which corporations under the OCA must hold Annual General Meetings (AGMs) in certain circumstances related to the emergency “no later than the 90th day after the day the emergency is terminated.”

For all jurisdictions, it is best to consult your local companies branch for further information or obtain legal advice.

Can my registered charity or non-profit organization hold virtual directors and members’ meetings?

Some non-profit corporate legislation in Canada allows for virtual meetings; however, the ability to hold virtual meetings can be limited by a corporation’s corporate documents such as its articles or by-law.  The rules may also be different for directors’ versus members’ meetings. Keep in mind that there may also be different rules for partially virtual meetings (where a few people are together and the rest are online).

You should first review the legislation under which you are incorporated. Then, if necessary, contact your companies branch as there may be special requirements or procedures to follow to ensure that your meetings (and any voting) is valid.  As well, some acts do not provide for virtual meetings.

Second, if the legislation that governs your corporation allows for virtual meetings, then you should review your governing documents (such as articles and by-laws) to see whether they allow for them.

For many organizations that have traditionally had face-to-face meetings, this may seem daunting. But many non-profits and charities are adjusting the way they hold director and member meetings to deal with the current COVID-19 crisis.

We have assisted many organizations with understanding the temporary rules and helped some change their by-laws to allow for completely virtual meetings where they were not allowed.

 

Can my registered charity or non-profit organization continue operating?

Please review any orders issued by any level of government relevant to your operations.  Some provinces (such as Ontario) have ordered the closure of all non-essential business, which can include non-essential non-profit organizations. However, these closure orders typically would not affect non-essential businesses that are working remotely (i.e. having volunteers and staff working from their own home).

Be sure to also consider the health and safety of your organization’s employees, volunteers, beneficiaries and community. It is best to practice safe physical distancing as much as possible.

My registered charity or non-profit needs to downsize, what do I need to consider in downsizing?

In light of the disruptions to work caused by the ongoing COVID-19 crisis, many charities and non-profits may be faced with the prospect of temporarily laying off some or all of their employees. Many will try to avoid any layoffs by repositioning work for employees, if possible, or paying employees to be home during the crisis, but some will not have sufficient unrestricted reserves to able to do this.  Every province and their respective employment law may deal with this issue differently, and you should obtain appropriate advice relating to your organization and its employees in different provincial jurisdictions.

For example, in Ontario, unless the employee has previously agreed to be temporarily laid off, whether in an employment agreement or otherwise, there is case law that suggests that such a layoff may constitute wrongful dismissal. However, if an organization is faced with such a wrongful dismissal claim, it may attempt to resist the claim by arguing that the employment contract was ‘frustrated’ due to the mandated closure of the organization’s operations as a result of the Ontario government’s ongoing efforts to reduce the spread of COVID-19. It remains to be seen whether an Ontario court would find this argument persuasive.

Wherever possible, employers should try to obtain the employee’s consent to the temporary layoff, ideally prior to laying off the employee. Additionally, employers should only have the temporary layoff continue as long as is necessary. The longer that an employee is laid off, the more likely he or she will consider claiming that they have been wrongfully dismissed.

Employment legislation varies from province to province and, depending on where the organization’s employees reside, the organization may need to obtain legal advice in multiple jurisdictions prior to proceeding with a layoff. For example, in Ontario, the Employment Standards Act, 2000 provides that an employee may only be temporarily laid off for a period of up to 13 weeks in any 20-week period, or up to 35 weeks in any 52-week period. Other statutory obligations in Ontario include the requirement to continue to pay the employee’s benefits during the entire layoff period. Organizations that are considering a temporary layoff of its employees should obtain legal advice in each jurisdiction where their employees reside prior to proceeding with the layoff.

You might also find this article on the Federal Wage subsidy helpful.

Can my registered charity or non-profit organization continue to fundraise during the crisis?

It depends on the nature of the fundraising. Any in-person fundraising events would probably be inappropriate and in violation of bans against group gatherings, which apply to charities as much as anyone else.   Face-to-face fundraising on the streets has already ceased.  You must also consider whether your organization has large reserves and whether or not now is the time to tap into those reserves. Keep in mind that it may not look appropriate to the public for an organization to continue to fundraise when it is sitting on large amounts of money in the bank. If you are a registered charity and have large reserves and wish to fundraise, you should definitely have a reserve fund policy.  For further information on this topic, please see:  If your Canadian charity has assets/reserve and you don’t have a reserve fund policy you should stop fundraising

There are many in need during this crisis and many Canadians who are willing to support those in need. Fundraising may help your organization assist those severely affected by the COVID-19 crisis, as long as it is done appropriately.  Be very careful when making requests for funds from the public or other charities, especially if they are specifically linked to the COVID-19 crisis. Now is a great time to push for online fundraising, and you can donate directly to many charities or you can go to CanadaHelps to find a list of all charities and donate to them.  If you want over 15  years of detailed information on over 84,000 Canadian registered charities you can visit Blumbergs’ CharityData.ca website.

How can my registered charity or non-profit continue to operate while adhering to ongoing restrictions and protecting our employees and/or volunteers?

For some charities there will be no alternative but to cease operations at this time. For others, as much as possible, try to allow volunteers and/or employees to work remotely even if you are, for example, an essential service and employees could attend in-person at work. There are various resources and articles online to help you transition to a virtual workplace.

For those who cannot have a virtual workplace, such as food banks, ensure that your volunteers and/or employees have good training, the right protective equipment, as well as generous leave options for those feeling ill.  In the past, in some workplaces, the culture may not have discouraged people who are ill to show up for work and in this current environment that culture needs to change.

What financial supports are available to registered charities and non-profits which have been impacted by the COVID-19 crisis?

Both Federal and Provincial governments are releasing regular updates on stimulus plans, which may include funding for your organization or your employees. Regularly check for those updates to see if you can apply for financial support.  Some funders will be increasing funding so you may want to utilize those options.

During the COVID-19 crisis, is there an exemption to the rules for registered charities, such as being able to work with non-profits or for-profit corporations without a structured arrangement or direction and control?

No, as a registered charity, the rules still apply. If your organization is going to work with another organization that is not a Canadian registered charity or another qualified donee, you must still adhere to the rules for working with intermediaries found in CRA’s guidance CG-004 – Using an intermediary to carry out a charity’s activities within Canada .

All other restrictions on registered charities, such as proper receipting, appropriate fundraising and acting only within your charity’s charitable purposes still apply as well. Charities have a lot of flexibility and resources but there are rules and limits. If you think your COVID-19 response plan may be in violation of the legal requirements, keep in mind that, in many cases, something can be done by a different organization or individual and does not need to be done by the registered charity itself.

We have to cancel our events, and this is going to mean a tremendous loss of revenue for our registered charity. Can we offer registrants a charitable donation receipt instead of a refund?

Canceling events will be very costly for charities, but they often have no alternative.  Some charities can adjust their events to make them online.  Other charities can delay their events by a few months instead of cancelling.  For those that must cancel, it may somewhat reduce the impact of the cancellation if you can convert potential refunds into charitable donations. Here is an article that discusses this issue at greater length: Corona Virus/COVID-19 charity issues – cancelling events, refunds and the possibility of a charitable donation.

I have received a request to donate to a COVID-19 charity cause by text or email. How do I know if it is legitimate?

Over the next few months, expect to receive a large number of fraudulent or deceptive requests for funds or donations for COVID-19-related issues. If you don’t want your money to end up in the hands of scammers, it is best that you exercise some caution.  Ideally, donate to non-profits or registered charities that you know well and that have the reputation and experience to do the work that is necessary. Go to their website directly and don’t follow links sent to you via text or email as they may be spoofing the group and not actually from the group.  Sometimes the scams are not asking for a donation but offering to sell you a COVID-19 test kit (these are apparently only available to hospitals) or to sell you face masks (they could take your money and you may never see the masks).

There are many groups, not only charities, doing great work in our communities and they need help with the increasing demands being placed on them. For more information see Blumberg’s smartgiving.ca website or the Canadian Anti-Fraud Centre.

I am on the board of a religious group and some members think that COVID-19 is over-hyped and that daily prayer services should continue. What should I do?

From a charity regulation point of view, charities must have objects that are charitable and must provide a public benefit.  If you undertake, or allow your facilities to be used for, reckless activities then you could be causing more harm (dis-benefit) than benefit and therefore your charity would not be providing a public benefit. If you endanger your supporters and there is more harm than public benefit, then expect that your charity could lose its registered charity status in addition to many other consequences that are even more dire. If you lose your charitable status, you will need to disgorge any assets within a year or face a penalty equal to the value of those assets. Furthermore, there are other consequences including protracted lawsuits and possible prosecution. Charities need to act responsibly and realize that we are not in normal times. For further information see our post “Some religious institutions are not closing and either conducting religious services or allowing them to happen”.

I am on the board of a foundation and traditionally we have made sure that we give out the required disbursement quota of 3.5%. What should we be thinking of today in light of this crisis?

Every foundation is different, and every grantee is different. Foundations are dealing with both a stock market decline and a pandemic at the same time.  However, most foundations realize that their work is far less stressful and dangerous than that of frontline workers. Many foundations are looking at doing very significant grantmaking because of current urgent needs.  While some foundations have historically given out only the minimum required, many others have always made greater disbursements than the legal requirement.

In terms of how much your organization can do to deal with COVID-19, you may wish to review whether the funds/assets you have are restricted or not.  If restricted, how are they restricted?  And can those restrictions be changed if required? Many areas are in need as a result of the pandemic, so almost any foundation can find some way to be supportive if they wish to. If a foundation cannot think of how to modify their systems to be supportive, they should reach out to experienced charity legal counsel to assist them.

If there are no binding restrictions on some or all your assets, then consider ramping up giving quickly, efficiently, without too much bureaucracy, but always in compliance with legal requirements. We are currently working with one large foundation that is looking to give away 50% of its very substantial assets to deal with COVID-19.

There can be reputational issues if your organization is not pulling its weight in dealing with the crisis.  In the future, people will look carefully at what foundations did and did not do during this time, and this might be a defining moment for many charitable foundations. Hopefully it will be a shining example of what great things foundations can do.

With COVID-19 cyberscams on the rise, how do I protect my registered charity or non-profit organization from cyberattacks?

With more employees and/or volunteers working from home on less secure home networks, there is an increased risk of cyberattacks, especially for non-profits and charities. This can be damaging to your organization’s reputation and alienate your members and donors. Ensure that you review your digital security and perform any necessary updates. For example, does each computer at home or at work have anti-virus software, anti-malware software and regular updates to the system?  You should also ensure that employees and/or volunteers have an appropriate level of security on their home systems, as home networks tend to be less secure.  As well, many employees and volunteers could benefit from educational material and training on basic online safety.  It may be advisable to consult an IT professional or firm to review your digital security and protocols. They will be able to suggest protective measures for home networks.

If you do experience a breach in your security, please note that you may be under an obligation to report the breach under various privacy legislation across Canada.  For example, groups that are under the Personal Information Protection and Electronic Documents Act (PIPEDA) may need to report to the Privacy Commissioner, as well as any individuals affected by the breach. In the event of a security breach, you should consult a privacy commissioner’s office or a privacy lawyer.  You can find more information on a breach in security in the Office of the Privacy Commissioner of Canada’s guidance What you need to know about mandatory reporting of breaches of security safeguards.

I understand that the Charities Directorate is closed so how can I sign up to use their online system?

The Charities Directorate is now open but since June 2019 the Charities Directorate of CRA has had an online system, Digital Services for Charities through the MyBA portal, and for many charities, it may make sense to get on that system as it can be used for a number of different purposes.

The Digital Services for Charities system can be accessed through your personal MY CRA account. If you don’t have a MY CRA account then:

  1. You will need to obtain a personal CRA user ID and password. You apply online and it will be sent by mail – it will have your CRA security code.  If you already have this personal CRA account (that you use for your personal income tax returns) you can skip to the next step.
  2. Then go to the My Business Account page  and do Option 2 CRA register – it will ask for your SIN and other information
  3. You can then login  to access the My BA account of the organization

Here is further information from CRA if helpful on CHAMP and MyBA.

Also here is a Webinar on Accessing Digital Services for Charities recorded on April 14, 2020 by Maddy Sawyer and Mark Blumberg with questions being answered by a number of CRA personnel.

Even though you can now call the CRA there are many tasks that can be performed though the Digital Services for Charities.  For example, you can file your T3010 or put in a charity application or advise CRA of numerous changes or authorize a representative.

We are regularly assisting clients with the Digital Services for Charities system and other interactions with CRA.

What to do if you have cancelled an event due to COVID-19 and the charity has already issued a tax receipt?

In a previous note entitled Corona Virus/COVID-19 charity issues – cancelling events, refunds and the possibility of a charitable donation, we discussed how charities can try to turn the cancellation of an event into some donations.  But what if you were scheduled to have an event, people bought tickets and you had already issued the official donation receipts, but the event is now cancelled and people will not be receiving an advantage?

I asked my colleague Gary Huenemoeder, who works at Blumbergs and was previously team lead for charity audits for the CRA for 16 years in Ontario, and he suggested that the charity can cancel and re-issue the donation receipt as no advantage was received by the donor. Section 248(32) of the ITA states:

Amount of advantage

(32) The amount of the advantage in respect of a gift or monetary contribution by a taxpayer is the total of

  • (a)the total of all amounts, other than an amount referred to in paragraph (b), each of which is the value, at the time the gift or monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm’s length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy
    • (i)that is consideration for the gift or monetary contribution,
    • (ii)that is in gratitude for the gift or monetary contribution, or
    • (iii)that is in any other way related to the gift or monetary contribution, and
  • (b)the limited-recourse debt, determined under subsection 143.2(6.1), in respect of the gift or monetary contribution at the time the gift or monetary contribution is made.”

As the event was cancelled, the donor did not receive any benefit or enjoyment and will not be entitled to receive any benefit immediately or in the future.

By way of example, let us say that the price of a ticket to a gala dinner was $500, the advantage was calculated to be $200, and the eligible amount of the donation is $300.  There are a number of potential options if receipts were already issued:

  1. Charity keeps funds and leaves receipt.  If the charity gets to keep all the funds ($500) and leaves the receipt as it is (eligible amount of $300), donors are getting some tax benefit but not as much as they could.
  2. Charity refunds full amount and reports to CRA. If the charity refunds all the money, then it would need to cancel the receipts. Since the eligible amount of the donation is over $50, the charity would need to report this to CRA within 90 days. This is not a great option for the charity or the donor (many donors would probably not want this option if they realize that it would have to be reported to CRA compliance).  Here is more information.  In some cases, it would be questionable whether a charity can return the gift.
  3. Charity keeps funds and replaces receipt.  If the charity cancels the receipt and keeps all the funds, then it can issue a new receipt and doesn’t have to report to CRA. The charity would have to keep the cancelled and new receipts in its books and records.
  4. Other options.  There may be other options including returning the amount of the advantage.

This also highlights why it is typically better to issue receipts after an event when there is more certainty as to costs, etc.  In fact, for many charities, issuing receipts only once a year makes good sense.

We have recently prepared a 3-hour course on receipting if you are interested in the rules relating to receipting.  You can find it here.  With complicated receipting questions, it may be best to obtain legal advice from a charity lawyer who has experience dealing with charity compliance issues.

I am in search of a non profit or charity to volunteer with. How do I find one?

Volunteering can be a fantastic experience for you.  In this time of COVID-19, it is a bit more challenging – many programs are either shut down or have to take tremendous precautions to protect their volunteers.  Some may not want to have new volunteers that have not received training etc.  Don’t be offended.  Some of the charitable organizations are also overwhelmed with need.   That being said there are many ways that you can assist some organizations in-person or remotely in your community in this time of need.

Volunteering can also be done informally.  You don’t need an organization to make a difference.  If you call friends and family that you may or may not normally be in contact with but you are concerned are socially isolated and may not have access to basic supplies that could be very helpful.  Helping them connect with resources in the community or if you are able to drop off some supplies outside their home can be very helpful.

There are many groups that you can volunteer with.  There are typically volunteer organizations or networks that coordinate volunteering in different areas and you might want to look them up and be in contact with them.

There is nationally Volunteer Canada which has lots of resources on volunteering including a list of different volunteer centres in different provinces.

Also, many non-profits and charities advertise volunteering activities on their website or social media.

In general, it is best to ask what the need is instead of assuming anything in particular.  A lot of well-meaning volunteers may not actually be helping anyone – even if they get a good feeling by “doing good”.

To find specific organizations you might want to Google search your “volunteer and _________[your area]”.  Or you can search for the type of volunteer experience you are looking for.    We have a database of 84,000 registered charities with data provided by the Canada Revenue Agency.  It does not have information on the 80-100,000 non-profits that are not registered charities.   You can access the website for free at www.CharityData.ca. You can use it for many things but specifically for searching for charities in your local area or charities by keywords.  It provides some uniform information on each charity that may be helpful.

Volunteering can be a positive experience for both yourself and the organization.  For many people, they may not have the strength or time to volunteer and for them, making a gift to a charity can be helpful or supporting a local non-profit organization.  If you have the time and skill to volunteer, then you can help out groups both locally, across Canada and even internationally.

This FAQ is provided as general information and is not intended as legal advice to specific organizations.