Charitable organisations work hard to achieve their goals and try to concentrate their precious resources on their missions. If you’re a director of a Canadian charity, aside from your mission, compliance with Canadian laws should be your primary objective so you can sustain your work. The following laws are important for a Canadian charity director to know.
The Canadian Income Tax Act
The Income Tax Act (ITA) is the main law that regulates the activities of charitable organisations. Several different elements should be taken into consideration, but at minimum, you should be aware of the ITA’s dispositions regarding:
- Obtaining and maintaining charitable status
- Issuing tax receipts
- Maintaining appropriate books and records
- Filing the annual T3010 Charity Return
- Tax shelters
- Charitable spending requirements
The Canada Revenue Agency (CRA) makes several publications available for free, including a “charities checklist” to help directors ensure their organisations are compliant with the ITA.
Excise Tax Act
Part IX of the Excise Tax Act (ETA) contains the provisions concerning the Goods and Services Tax (GST). When you engage in commercial activities, your charitable organisation may need to register for, collect, and remit the GST. The notion of commercial activity under the GST does not take into account the fact that profits are used for a charitable cause. Rather, if you make taxable supplies, usually in excess of $50,000, you’re treated just like any other business.
A number of exceptions in the ETA lessen the administrative burden of charities. However, if your organisation supplies any type of good or service, you should check ahead of time to see if the GST, along with the HST, QST, or other provincial taxes, applies to your case.
If your charity employs people, then you are subject to the same employment laws as any other business, such as minimum wage and mandatory holidays. For federal enterprises, this means adhering to Federal Labour Standards, and for any other enterprise, it means adhering to the laws of the province where the employee works.
As director, it’s important to be especially aware of any applicable payroll taxes, such as employment insurance or Canada Pension Plan payments, since, under certain circumstances, you can be held personally accountable for deductions not handled properly.
Federal and Provincial Lobbying Acts
Communication with various branches of government to discuss policies and try to implement changes to laws to further a cause is a perfectly legitimate, and legal, pursuit. Both the federal government and several of the provinces have enacted or modified their legislation concerning the registration and permissible activities of lobbyists.
At the federal level, the Lobbying Act is administered by the Office of the Commissioner of Lobbying of Canada, and it’s a good practice to check with this agency before entering into any discussions with government officials. Similarly, checking the status of provincial, and even municipal, legislation before you make any representations to local governments is in your best interest.
Can a Charity Participate in Political Activities?
Are Canadian-registered charities allowed to participate in political activities? The short answer is yes, but there are limitations, and overstepping these boundaries can have serious consequences. First of all, learn what constitutes political activities, and if you do engage in anything political, remember the requisite reporting requirements.
What is considered a political activity?
The distinction between charitable and political activities is not defined in the Income Tax Act. Over time, the CRA has identified activities that qualify as charitable, such as the relief of poverty, the advancement of education, the advancement of religion, and certain other endeavors. The CRA is working to identify solutions to the blurring of details regarding what does and does not constitute political activity. By definition, a charitable activity is an activity that furthers a charitable purpose – and everything else is not.
As a rule, to maintain its registration, a charity must devote substantially all of its resources to charitable activities. Charities can engage in other types of activities, including political activities, but to a very limited extent. The CRA has indicated that political activities are not charitable activities, despite how beneficial the results of the activity might be, or how sincere the intentions or beliefs of the charity.
The CRA offers four criteria that qualify an activity as political:
- The activity explicitly communicates a call to political action such as representations made to an elected representative or public official
- The activity explicitly communicates to the public about the merits of a law, policy, or decision of any level of government anywhere
- The activity explicitly indicates in its materials that the intention of the activity is to influence an elected representative or public official to retain, oppose, or change a law, policy, or decision of any level of government anywhere
- The making of a gift to another qualified donee to support political activities
In all cases, a charity cannot engage in partisan politics, so a charity cannot support a particular candidate or party.
Record keeping and reporting requirements.
Annually, charities must file Form T3010, the Registered Charity Information Return, detailing their activities of all types. This annual return is used by the CRA to ensure that your charity devotes substantially all of its resources to charitable activities.
Section C5 of the annual return asks if your charity carried on any political activities during the fiscal period, including making gifts to qualified donees that were intended for political activities and the total amount spent by the charity on these political activities. For charities that answer yes, there is an additional schedule (Schedule 7) to complete detailing the political activities.
The consequences of engaging in political activities beyond what is permitted are serious. If you exceed the limits or engage in partisan political activities, your registration may be suspended for one year. During this time, you can’t issue tax receipts or receive gifts from other charities. The CRA adds that “charities who engage in serious non-compliance with the rules governing political activities continue to face possible revocation of their registered status.
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