Typical charitable organisations work hard to achieve their goals and try to concentrate their precious resources on their missions. However, for directors of these organizations, compliance with Canadian laws should be a primary objective to ensure the sustainability of the mission. Here are four laws every director should know.
The Canadian Income Tax Act
The Income Tax Act is the main law regulating the activities of charitable organisations. There are many different elements that need to be taken into consideration, but every director of a Canadian charity 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 makes several publications available for free, including a “charities checklist” to help directors ensure their organisations are compliant with the ITA.
Federal and Provincial Lobbying Acts
A frequent activity of charitable organisations is to communicate with various branches of government to discuss policies and try to implement changes to laws to further their cause. This is a perfectly legitimate, and legal, pursuit. However, in the last decade, 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 you should check with it before entering into any discussions with government officials. Similarly, check the status of provincial, and even municipal, legislation before you make any representations to local governments.
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 the Federal Labour Standards, and for any other enterprise, it means the laws of the province where the employee works.
Directors should be especially aware of any applicable payroll taxes, such as employment insurance or the Canada Pension Plan, since, under certain circumstances, they can be held personally accountable for unremitted source deductions.
Excise Tax Act
Part IX of the Excise Tax Act contains the provisions concerning the Goods and Services Tax. When they engage in commercial activities, charitable organisations 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 will be used for a charitable cause. Rather, if you make taxable supplies, usually in excess of $50,000, you will be treated like any other business.
There are a number of exceptions in the ETA to 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.