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Charity and Not-For-Profit

Remaining CRA compliant crucial for charities, not-for-profits

It’s important to get the initial application for a charity or non-profit status right but it’s even more critical to remain compliant with Canada Revenue Agency (CRA) rules or risk revocation, Toronto charity and not-for-profit lawyer Taras Kulish tells AdvocateDaily.com.

At a recent Knowledge Hub entitled “Churches, Charities and Not-For-Profits,” a host of speakers from law and government agencies, including the CRA, discussed what charities and non-profits must do in order to maintain their status.

Kulish, a senior associate with Steinberg Title Hope & Israel LLP, was one of the event’s speakers and focused on compliance.

“One of the important things for stakeholders is that the Not-for-profit Corporations Act is now targeted to come into force in early 2020,” Kulish says. “In addition to those amendments, bear in mind that the CRA has implemented the Charities Education Program, which is an information program, rather than an audit program. I really want to help get that message out.”

The key, moving forward, is that registered entities remain compliant at every step because even the most altruistic of intents can end up costing the organization its charitable status, he says.

“It starts with the objects, which are the purposes of each not-for-profit organization. These must be written down in the charity application and are coupled with a statement of activities for each purpose,” Kulish says. “This is important because when you are granted charitable status, you must continue to follow the objects at all times. You can go back and amend those objects if you want to change what you are doing. However, you just can’t change what you are doing without amending those objects — no matter how important the cause or how strong the humanitarian justification is. That’s the law.”

Kulish says a group could establish a church, for example, and later decide to build a religious school and teach the Ontario curriculum.

“It happens all the time,” he says. “But the original objects of the charity were for a church, not a school. You have to be very careful because your objects may not allow you to build or operate a school.”

Even a church that wanted to set up a basketball league as a way to reach out to youth would have difficulty using their charitable status because sports are not considered an allowed activity under the rules, he says.

“You could lose your charitable status. The sports facet has to be incidental to the charitable activities. You could have a Bible study group that ends with a pick-up basketball game. You can’t have a basketball league with a couple of Bibles lying around. There’s the option to amend your objects but the process is not so simple – you could end up losing charitable status if the organization is deemed to be carrying out non-charitable activities that are not merely incidental,” Kulish says.

There are four “heads” of charity — relief of poverty, advancement of education, advancement of religion and other purposes beneficial to the community that are approved by the courts as being charitable — and there isn’t any wiggle room outside those pillars, he says.

“Details are important when applying for charitable registration,” Kulish says. “It is like applying for citizenship. You have to answer every question, you can’t just pick and choose what information to provide. If you have directors who aren’t willing to provide details such as their occupation, date of birth or address, they can’t sit on your board.”

Also, he says, who sits on the board is important as is their relationships to each other.

“For a public charity, for example, no more than 50 per cent of your board can be related by blood or marriage,” he says.

Kulish was part of a similar Knowledge Hub in 2017 and he says the response has been overwhelmingly positive.

“There are many people involved in charities and not-for-profits who really want to know what their responsibilities are and what the law requires,” he says. “That’s why we did the second one and why we will likely continue on an annual basis.”

The next Knowledge Hub is scheduled for May 2, 2019 at The Old Mill.

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