In Canada, charities are regulated by both federal and provincial/territorial governments.

What Is A Charity?

The term “charity” in its legal sense includes charitable organizations, whether incorporated or not, as well as trusts for charitable purposes.

Therefore, non-profit organizations, such as non-profit social clubs, are not charitable and require the Canada Revenue Agency’s approval prior before being considered as such.

To become a registered charity with the Canada Revenue Agency (“CRA”), an organization must carry on one of the four categories of charitable purposes:

• the relief of poverty;
• the advancement of education;
• the advancement of religion; or
• other purposes that benefit the community in a way the courts have said are charitable.

A general guideline is that a charity must provide a public benefit.

To maintain its registered status, a charity must continue to run for charitable purposes and to comply with the requirements of the Income Tax Act such as devoting all of its resources to charitable activities.

Be Aware of Charity Fraud

The past a couple of years have witnessed several cases of charity fraud. As a donor, you want to be cautious about charity fraud. To protect yourself against a scam, you should:

• confirm that a charity is registered with the Canada Revenue Agency (although this does not guarantee that fraud will not occur as the CRA does not proactively audit charitable giving plans);
• confirm that you will receive an official donation receipt if you want to claim a tax credit;
• know the exact name of the charity to which you are donating because fraudulent charities can use names that are similar to well-known and respected charities;
• beware of schemes that promise you tax savings greater than your donations, thus allowing you to “profit” from donating to a registered charity; and
• write cheques payable to the charity, not an individual, or make sure that your online payments are secure.

In a word, to keep yourself as informed as possible and if it seems too good to be true, it probably is.

For more information, visit http://www.cra-arc.gc.ca/chrts-gvng/menu-eng.html.

Masha Loftus, M.A., J.D.

Merlyn B. Fernandes, B.A., LL. B.

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