Under Canadian law, there are four steps that must be followed when applying to become a registered charity. The steps outlined by the Canada Revenue Agency (CRA), are as follows:
Make an informed decision about becoming a registered charity
Set up your organization before applying for registration
Apply for registration
Application review process
In this post, we provide a detailed explanation of each step to help organizations better understand the process of becoming a registered charity.
1. Make an informed decision about becoming a registered charity
The first step in the charitable registration process is to make an informed decision about whether your organization can and should become a registered charity. This means understanding the requirements, and determining if it is suitable for the organization.
First, it is important to understand the difference between a registered charity and a non-profit organization, which we explain in our most recent blog post. Only certain organizations can become registered charities, and there are several factors that might prevent an organization from doing so, such as:
If an organization is established and resident outside of Canada,
if the purposes are not exclusively charitable at law,
if it provides personal benefit to members, shareholders, directors, or trustees,
if its activities support or oppose a political party or candidate, or
if its activities are illegal or contrary to Canadian public policy.
Potential applications should also know that while operating as a registered charity comes with advantages, there are also compliance obligations that all registered charities must follow. For example, a charity’s resources must be devoted entirely to its charitable purposes, it must file a “Registered Charity Information Return” (the T3010 form) within six months of each fiscal year end, it must meet its annual spending requirement, it must keep reliable records, it must issue donation receipts according to CRA regulations, and it must maintain its status as a Canadian legal entity. If any of these obligations are not met, there are compliance measures set in place that range from educational letters on compliance, to revocation of charitable registration.
2. Set up your organization before applying for registration
An organization should be set up before applying for charitable registration. Often, but not always, this entails incorporation of a not-for-profit corporation. Whether incorporated or not, an organization must have a governing document confirming its legal existence to apply for charity registration.
Setting up an organization may not be as straightforward as it sounds. This is because when CRA approves an application for charity registration, it assigns one of three designations to the charity: a charitable organization, a public foundation or a private foundation. The designation is based on how the charity is controlled and how it carries out its charitable purposes. The designation also determines whether certain activities are permissible or not. This means that for each organization, it is dependent on its structure, source of funding, and mode of operation. Special rules apply when a charity is registering as an affiliate or division of another charity.
3. Apply for registration
Once a not-for-profit corporation is set up, the first major step in the application process is to describe the organization's activities. The CRA will expect a detailed description of the organization's activities and how they relate to the purpose. Then the application must provide similarly detailed descriptions about the organization’s fundraising activities and its financials. In each of these sections, CRA seeks to confirm that all of an organization’s resources are directed at its charitable activities.
A strong application ends up looking much like a business plan. Each charitable activity furthers a charitable purpose, and each fundraising or marketing activity enables a charitable activity. An application with a strong chance of approval demonstrates that the organization is operated for exclusively charitable purposes, and that it devotes its resources—including funds, personnel, and property—to charitable activities.
The final step is to submit the application via CRA’s My Business Account (MyBA)”. The online form can be saved and revisited later if not completed initially, and also allows for multiple individuals to contribute to the application. Once submitted, the status of the application can be tracked by logging into MyBA and choosing View Application Status.
4. Application review process
Following submission, the application is reviewed by CRA’s Charities Directorate. Incomplete applications will be rejected. Complete applications will be reviewed within a timeframe indicated by CRA. Upon review, the CRA may request additional information, which must be provided within 60 days. CRA will either approve or reject an application. If rejected, the applicant has 90 days to appeal the decision by filing a notice of objection. If approved, the applicant will receive a notice of registration that includes the organization's rights and responsibilities as a registered charity, its registration number, and its effective date of registration.
Conclusion
The charitable registration process can seem complicated, there are many things that must be taken into consideration for an application to be successful. We recommend seeking legal assistance with this process as it can increase your chance of approval and make the process much less intimidating. Legal counsel will ensure your activities are lawful and that they fulfill your purposes.
At Outsiders Law, we have a streamlined charitable registration process that can help set your organization up for success. We are available to answer any questions you may have and offer a money back guarantee if your application is denied for reasons within our control. Contact Outsiders Law and let us bring your charitable ideas to life! We cannot wait to work with you.
Disclaimer
The information provided in this article is for educational purposes only. Nothing contained herein should be considered as legal, professional, or tax advice. Please contact us directly if you require legal assistance.
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