Registering a Charity for Income Tax Purposes

T4063(E) Rev. 01

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La version française de cette publication s'intitule L'enregistrement d'un organisme de bienfaisance aux fins de l'impôt sur le revenu.

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Table of Contents

• Your opinion counts
• Canada Customs and Revenue Agency's service pledge
• Before you start
• Need more information?
  • Internet access
• Section I - Information on Registration
  • Introduction
  • Glossary of terms used in this publication
  • What are the advantages of being a registered charity?
  • What are the obligations of a registered charity?
  • Does the organization need to be registered?
  • Are charities subject to other federal and provincial requirements?
  • What standards does the Canada Customs and Revenue Agency use to register charities?
  • What are charitable purposes?
  • What factors will disqualify an organization from registration?
  • What types of organizations or activities are not "charitable at law"?
  • What types of charities are identified by the Income Tax Act?
  • Governing documents
  • What can you do if the organization is denied registration?
  • What should an organization know about re-registration?
  • Where can you get more information?
• Section II - Guide to Completing Form T2050, Application to Register a Charity Under the Income Tax Act
  • Part 1 - Identification of applicant
  • Part 2 - List of applicant's directors or trustees
  • Part 3 - Organizational structure of applicant
  • Part 4 - Information about the activities of the applicant
  • Part 5 - Financial information
  • Part 6 - Confidential information
  • Part 7 - Certification and final steps

Your opinion counts

If you have any comments or suggestions that would help us improve this guide, we would like to hear from you. Please send your comments to:

Charities Directorate
Canada Customs and Revenue Agency
Ottawa ON  K1A 0L5

Canada Customs and Revenue Agency's service pledge

As a client, you can expect reliable, responsive, fair service in the official language of your choice. We will provide this service to you, explain our decisions and actions, and seek your suggestions on ways to improve our services.

Before you start

This publication is a companion to Form T2050, Application to Register a Charity Under the Income Tax Act. You should read it carefully before you apply for registration as a charity.

The first section of this publication explains whether or not an organization should apply for registration, and outlines the principal factors we consider in evaluating an application. The second section contains step-by-step instructions that explain in detail how to complete the application.

ONCE COMPLETED THE FORM SHOULD BE MAILED TO:

CHARITIES DIRECTORATE
CANADA CUSTOMS AND REVENUE AGENCY
OTTAWA ON  K1A 0L5

Need more information?

This publication uses plain language to explain the most common questions you may have when you consider registering a charity for income tax purposes. Please contact the Charities Directorate if you need more information or further clarification on a particular topic. You can reach the Charities Directorate at the following telephone numbers:

• 954-0410 for local Ottawa calls (English);
• 954-6215 for local Ottawa calls (bilingual);
• 1-800-267-2384 for toll-free, long-distance calls (English);
• 1-888-892-5667 for toll-free, long-distance calls (bilingual);
• 1-800-665-0354 for toll-free service for hearing impaired persons.

You can get copies of all forms, pamphlets, information circulars, and interpretation bulletins referred to in this guide from the Charities Directorate or from any of the tax services offices. You can also get copies by calling 1-800-959-2221. See the order form printed at the back of this guide.

To contact a tax services office, see the telephone listings in the Government of Canada section of the telephone book.

Internet access

You can find the list of registered charities and many of our publications on our Web site at www.ccra.gc.ca/charities

Section I - Information on Registration

Introduction

You already know that the Canada Customs and Revenue Agency collects income tax. But did you know it is also responsible for registering charities for income tax purposes? The Charities Directorate of the Canada Customs and Revenue Agency administers the Income Tax Act as it applies to registered charities.

This publication explains:

• the benefits available to a registered charity;
• the legal requirements of being registered; and
• information you should know when sending us your registration application.

We can only grant registration if:

• the applicant's purposes and activities fall within the legal concept of charity as recognized by the courts (see the information provided under the question "What are charitable purposes?"); and
• the organization meets the other requirements of the Income Tax Act (see the information provided under the question "What are the obligations of a registered charity?" ).

Please note that there are organizations in the community with worthwhile purposes that are not considered "charitable" by the courts. For example, organizations like non-profit social clubs and advocacy groups fall in this category. These groups do not qualify for registration (see the information provided under the question "What are charitable purposes?" ).

Glossary of terms used in this publication

At Arm's Length

At arm's length is a tax concept describing a relationship in which the parties are acting independently of each other. The opposite, not at arm's length, covers people acting in concert without separate interests. Not at arm's length also includes individuals who are related to each other by blood, marriage, adoption, Common Law relationships, or close business ties. (See the term related persons below.) You can find general information on this subject in Interpretation Bulletin IT-419, Meaning of Arm's Length, and Interpretation Bulletin IT-64, Corporations: Association and Control.

Fair Market Value

The generally accepted meaning of fair market value is the highest price that a property would bring in an open and unrestricted market between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other.

Fiscal Period

A fiscal period is the 12 months (or, for incorporated charities, a period of up to 53 weeks) covered by an organization's financial statements. Many organizations select a fiscal period that matches the calendar year (January 1 to December 31). Others select a different fiscal period (e.g., April 1 to March 31). If an organization applied for registration in February 1998, and its fiscal period is July 1 to June 30, then its next complete fiscal period would have been July 1, 1998, to June 30, 1999.

Significance of the fiscal period

Each year, a registered charity is required to file a Registered Charity Information Return (Form T3010) with the Canada Customs and Revenue Agency. This return must be submitted within 6 months following the fiscal period end chosen by the charity, otherwise its registration may be revoked.

Gift

A gift is a voluntary transfer of property for which the donor receives or expects nothing in return. A contribution of services (i.e., time, skills, and effort) does not qualify as a gift, since services are not property. To qualify as a gift, all three of the following conditions must be met:

• Some property, either in the form of cash or a gift-in-kind, is transferred by a donor to a registered charity. (A gift-in-kind involves property other than cash, such as equipment, shares, or land);
• The property is given voluntarily. The donor must not be obliged to part with the property (e.g., as the result of a larger contract or a court order); and
• The donor is transferring the property to the charity without expecting anything in return. No benefit of any kind may be provided to the donor or to anyone designated by the donor as a result of a gift.

Qualified Donees

Under the Income Tax Act, "qualified donees" are:

• registered charities;
• registered Canadian amateur athletic associations;
• registered national arts service organizations;
• certain housing corporations resident in Canada that are constituted exclusively to provide low-cost accommodation for the elderly;
• Canadian municipalities;
• the United Nations or its agencies;
• prescribed universities outside Canada;
• charitable organizations outside Canada to which Her Majesty in right of Canada (the federal government or its agents) has made a gift during the taxpayer's taxation year or the 12 months before it; or
• Her Majesty in right of Canada or in right of a province (i.e., the federal government, a provincial government or their agents).

Related Persons

Individuals can be related to each other by blood, marriage, adoption, common-law relationship, or by a close business or corporate association (e.g., business partners, employee and employer).

Individuals or groups can also be related to a corporation in which they have a controlling interest. Those people related to these individuals or groups are also related to the corporation.

Related persons are considered to be acting not at arm's length with each other.

What are the advantages of being a registered charity?

There are two basic advantages of being a registered charity:

• Registration allows an organization to issue official receipts for gifts received. This reduces the individual donor's income tax payable, and reduces the taxable income of a corporate donor.
• Once the organization is registered, it is exempt from paying income tax (under Part I of the Income Tax Act).

What are the obligations of a registered charity?

Once it is registered, an organization must:

• devote its resources to charity;
• continue to meet the other requirements of registration; and
• file Form T3010, Registered Charity Information Return, within six months of the organization's year-end. (Part of the return is available to the public on request.)

If it does not meet these obligations, the charity may lose its registered status.

Does the organization need to be registered?

An organization may not need to be registered in the following situations:

• it does not need to be exempt from income tax, and it does not anticipate receiving gifts for which it will issue official receipts for income tax purposes; or
• it is a branch or agent of a Canadian municipality, or is raising funds for a municipal project.

The Income Tax Act provides that gifts to a Canadian municipality are tax-supported to the same extent as gifts to registered charities. If a municipality agrees to receive the money contributed, control the expenditures, and issue official receipts in the municipality's name, the organization does not need charitable registration for income tax purposes.

Organizations should keep in mind that some provinces and municipalities will only grant certain licences or provide relief from provincial and municipal taxes to organizations that are registered charities under the Income Tax Act. Special provisions are available for registered charities under the goods and services tax rules. For more information, see the information provided under the next question.

If an organization cannot meet the requirements for becoming a registered charity, it may qualify as a non-profit organization under the Income Tax Act. An organization with non-profit status does not have to pay tax on most types of income, but it cannot issue official receipts for income tax purposes.

For more information on non-profit status, contact the Assistant Director - Client Services of your local Canada Customs and Revenue Agency's tax services office. To contact a tax services office, see the telephone listings in the Government of Canada section of the telephone book.

Are charities subject to other federal and provincial requirements?

The Income Tax Act is not the only law that applies to charities. Charities can also be subject to other federal or provincial legislation that is associated with their operations, such as provincial or municipal standards for a nursing home, hospital, school board, or housing project.

At the federal level, registered charities also have to meet the requirements of the goods and services tax (GST) or the harmonized sales tax (HST), and may need to register with us for GST/HST purposes. An organization may be able to claim a rebate for a part of the GST and HST it paid or owes on goods and services it purchased for use in its activities. However, an organization is eligible for the rebate only after it is registered as a charity. For more information about the GST/HST, contact our local tax services office. You will find the address and telephone number in the Government of Canada section of your telephone book.

If a charity is federally or provincially incorporated, it has to meet certain requirements under the incorporating law. These may include the requirement that corporations send returns to the appropriate incorporating authority. For more information, contact the government department that issued the charity's certificate of incorporation, letters patent, memorandum of association, or other incorporating document.

To find out how a charity may be affected by legislation other than the Income Tax Act, contact the appropriate government authority.

What standards does the Canada Customs and Revenue Agency use to register charities?

To qualify for registration, an organization must be established and operated for charitable purposes, and it must devote its resources to charitable activities. The charity must be resident in Canada, and cannot use its income to benefit its members.

A charity also has to meet a public benefit test. To qualify under this test, an organization must show that:

• its activities and purposes provide a tangible benefit to the public;
• those people who are eligible for benefits are either the public as a whole, or a significant section of it, in that they are not a restricted group or one where members share a private connection, such as social clubs or professional associations with specific membership; and
• the charity's activities must be legal and must not be contrary to public policy.

For purposes of registration as a charity, the organization has to be either incorporated or governed by a legal document called a trust or a constitution. This document has to explain the organization's purposes and structure. When an organization is governed by a constitution or trust, these documents have to meet the minimum requirements outlined under the question "What are the minimum requirements of a 1) trust document? 2) constitution?" .

What are charitable purposes?

The courts have identified four general categories of charitable purposes. For an organization to be registered, its purposes have to fall within one or more of the following categories:

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

The application for registration you send to us should clearly show the way the organization will meet each of its charitable purposes. Thus, a purpose "to relieve poverty" is acceptable only if it is accompanied by a statement of activities indicating how the organization will accomplish this purpose. For example, the statement might say the organization will relieve poverty "by establishing a food bank, operated by volunteers, in rented premises on Maple Street. The food bank will receive gifts of food from retail stores and individual donors."

The following are examples of the types of organizations that may qualify as charitable under each of the four categories.

The relief of poverty

Organizations established for the relief of poverty include food banks, soup kitchens, as well as enterprises that supply low-cost rental housing, clothing, furniture, and appliances to the poor.

The advancement of education

The courts recognize a purpose or activity as advancing education in the charitable sense if it involves formal training of the mind or formal instruction, or if it prepares a person for a career, or if it improves a useful branch of human knowledge. Only providing information is not accepted by the courts as educational; training or instruction also have to be offered. The advancement of education includes:

• establishing and operating schools, colleges, universities, and other similar institutions;
• establishing academic chairs and lectureships;
• providing scholarships, bursaries, and prizes for scholastic achievement;
• undertaking research in a recognized field of knowledge (The research must be carried out for educational purposes and the results must be made available to the public.);
• advancing science and scientific institutions, including maintaining learned societies (Professional associations or other societies that primarily provide benefits to members are not considered charitable.); and
• providing and maintaining museums and public art galleries.

The courts have ruled that an activity which advances education should involve a full and fair presentation of the facts so people can draw their own conclusions. If an organization intends to influence the opinion or actions of the public toward one side of a controversial issue, it is not advancing education in the charitable sense. For this reason, an advocacy group would not qualify as a charity.

The advancement of religion

This category refers to promoting the spiritual teachings of a religious body, and maintaining the doctrines and spiritual observances on which those teachings are based. There has to be an element of theistic worship, which means the worship of a deity or deities in the spiritual sense. To foster a belief in proper morals or ethics alone is not enough to qualify as a charity under this category. A religious body is considered charitable when its activities serve religious purposes for the public good. The beliefs and practices cannot be what the courts consider subversive or immoral.

Other activities that advance religion include:

• organizing and providing religious instruction, and performing pastoral and missionary work; and
• establishing and maintaining buildings for worship and other religious use.

Purposes beneficial to the community

This category includes various purposes that do not fall within the other categories, but which the courts have decided are charitable. However, not all purposes that benefit the public are charitable. For example, a property-owners' association or community association might not qualify. Organizations that normally qualify as charitable include those with the following purposes:

• providing immediate relief to victims of natural disasters or sudden catastrophes (e.g., floods, earthquakes, and tornadoes);
• relieving suffering or disability caused by old age, which includes providing facilities for the care, maintenance, and rehabilitation of the elderly;
• preventing and relieving sickness and disability, both physical and mental (e.g., services performed by hospitals, clinics, nursing and convalescent homes, the provision of home care services and the establishment of workshops or other centres for disabled people);
• providing rental housing and related facilities for people with special needs (e.g., homes for disabled people);
• preserving the environment;
• protecting the welfare of children (e.g., societies for the prevention of child abuse);
• providing counselling services for people in distress;
• rehabilitating victims of substance abuse and preventing substance abuse;
• providing certain public amenities to benefit the community;
• establishing safety rescue operations or a volunteer fire department; and
• establishing humane societies, animal shelters, and similar institutions to prevent cruelty to animals.

What factors will disqualify an organization from registration?

Providing personal benefits

The Income Tax Act stipulates that no part of a registered charity's income can be payable or otherwise available to personally benefit any proprietor, member, shareholder, trustee, or settlor of the organization. However, this does not prevent an organization from paying for services rendered, or incurring and paying other expenses that are associated with the normal operation of the charity.

Political purposes or activities

Under Common Law, political purposes are not charitable and an organization will not qualify for charitable registration if at least one of its purposes is political. In this regard, the courts have decided that organizations seeking to achieve political objects, in whole or in part, cannot be recognized as charities. Examples of purposes of a political nature include:

• furthering the aims of a political party;
• promoting a political doctrine;
• persuading the public to adopt a particular view on a broad social question; and
• attempting to bring about or oppose changes in the law or government policy.

As well, purposes that are so broad as to allow for unlimited political activity are not acceptable.

Under the Income Tax Act, a registered charity that is established exclusively for charitable purposes can engage to a limited extent (i.e., devote no more than 10% of the charity's resources) in non-partisan political "activities" which directly help accomplish the charity's purposes. This includes, for example, distributing publications or holding conferences, workshops or other forms of communication intended primarily to sway public opinion to the charity's point of view.

However, the Act specifically prohibits a registered charity from engaging in any partisan political activity. Partisan political activity usually means supporting or opposing, monetarily or otherwise, a political party or candidate for public office.

A registered charity with a charitable purpose to provide for the welfare of children can engage in activities that take a public position about certain legislation in the field of child welfare provided the activities are within the limits described above. However, an organization established solely for purposes of pressuring for change in legislation affecting the welfare of children cannot be recognized as a "charity", according to the principles recognized by the courts.

Additional information about political activities and registered charities can be obtained by contacting the Charities Directorate or by consulting the draft publication RC4107, Registered Charities: Education, Advocacy, and Political Activities. You will find the address and telephone numbers of the Charities Directorate here.

What types of organizations or activities are not "charitable at law"?

The public supports and benefits from a number of worthwhile organizations and activities. However, the courts may not consider all of these as "charitable" in the legal sense. The following are examples of organizations and activities that are not considered "charitable."

Service clubs or fraternal lodges

Many service clubs and fraternal lodges devote their resources to a mix of charitable and non-charitable activities. For example, many clubs provide services for needy members of the community, but also hold regular social events for their members. Therefore, they cannot be registered as charities under the Income Tax Act.

However, these groups could establish a separate organization to handle their charitable activities (e.g., a trust established to purchase wheelchairs for physically challenged children) and then apply for charitable registration on its behalf. In this instance, it is the separate organization which is applying to be registered and not the service club or lodge. Therefore, it is crucial that the two organizations keep their funds, activities and books and records separate. Where there is insufficient separation, the charity's registration may be revoked, which could potentially expose the service club or lodge's assets to a revocation tax.

Acts of private benevolence

A family loses its house in a fire and the community establishes a fund to accept donations for the family. An organization is set up to cover the travel and incidental costs for a particular child's surgery. While these endeavours are commendable, an organization that is established to provide assistance to a single identified individual or to a group of specifically named individuals is established for private benevolence. The courts do not accept the act of private benevolence as charitable, since it lacks the necessary element of public benefit. This means organizations that are formed to help named individuals or a private group do not qualify for charitable registration.

However, other registered charities that are established to provide general help to the community may be able to assist in these circumstances. For more information, contact the Charities Directorate.

What types of charities are identified by the Income Tax Act?

There are three types of charity. The designation of a charity depends on its structure, its source of funding and the charity's mode of operation. The Income Tax Act requirements are different, depending on the type of charity.

• A charitable organization (e.g., a hospital) primarily carries on its own charitable activities. It can be a corporation, or it can be established by a constitution or a trust document. Less than 50% of its directors/trustees are related persons and at least 50% of the funds it receives are from donors who are not related persons.
• A public foundation (e.g., a hospital foundation) gives more than 50% of its income annually to other qualified donees, usually other registered charities. It must be established either as a corporation or a trust. Less than 50% of its directors/trustees are related persons and at least 50% of the funds it receives are from donors who are not related persons. A public foundation may carry on some of its own charitable activities.
• A private foundation may either carry on its own charitable activities, or it may give funds to other qualified donees, usually other registered charities. It must be established either as a corporation or a trust. 50% or more of its directors/trustees are related persons or otherwise do not deal at arm's length, or more than 50% of its funds are received from one person or from a group of persons who do not deal with each other at arm's length.

Public foundations and charitable organizations can only operate businesses that are related to their mandate or that are run substantially by volunteers. Private foundations are not allowed to engage in any business activity.

Governing documents

Every registered charity (other than an internal division of an existing registered charity) must be legally established by a governing document, e.g., letters patent, articles of incorporation, trust deeds, or constitutions that legally establish a charity and that identify the objects or purposes for which the organization is established, as well as provide information on the organization's corporate structure and internal procedures.

How should a governing document define an organization's purposes?

Note
The terms "object", "goal", "purpose" and "mandate" are used interchangeably throughout this publication and may be regarded as synonyms.

An organization must be constituted and operated exclusively for charitable purposes in order to qualify for registration under the Income Tax Act. (For an explanation of what purposes are considered charitable under Common Law, click here ) In addition, it is a basic principle of charity law that an organization's objects must be expressed in precise rather than broad or vague terms. This identifies as clearly as possible a recognized charitable purpose and ensures that an organization does not have the legal capacity to engage in any non-charitable activities.

Incorporation as a non-profit organization in some provinces does not automatically or always require an organization to restrict itself to purposes and activities that are exclusively charitable. In some cases, there may be no restrictions on the activities that a non-profit corporation may carry on. Some organizations, of course, prefer to define their goals in broad terms, thereby allowing themselves more flexibility in carrying out their activities. However, in relation to charities and the law, only those objects that restrict an organization to charitable pursuits are acceptable for purposes of registration under the Income Tax Act. We cannot register an organization that has a mix of charitable and non-charitable purposes. Therefore, vague and broad objects in a governing document usually constitute grounds for denial of registration.

Examples of objects which we consider too vague or broad for registration are:

• to facilitate and encourage community spirit and development;
• to provide a network of information to the public;
• to support programs and activities for seniors in the community;
• to assist youth in becoming self-employed; and
• to establish a forum for networking, communication, and liaison between government and Canadian citizens.

Examples of objects which we would consider precise enough for purposes of charitable registration:

• to raise funds for the repair and restoration of __________ Synagogue (or Temple, Mosque, Church) in the city of __________, province of __________, so that it may continue to be used as a place of worship;
• to establish a shelter for women throughout the regional municipality of __________, who are victims of spousal abuse, to provide them with necessary counselling, and to make available medical and legal services when needed;
• to promote the preservation of the environment through the sponsorship of a tree-planting program in the county of __________, province of _________;
• to provide financial and material relief to the victims of the floods in __________;
• to establish and maintain a toll-free telephone line in the city of __________ in order to provide counselling services to teenagers on matters related to substance abuse, and to provide referrals, where appropriate, to physicians or social workers.

Note
The promotion of a sport is not considered charitable at law. However, an organization which has, as its primary purpose and its primary function, the promotion of amateur athletics in Canada on a nation-wide basis, may be registered as a Canadian amateur athletic association. Organizations seeking registration as a Canadian amateur athletic association should obtain Form T1189, Application to Register a Canadian Amateur Athletic Association Under the Income Tax Act.

What type of governing document is required for registration?

The type of governing document needed for registration will depend on the designation that we assign to an organization. As indicated above, the Income Tax Act has established three designations for charities: charitable organization, public foundation, and private foundation.

In relation to governing documents:

• Charitable organizations can either be incorporated or established by a constitution or trust document.
• Public or private foundations must either be incorporated or established in the form of a trust.

What are the minimum requirements of a

1) trust document?

For the purpose of registering a trust as a charity, the trust document has to include at least the following items:

• the name of the trust;
• the names of the original trustees;
• the purpose for which the trust is established;
• the rules governing how the trustees of the trust will administer all money received;
• a provision in which the trustees give assurance that all the money received will be spent only for the purposes outlined in the trust document;
• provisions that explain how trustees will be replaced;
• the effective date of the document; and
• the signatures of at least three of the trustees.

2) constitution?

For the purposes of registering an organization as a charity, its constitution has to include at least the following items:

• the organization's name;
• the organization's purposes;
• a clause stating that the organization shall be carried on without purpose of gain for its members, and any profits or other accretions to the organization shall be used solely to promote its objectives;
• the organization's structure (president or chair, secretary, treasurer, etc.);
• a provision that explains how the organization will replace its directors;
• the effective date of the document; and
• the signatures of at least three of the organization's directors.

What should an organization know when it seeks to incorporate under the laws of certain provinces?

Organizations should be aware that some provincial incorporating documents, or guidelines with respect to incorporation, can sometimes produce results which could effectively disqualify an organization from registration as a charity. Examples are provided below.

Alberta

Under Alberta's Societies Act, the Application to Form a Society lists a number of objects that an organization can choose to describe its purposes. Some of the objects that are listed are analogous to purposes which the courts have determined are not charitable, while others are simply too vague and broad to identify clearly any recognized charitable aim. Furthermore, the objects often bear little, if any, real relationship to the actual work that an organization may be undertaking. We would prefer that organizations formed in Alberta provide a clear list of their purposes only in their governing documents but, if selecting objects from the Application to Form a Society, they should choose only those which clearly and accurately reflect their intentions. In general, however, we recommend that organizations formed in Alberta do not select any of the objects listed in the Application to Form a Society document if they intend to apply for registration as a charity.

Some examples of objects listed in Alberta's Application to Form a Society that are not charitable at law and which, if chosen, would disqualify an organization from becoming a registered charity, are:

• to provide for the recreation of the members and to promote and afford opportunity for friendly and social activities;
• to encourage and promote amateur games and exercises; and
• to carry on a literary and debating club for the discussion of topics of general interest, and to encourage the practice of public speaking among its members.

Saskatchewan

The Non-Profit Corporations Act of Saskatchewan does not require that an organization provide a list of its objects. It does allow an organization the opportunity, under article 7 of the Articles of Incorporation, to list restrictions, if any, that the organization may have on its powers and business activities. However, as explained above, in order that an organization be considered for registration as a charity, it must outline in precise terms what its purposes and programs are. Organizations in Saskatchewan that have been formed under the Non-Profit Corporations Act should therefore make clear that they are restricting themselves to purposes and activities that are exclusively charitable. Unless an organization has provided a list of its objects elsewhere in its application, it should not leave article 7 blank. When asked to indicate what restrictions it might have on its powers and activities, an organization should provide a clear list of its objects so that we can readily determine whether the objects are charitable at law.

Quebec

In Quebec, the Inspector General of Financial Institutions provides a list of objects that he considers acceptable for purposes of non-profit incorporation, and which includes the object "to promote and defend the interests of members." However, this purpose is not charitable at law. Organizations formed in Quebec that wish to apply for charitable registration should therefore not include this object in their governing documents.

Will the Canada Customs and Revenue Agency review draft governing documents?

In considering whether an organization might qualify for registration as a charity, we are prepared to consider draft governing documents. However, all other documents and information required on the application form must also be provided. We cannot make a determination regarding registration solely on the basis of a draft governing document, or on other, partial information. We will consider draft governing documents on a one-time basis only, on the understanding that any further contact by the organization must include a copy of the organization's formal governing documents. Draft applications are recognized on a one-time basis to alleviate the costs in time and money that an organization can incur when it goes through the formal procedures and expense of constituting itself, only to discover that its formally constituted objectives are not acceptable for registration as a charity.

With these facts in mind, what happens if an applicant seeks charitable registration on the basis of a draft governing document, and we view the draft application favourably?

We will tell the applicant to finalize the governing document. In most cases where we view a draft application favourably, we will proceed with registration once we receive a copy of the organization's formal incorporating documents, executed trust deed, or signed constitution. However, we do reserve the right to change our preliminary view about an organization's eligibility for registration.

What happens if an applicant seeks charitable registration on the basis of a draft governing document, and we view the draft application negatively?

In cases involving draft documents, it is important to note that the Income Tax Act does not allow for the possibility of any appeal in situations where an organization has yet to be formally created. Moreover, it is not appropriate for us to make a formal decision on registration in cases where applications contain only draft governing documents. We will usually explain in writing our reasoning behind a negative assessment of an application. However, in such cases, applicants must recognize that no official mechanism exists that would allow them to appeal our conclusions if an organization is not yet formally in existence. The appeal mechanism is available only to legally constituted entities; it does not cover cases where an organization has yet to be legally created.

What happens if an applicant seeks charitable registration on the basis of proposed revisions to an existing governing document?

It is not appropriate for us to make a formal decision on registration based on proposed revisions to an existing governing document. In cases where a legally constituted entity applies to be registered as a charity on the basis of proposed changes to its governing document, we will consider both the formal governing document under which the organization was legally established, as well as the proposed revisions to it, and then provide an assessment that takes both into account. Such an assessment, however, is provided on a one-time basis only, on the understanding that any further contact by the organization must include a copy of the official amended governing document under which the organization intends to operate. Failure to provide the official amended governing document means that any decision on registration could only be based on the purposes of the organization as contained in the original formal governing document.

What can you do if the organization is denied registration?

Before we make a final decision, we send a letter to the applicant to explain why it likely will not qualify for charitable registration. The applicant has 60 days to make further submissions to us. However, if we deny an application for registration, you can appeal this decision to the courts.

What should an organization know about re-registration?

Organizations that have had their charitable registration revoked and that are now applying to be re-registered, should be aware of the following:

• After revocation, any application for re-registration is treated in the same way as a new, first-time application. An organization seeking to regain its registration must complete Form T2050, Application to Register a Charity Under the Income Tax Act in full, and provide the requested documentation, information, and signatures. Incorporated organizations applying for re-registration must also include a certificate of good standing (see Q.10A.1 ).
• Before it can be re-registered, an applicant will be required to submit annual returns and financial statements for the years that it has not filed such information. This requirement applies to years both before and after revocation.
• Statute law, Common Law, and administrative policies concerning charities change over time. Therefore, an organization that qualified for registration several years ago may not qualify today, or may have to make changes to its objects and activities.

Where can you get more information?

For more information on the registration process and registered charities in general, contact us at the address and telephone numbers printed on the inside front cover of this publication.

Section II - Guide to Completing Form T2050, Application to Register a Charity Under the Income Tax Act

Who should complete the application form?

The application form should be completed by either:

• a person holding a responsible position in the organization (e.g., the chairperson, treasurer, or manager); or
• someone appointed by the organization to act on its behalf (e.g., a legal representative).

Who should sign the application form?

The certification section at the end of the form must be completed by two persons who are authorized to sign on behalf of the organization. Such persons could be directors, trustees, treasurers, or anyone else holding a responsible position within the organization.

When should it be completed?

The form should only be completed when the organization has a clear idea of what it will do and how it will operate. If you do not yet have all the information you need to complete the form, please wait until you have clarified the details. If you want us to consider whether the organization would qualify for registration and you have not yet formally set up the organization by adopting or executing a governing document, we will consider draft governing documents on a one-time basis, and on the understanding that any further contact by the organization must include a copy of the organization's formal governing documents. You should send not only the draft of any proposed governing document, but also all other documentation and information required on the form. We cannot make a determination regarding registration solely on the basis of a draft governing document, or on other partial information.

How to use this Guide

The question numbers in this guide correspond to the question numbers on Form T2050, Application to Register a Charity Under the Income Tax Act. All applicable questions must be answered. If a particular question does not apply to the organization, check box N/A (not applicable) or indicate N/A in the space provided. Where answers to questions are left blank, we may ask for information that seems to be missing, or we may even reject the application as incomplete.

If there is not enough space on the form to provide the information you wish to give, please use separate sheets of paper. Put the organization's name at the top of each sheet and label each so that we know which questions are being answered on which sheet. On the form itself, indicate that you are answering a question or continuing a response elsewhere by writing "see attached."

Send the completed form to:

Charities Directorate
Canada Customs and Revenue Agency
Ottawa ON  K1A 0L5

You should keep a copy of the completed application for your own records.

Registration of applicants

We make every effort to process applications as quickly as possible. Generally, our practice is to process applications on a first-in, first-out basis. Acknowledgement letters are sent for all applications received.

We appreciate that applicants may have unique circumstances that would warrant our earlier consideration. In that case, it is the applicant's responsibility to submit details and documentation with its application identifying why its application should be addressed on a priority basis.

We understand that applicants need to be registered quickly to enable them to receive gifts and issue tax receipts to donors. Likewise, applicants need to be registered before they can receive grants from funding agencies. While these reasons are important, because they are common to almost all applicants, we do not grant priority on those grounds.

You should also note that delays occur for a variety of reasons, most commonly as a result of missing or incomplete information.

For example, failure to provide a list of directing officials would not allow us to determine whether an applicant is a charitable organization or a foundation. Failure to supply complete and appropriate governing documents (i.e., you provide no governing documents, only partial governing documents, or inappropriate documents), or a detailed list of activities, would prevent the Directorate from making a determination regarding registration itself.

Accordingly, in order for the Directorate to be able to consider an application, it is important to ensure that:

• all the questions on the form are fully answered;
• all required documents are provided; and
• detailed and specific information is given.

Failure to provide all of the information and documentation required by the form will usually result in the Directorate contacting the organization to request the documents and/or details necessary to proceed with the processing of the application. If the material requested is not provided, the Directorate will not be in a position to give any further consideration to the application.

If the application is approved

If the application is approved, we will send you a "Notification of Registration." It includes important information about the rights and obligations of a registered charity, and also provides the registered charity with a business number (BN) (see Q.4 ). Please note that, although a BN is issued to all corporate entities, this number is not the same as the BN that we issue to an organization to identify the organization as a registered charity.

An organization must not issue official donation receipts until we have formally registered it as a charity. It also must not promise such receipts or misrepresent itself to the public as a registered charity before it is officially registered.

If the organization is unlikely to qualify

If it appears that the organization is unlikely to qualify for registration, we will send a letter explaining why. You will then have an opportunity to reply to our concerns. Meanwhile, if you need any information, you can contact the Charities Directorate at any of the telephone numbers listed at the front of this publication.

Part 1 - Identification of applicant

Part 2 - List of applicant's directors or trustees

Part 3 - Organizational structure of applicant

Part 4 - Information about the activities of the applicant

Part 5 - Financial information

Part 6 - Confidential information

Part 7 - Certification and final steps

Certification

Please ensure that the application is dated and signed by two individuals authorized to sign on the organization's behalf, showing their position within the organization. This application will not be processed if it has not been properly certified.

The organization's treasurer should sign any financial statements that have not been professionally audited.

It is our policy that information provided under Part 6 of Form T2050 will remain confidential and will not be made publicly available except in circumstances where the release of any or all of the information is required by law or, in certain exceptional circumstances, where it is permitted by law. Circumstances where the law would require or permit the disclosure of such information include a court order, warrant, or subpoena issued with respect to criminal proceedings initiated under any Act of Parliament, or any legal proceedings relating to the administration or enforcement of the Income Tax Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act, or "any other Act of Parliament or law of a province that provides for the imposition or collection of a tax or duty." Other circumstances where we are required or permitted by law to disclose certain records would include requests made under the authority of the Auditor General Act, warrants issued by the Canadian Security Intelligence Service Act, and inquiries from the Department of Finance for information "solely for the purposes of the formulation or evaluation of fiscal policy."