Non-Profits and Charities: Editorial

The Statute of Charitable Uses is a British document created in 1601. It is so old, it seems to be written in another language. “An Acte to redresse the Misemployment of Landes Goodes and Stockes …”

But this ancient text underlies the legal definition of “charity”. Its 1891 amendment added four categories:

1. Trusts for the relief of poverty;
2. trusts for the advancement of education;
3. trusts for the advancement of religion;
4. and trusts for other purposes beneficial to the community.

For tax purposes, Canada Revenue Agency says that a charity:

1. is established as a corporation, a trust, or under a constitution;
2. has exclusively charitable purposes;
3. primarily carries on its own charitable activities, but may also gift funds to other qualified donees (esp. other registered charities);
4. more than 50% of its governing officials must be at arm's length with each other;
5. generally receives its funding from a variety of arm's length donors; and
6. its income cannot be used for the personal benefit of any of its members, shareholders, or governing officials.

The Canada Customs and Revenue Agency (CCRA) assesses registered charity status eligibility. There are many grey areas about who qualifies, including organizations serving a limited segment of the community, such as multicultural groups and cultural organizations.

Charities and non-profit organizations are dedicated to the public good, and neither type of organization pays taxes – but only charities may issue receipts offering tax deductions to people and businesses who give them money. Non-profit organizations may make a profit if it goes toward furthering the organization’s objectives.

The CRA defines a non-profit organization (NPO) as “a club, society, or association that's organized and operated solely for social welfare, civic improvement, pleasure or recreation or any other purpose except profit”.

The Canada Business Ontario website says: “Activities of a not-for-profit organization may be of a patriotic, national, charitable, philanthropic, religious, professional, or athletic nature without monetary gain. Directors, officers and/or members of a not-for-profit corporation do not own the corporation or its assets. The organization may not be operated for financial gain for its members, officers or directors.”

If a company’s main purpose is serving the public good, it is probably a charity or a non-profit. Private companies trying to serve the public good seldom get money through the same channels as charities and non-profits, don’t get tax breaks, and can’t find investors because profit is not their main objective.

Dale Sproule