Co-opZone Legal NetworkCo-ops and Charities

Presented by Brian IlerIler Campbell LLP

May 2013

Aren’t Charities and Co-ops Mutually Exclusive?

Co-ops, by definition, provide services to their members

Charities do benevolent work – relief of poverty, advance education or religion, or other acceptable charitable goals – for public benefit, not for benefit of members

Charities with democratic governance – by those who benefit from the charity’s services – can be structured as a co-op

Charity Regulation

Mostly CRA – need registration to issue donation receipt for income tax credit

In Ontario, Public Guardian & Trustee oversees, but has limited resources

Grantors will oversee the use of their funds

Charity Rules

Non-profit: all resources used to further charitable objects

Dissolution: all net assets to qualified donees, which includes other charities

Directors can’t be paid - in Ontario, directors cannot be staff, or be paid in any capacity

Charitable PurposesThat Have CED Aspect

relieving poverty by providing employment

advancing education: employment-related training

benefiting the community in a charitable way by:

1. relieving unemployment 2. relieving conditions associated with disability3. improving conditions where social and

economic deprivation

Exclusively Charitable

A charity must have objects and activities that are exclusively charitable

Exceptions:• Administration, fundraising – within limits• Ancillary and incidental political activities,

very carefully circumscribed – see CRA’s Policy Statement on Political Activities

No unrelated business

Public Benefit Test?

Two-part Test1. Does the activity provide a tangible

and socially useful benefit?2. Is that benefit directed to the public

or sufficient section of the public?o Activity must not be concerned with conferring

private advantage.o A private benefit may be okay so long as it is only

incidental to achieving a charitable purpose (i.e., it’s necessary, reasonable, and not disproportionate to the public benefit delivered).

Registration as a Charitable Organization

Unincorporated organizations, trusts, and non-profit corporations are eligible to apply

Must have charitable objects and non-profit clauses in constituting document

Submit application to CRA – no fee Examiner will respond in writing,

provide comments, will discuss Timing varies hugely

Annual Requirements

File T3010 Registered Charity Information Return with CRA

In Ontario, that, with the specified worksheets, suffices for notices of change of directors and officers to the Ontario government as well:

Charities RC232 – Ontario Corporations Information Act Annual Return Worksheet, T1235, Director/Trustees and Like Officials Worksheet

CRA does not require audit – funders, and members, might

Alternative

Affiliated Charity – e.g. TREC• Non-charity is only voting member of

charity• Non-charity appoints board• Non-charitable activities in TREC,

charitable activities in charity• Grants requiring charitable registration to

charity, others to TREC• TREC provides services to charity through a

services agreement – at or below fair market value

Community Economic Development

CRA’s Guide CG‑014 Community Economic Development Activities and Charitable Registration was released July 26, 2012.

“Community economic development (CED) activities can be charitable when they further a charitable purpose.”

What are CED activities?

Many CED activities involve improving economic opportunities and social conditions of an identified community.

CED activities:1. activities that relieve unemployment2. grants and loans3. program-related investments4. social businesses for individuals with

disabilities5. community land trusts

CED and Charities

Key: Regardless of how a CED activity is

labelled, it will only be charitable if it • directly furthers a charitable

purpose, and • meets the Public Benefit Test

Resources

Richard Bridge’s Paper on Co-ops and Charities: http://coopzone.coop/files/Co-opCharityLaw.pdf

Laird Hunter’s presentation on Charities and CEDs: http://coopzone.coop/en/node/3961

Policy Statement CPS-024 Guidelines for Registering a Charity: Meeting the Public Benefit Test (March 10, 2006),: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-024-eng.html

Guidance CG‑014 Community Economic Development Activities and Charitable Registration (released July 26, 2012):http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/cmtycnmcdvpmt-eng.html