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INCORPORATING AND REGISTERING A CHARITY MAY 2014

PART 1: THE DIFFERENCE BETWEEN A REGISTERED CHARITY AND NON-PROFIT ORGANIZATION

CA COMMUNITY AMBASSADORS

Disclaimer:The contents of this presentation are provided as general information only. It is not legal advice. If you have a legal problem, you should consult a lawyer.Your use of this information in this presentation is your responsibility and is at your own risk. This information is provided ‘as is’, without warranty of any kind. The information in this presentation was correct at the time it was printed. Be aware that there may have been subsequent changes which make the information outdated.

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OUR GOAL• To explain the requirements for a Canadian Registered

Charity as mandated and regulated by the Canadian Revenue Agency.

• To explain the process of incorporating and registering a charity

• To provide resources to support non-profit organizations

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CA COMMUNITY AMBASSADORS

The mission of the Community Ambassador Committee is to connect Alberta CA’s with not-for-profit organizations to offer financial expertise, leadership and guidance using the CA skill set.

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PRESENTATION OVERVIEW:

Part 1: Charity Vs. Non-Profit Organization

Part 2: Requirements for a Registered Charity

Part 3: Process of Registering as Charity

Part 4: Process of Incorporating

Part 5: Compliance

Part 6: Resources

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PART 1

THE DIFFERENCE BETWEEN A REGISTERED CHARITY AND NON-PROFIT ORGANIZATION

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DEFINITIONS: PRIMARY DIFFERENCES

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources

• Registered charities are often referred to as Not-for-Profit Organizations. However, while both types of organizations operate on a Not-for-Profit basis, the two types are defined differently under the Income Tax Act.

• Registered charities must be established and operate exclusively for charitable purposes, and an entity must apply to the Canada Revenue Agency (CRA) to be approved as a charity.

• Not-for-Profit Organizations (NPO’s) can operate for social welfare, civic improvement, pleasure, sport, recreation or any other purpose except profit. NPO’s are not required to register with the CRA and are not issued a registration number. NPO’s cannot issue official donation tax receipts, and are generally (but not always) exempt from paying tax.

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DEFINITIONS: PRIMARY DIFFERENCES

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources

• The primary differences between a non-profit organization and a registered charity is the following:

• Tax receipts can be issued by a registered charity• A registered charity must be approved by Canadian

Revenue Agency• Spending requirements must be met by a registered

charity

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DEFINITIONS: SUMMARY

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources

Registered charity NPO

Purposes • must be established and operate exclusively for charitable purposes

• can operate for social welfare, civic improvement, pleasure, sport, recreation, or any other purpose except profit

• cannot operate exclusively for charitable purposes

Registration • must apply to the Canada Revenue Agency (CRA) and be approved for registration as a charity

• no registration process for income tax purposes

Charitable registration number • is issued a charitable registration number upon approval by the CRA

• is not issued a charitable registration number

Tax receipts • can issue official donation receipts for income tax purposes

• cannot issue official donation receipts for income tax purposes

Spending requirement (disbursement quota)

• must spend a minimum amount on its own charitable activities or as gifts to qualified donees

• not applicable

Designation • is designated by the CRA as a charitable organization, a public foundation, or a private foundation

• does not receive a designation

Returns • must file an annual information return (Form T3010) within six months of its fiscal period-end

• may have to file a T2 return (if incorporated), and/or an information return (Form T1044) within six months of its fiscal period-end

Personal benefits to members • cannot use its income to personally benefit its members

• cannot use its income to personally benefit its members

Tax exempt status • is exempt from paying income tax • is generally exempt from paying income tax

• may be taxable on property income or on capital gains

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SHOULD OUR ORGANIZATION BECOME A REGISTERED CHARITY: THE PROS AND CONS

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources

• Pros

• Official donation receipts can be issued which allows for individuals to claim donations as a tax deduction.

• This results in increased fundraising opportunities

• Receives a designation by the CRA as charitable organization

• Allows for stronger recognition by stakeholders

• Cons

• Must apply to the CRA and be approved for registration as a charity. This process can be time consuming

• Must spend a minimum amount on its own charitable activities

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RESOURCES

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources

• Thinking of Becoming a Registered Charity

• Charity Central• Applying for Registration

• CRA• Canada Not-for-profit Corporations Act (CNCA) Suitcase

• Mark Blumberg

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THE END OF PART 1.

Definitions | Requirements | Incorporating | Registering as a Charity | Compliance | Resources