You work for Your Junk Is Our Gems, a group collecting clothing for the homeless. You want to help more people, but need to collect donations from the public to expand your activities.
You've read our article Introduction to Registered Charities and weighed the pros and cons of becoming a registered charity. You've decided registration is right for your organization.
In this article, Éducaloi explains what you need to know about the registration process.
To whom do I apply?
Applications must be made to the Charities Directorate of the Canada Revenue Agency. The Directorate is a branch of the agency.
When should I apply?
Only when you have a very good idea of your charity's mission, how it will carry out that mission and how it will operate as an organization.
This is because the application process requires charities to provide a lot of detailed information. For example, you must provide a very precise description of the charity's purposes and activities, and a proposed budget.
Where do I get the application form?
The form is called a T2050 - Application to Register a Charity Under the Income Tax Act. You can get the form on website of the Canada Revenue Agency. If you use the form called "PDF fillable/saveable", you can fill it out online and save it as you go along.
You can also get the form by calling the agency at 1-888-892-5667.
Who should fill out and sign the application?
The form can be filled out by either:
- a person with a responsible position in the organization (chairperson, treasurer, manager, etc.)
- someone acting on behalf of the organization (for example, a legal representative)
The certification section at the end of the application must be dated and signed by two people with permission to sign for the charity, for example, directors, trustees or treasurers. Original signatures are required.
What information and documents do I need to complete the application?
Many applications are delayed or turned down because they are incomplete. Make sure to provide everything. There is no fee for applying. You don't have to use a legal advisor to apply, but in more complicated cases you might need help.
Here are some important parts of the application:
1. Description of Purposes
This is one of the most important parts of the application. It often creates difficulties for charities applying for registration.
Charities must provide a very precise statement of their "purposes". Purposes means the reason the charity was created - its mission. CRA sometimes also refers to purposes as "objects".
These purposes must fit completely within the 4 categories that qualify as charitable under the law:
- relief of poverty
- advancement of education
- advancement of religion
- a purpose beneficial to the community that the law considers charitable
Charities cannot have a mix of these purposes and others that do not fit within the 4 categories. For more on the 4 purposes, consult our article Introduction to Registered Charities or the explanation of the Canada Revenue Agency.
Many applications are denied or delayed because the statement of purposes is too vague. It is not enough to use general words such as "promote", "support", "foster", "facilitate", "building networks" or "act as an umbrella" without being specific about why the organization was created. For information on the level of detail required, consult the explanation of the Canada Revenue Agency.
The description of purposes must also show that there will be a real benefit to the general public or a significant section of the public. The people who will benefit cannot be a restricted group or people who share a private connection, such as a social club or professional association. To learn more, consult CRA's explanation of the public benefit test.
Finally, the purposes must match with the activities of the organization. See the next section about activities.
2. Description of Activities
The application form also asks for a description of activities. "Activities" are the projects and programs an organization will use to carry out its purposes. Again, you must provide details: for each purpose, you must describe the specific activities that will be used to achieve that purpose. It is not enough to just repeat the purposes.
Also, the description of activities must make it clear there will be a real benefit to the general public or a significant section of the public.
If your charity wants to carry out its purposes by giving resources to qualified donees, including other registered charities, you must provide details on these resources.
Again, many applications are delayed or rejected because the description of activities is not detailed enough, or there are too many different activities listed. CRA's application guide contains information on the required level of detail.
3. Governing Document
This must accompany the application. What is a "governing document"? It identifies a charity's name and describes its purposes, structure and internal procedures.
There are different kinds of governing documents, such as: constitutions, trust deeds (if the charity is set up as a trust) and, for incorporated charities, articles of incorporation or letters patent.
The type of governing document required by CRA depends on a charity's "designation" as a charitable organization, public foundation or private foundation. Charitable organizations must provide either a constitution, trust deed or, if they are incorporated, their incorporation documents. Public or private foundations must provide either a trust document or, if they are incorporated, their incorporation documents.
Since the governing document will contain a statement of the organization's purposes, make sure the purposes meet the tests described in Number 2 above - "Description of Purposes".
Charities that are a branch, chapter, division, congregation or other part of an existing Canadian registered charity do not need governing documents: they can provide a letter of good standing from the parent organization (the existing registered charity) confirming they are part of that charity.
4. Information on the Charity's Officials
The application form asks for information about directors, officers, trustees and other similar officials in the charity.
You must provide the dates of birth for directors and trustees. Applicants often ask why they must provide this information: it is to ensure there is no confusion around the identity of the people who are responsible for the charity. Two people can have exactly the same name. Providing a date of birth makes it clear who is being identified. Date of birth information remains confidential.
How are applications processed?
As a general rule, applications are dealt with on a first-come, first-served basis. But if an organization thinks its application should be processed more quickly than normal, it can submit a special request in writing.
Note that priority is not given just because a group wants to receive donations and issue receipts right away, nor because the group must be registered to get money from funding agencies or other sources.
If there are problems with the description of purposes and activities or if information is missing, the Canada Revenue Agency contacts the organization to request information.
If the application is approved, the Canada Revenue Agency sends the charity a notification of registration with a registration number.
If the application is denied, this decision can be appealed.
How can I find out about the status of an application?
Anyone named on the application form as an authorized representative of the charity can call the Canada Revenue Agency's toll free line (1-888-892-5667) to ask about the status of an application.
Do registered charities have to incorporate?
Registered charities do not have to incorporate, but it is sometimes a good idea.
For an explanation of what it means to incorporate and why it is sometimes a good idea, consult our article Charity Inc. - Incorporation and Registered Charities.
This article explains in a general way the law that applies in Quebec. This article is not a legal opinion or legal advice. To find out the specific rules for your situation, consult a lawyer or notary.