RC13. What are the responsibilities of a registered charity?
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In return for the advantages of being a registered charity, a charity must follow certain rules.
There are three general categories of responsibility:
1. A registered charity can only do a limited range of things. It can advance religion, relieve poverty, carry out education, or undertake programs and activities of benefit to the community that the law considers charitable.
2. It must follow detailed rules under the Income Tax Act (ITA) for spending money, receiving income, and reporting.
3. It cannot engage in a range of activities that the law considers political.
As part of its responsibilities, a registered charity must:
- ensure that all its activities are charitable and within its objects
- demonstrate that it is devoting its resources to its stated charitable purposes
- keep accurate, detailed and complete records, books and receipts
- ensure that it does not pay, or otherwise make available, its income to any of its members
- ensure that at least 50 per cent of its directors are at arm’s length (that is, not in a close relationship) with each other. (Excepting private foundations )
- meet its spending requirement (disbursement quota)
- ensure the accuracy of all official donation receipts and ensure that all such receipts are in accordance with the ITA and its regulations
- file a yearly T3010 Information Return on time (within six months of the organization’s fiscal year-end)
- engage only in permitted political activity. A charity cannot
- engage in any political activities to support or oppose a political party or a candidate;
- try to influence public opinion on a broad social question; or
- advocate for a change in law or policy.
However, a charity can spend up to 10 per cent of its resources on non-partisan political activities that help to accomplish the charity’s purpose. All political activity must also be ancillary and incidental to the objects of the charity.
- not make any changes to its constitution without the approval of the Canada Revenue Agency (CRA)
- allow the CRA to audit its books and activities, if asked
- carry out all other obligations under the ITA.
These responsibilities are to be taken very seriously, as any violation could result in public embarrassment, the loss of reputation, and a range of sanctions by the CRA (such as financial penalties, the loss of privileges until corrective action is taken, or ultimately the revocation of charitable status). If an organization’s charitable status is revoked, it can no longer issue tax receipts for donations and will no longer be a qualified donee.