1
Fundraising From Canada: An introduction for UK charities
June 12, 2014
For Chapel and York
Mark Blumberg ([email protected]) Blumberg Segal LLP
2
Blumberg Segal LLP is a law firm based in Toronto, Ontario Mark Blumberg is a partner at Blumbergs who focuses on non-
profit and charity law Assists charities from across Canada with Canadian and
international operations and foreign charities fundraising here www.canadiancharitylaw.ca and www.globalphilanthropy.ca
Free Canadian Charity Law Newsletter. Sign up at: http://www.canadiancharitylaw.ca/index/php/pages/subscribe
(416) 361 – 1982 or 1-866-961-1982 [email protected] www.twitter.com/canadiancharity * Legal information not legal advice
Blumberg Segal LLP
GlobalPhilanthropy.ca
3
Introduction to Canadian Charity Sector
Considerations when fundraising in Canada
Fundraising Rules Spending Funds in Canada and Abroad Receipting, Reporting and Compliance
Overview of Seminar
GlobalPhilanthropy.ca
Introduction to the Canadian charity sector
5
34 million people
2nd largest country in terms of land mass, after Russia
Shares border with the US
Canada
GlobalPhilanthropy.ca
6
161,000 non-profits in 2003 (federal and provincial and unincorporated)
86,000 Registered Charities (as of 2014)
$212 Billion in revenue, 3.4 million on payroll
Revenue – about 70% from Gov, the rest is earned income, donations ($15b)
Most charities have revenue under $100,000
Voluntary Sector in Canada
GlobalPhilanthropy.ca
7
Canada does not try to be homogeneous (multiculturalism, not a melting pot)
higher taxes in general during lifetime – greater tax benefit for gifts during lifetime
no estate/death tax in Canada
more services and safety net - good thing
less developed understanding of philanthropy
charity system much simpler than US
Canada is similar to, but different, from the US
GlobalPhilanthropy.ca
Considerations when fundraising
in Canada
9
Is it one time gift from one donor?
Is it ongoing fundraising?
Do you have affiliate in Canada?
How much money is involved? Goal in Canada – financial vs. awareness and operations
Some factors
GlobalPhilanthropy.ca
10
Who are your Canadian supporters? What type of organization are you?
Do you have the energy, organization and capacity to
fundraise internationally?
Some factors
GlobalPhilanthropy.ca
Options for Structure
12
1. No presence and no fundraising (wait and see)
2. No presence with fundraising
3. Work with existing group or Charity
4. Incorporated or unincorporated NPO (not registered charity)
5. Registered Charity (“Canadian Friends of …”)
Options for structuring Canadian charity operations
GlobalPhilanthropy.ca
13
Canadian charity must be created or established in Canada
Canadian charity must be resident in Canada
4 heads of charity (relief of poverty, education, religion, other purposes beneficial to the community that the law considers charitable)
foreign resident charities cannot become registered charities in Canada
What is a registered Canadian charity?
GlobalPhilanthropy.ca
14
tax exempt, can also issue official donation receipts
some foundations require status for funding
some corporations only grant to registered charities
benefits –GST/HST rebate, property tax rebate
more public disclosure and credibility, dissolution to eligible donees
Canadian Registered Charity Status
GlobalPhilanthropy.ca
15
Canadian for-profit business corporations Canadian government or provincial government
Canadian individuals
Canadian registered charities including foundations
Who are your Canadian supporters?
GlobalPhilanthropy.ca
16
Canadian corporations can claim deduction up to 75% of income for charitable donations to qualified donees
can carry forward donation for 5 years
corporations can also enter into sponsorship arrangements, advertising etc., can receive business deduction (similar value to gift to charity) and these arrangements do not have to be with Canadian charities
some companies decide to only support Canadian charities
Canadian businesses
GlobalPhilanthropy.ca
17
grants and contributions
Accessibility to funds depends on government (Federal, 10 provincial and 3 territorial), and program requirements
about $145 billion per year
in some cases must be Canadian charity etc. but often not
concern re bureaucracy, accountability, efficiency, effectiveness
Canadian, Provincial and Municipal Governments
GlobalPhilanthropy.ca
18
foundations can often easily grant to Canadian charities
more work when supporting foreign initiatives – both practical
and legal
Many foundations have narrow object clauses: “To receive and maintain a fund or funds and to apply all or part of the principal and income therefrom, from time to time, to charitable organizations that are also registered charities under the Income Tax Act (Canada).”
Canadian Foundations
GlobalPhilanthropy.ca
19
46 cents of every dollar in Ontario up to 75% of income when highest marginal tax rate.
can carry forward for up to 5 years
greater benefit on gift of appreciated marketable securities
on death up to 100% of income in final year and preceding year
tax benefit for donation to qualified donee when “official donation receipt”
Individuals – tax benefit when donating to qualified donee
GlobalPhilanthropy.ca
20
Foreign university? Prescribed university?
UN
Certain foreign qualified donees that have received a gift from the Canadian government? only 2 organizations in the UK at the moment
The Foundation for Canadian Studies in the United Kingdom
The Rhodes Trust – Public Purposes Fund
Special preferences for some foreign entities
GlobalPhilanthropy.ca
21
UK prescribed foreign universities
GlobalPhilanthropy.ca
Country City Name Status
England Birmingham Aston University Listed (2012-01-01)
England Uxbridge Brunel University Listed (2012-01-01)
England Bedfordshire Cranfield University Listed (2012-01-01)
England Gateshead Gateshead Talmudical College Listed (2012-01-01)
England London Imperial College of Science, Technology and Medicine Listed (2012-01-01)
England London King’s College London Listed (2012-01-01)
England London London Business School Listed (2012-01-01)
England London London School of Economics and Political Science, The Listed (2012-01-01)
22
UK prescribed foreign universities
GlobalPhilanthropy.ca
Country City Name Status
England Leicestershire Loughborough University Listed (2012-01-01)
England Bath University of Bath, The Listed (2012-01-01)
England Birmingham University of Birmingham Listed (2012-01-01)
England Bradford University of Bradford Listed (2012-01-01)
England Bristol University of Bristol Listed (2012-01-01)
England Cambridge University of Cambridge Listed (2012-01-01)
England London University College London Listed (2012-01-01)
England Durham University of Durham Listed (2012-01-01)
England Exeter University of Exeter Listed (2012-01-01)
England Keele University of Keele Listed (2012-01-01)
23
UK prescribed foreign universities
GlobalPhilanthropy.ca
Country City Name Status
England Canterbury University of Kent Listed (2012-01-01)
England Leeds University of Leeds Listed (2012-01-01)
England Liverpool University of Liverpool Listed (2012-01-01)
England London University of London Listed (2012-01-01)
England Manchester University of Manchester, The Listed (2012-01-01)
England Newcastle upon Tyne University of Newcastle, The Listed (2012-01-01)
England Nottingham University of Nottingham, The Listed (2012-01-01)
England Oxford University of Oxford Listed (2012-01-01)
England Reading University of Reading Listed (2012-01-01)
24
UK prescribed foreign universities
GlobalPhilanthropy.ca
Country City Name Status
England Sheffield University of Sheffield Listed (2012-01-01)
England Southampton University of Southampton Listed (2012-01-01)
England Guildford, Surrey University of Surrey Listed (2012-01-01)
England Brighton University of Sussex Listed (2012-01-01)
Northern Ireland
Belfast Queen’s University of Belfast, The Listed (2012-01-01)
Northern Ireland
Newtonabbey University of Ulster Listed (2012-01-01)
25
UK prescribed foreign universities
GlobalPhilanthropy.ca
Country City Name Status
Scotland Edinburgh Heriot-Watt University Listed (2012-01-01)
Scotland Aberdeen University of Aberdeen Listed (2012-01-01)
Scotland Dundee University of Dundee, The Listed (2012-01-01)
Scotland Edinburgh University of Edinburgh Listed (2012-01-01)
Scotland Glasgow University of Glasgow Listed (2012-01-01)
Scotland St. Andrews University of St. Andrews Listed (2012-01-01)
Scotland Glasgow University of Strathclyde Listed (2012-01-01)
Wales Cardiff University of Wales Listed (2012-01-01)
Should we establish
Canadian charity?
27
why not work with one of the 86,000 existing charities?
fundraising opportunities in Canada for you may be limited
if objects are social or political
don’t need to issue official donation receipts
don’t have patience for details of running Canadian affiliate
you have tax status as qualified donee by being prescribed foreign university etc.
Should we set up Canadian Charity? NO
GlobalPhilanthropy.ca
28
lasting impact in charitable area
need funding from Canadian individuals
need funding from Canadian foundations
some corporations only donate to Canadian charities
other tax benefits –GST, property taxes, etc
reputational benefits
Should we set up Charity? YES
GlobalPhilanthropy.ca
29
Federal vs. provincial
Documents and information required
Name
Objects
Directors
Preliminary issues
GlobalPhilanthropy.ca
30
3 Directors –name, address, occupation, tel #, ID,
Name of Charity
Objects of Charity
Address of Corporation
Activities and budget
Basic Information Required for Federal Incorp.
GlobalPhilanthropy.ca
31
three directors minimum for soliciting corporation
majority arms-length, unless private foundation
qualifications –18, sound mind, not bankrupt
director cannot receive compensation in Ontario, also not good idea elsewhere
no residency requirement but…
mix of skills - diversity
Directors
GlobalPhilanthropy.ca
32
www.canadiancharitylaw.ca and www.globalphilanthropy.ca
Registering a Charity for Income Tax Purposes
http://www.cra-arc.gc.ca/E/pub/tg/t4063/t4063-e.html
CentrePoint’s Starting a Canadian Charity
http://newcharity.thecentrepoint.ca/Pages/NewCharity.aspx
http://www.charitycentral.ca/
http://www.educaloi.qc.ca/en/loi/charities/
Resources on Registration
GlobalPhilanthropy.ca
Revenue Generation
34
Canada Revenue Agency (CRA) Charities Directorate:
Guidance on Fundraising (CG-013): http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/fndrsng-
eng.html My page on the fundraising guidance: http://tinyurl.com/8x99n2j PDF Version of Guidance http://www.globalphilanthropy.ca/images/uploads/CRA_Fundr
aising_Guidance_April_20,_2012_-_final.pdf
Fundraising by Registered Charities
35
CRA’s indicators and factors
resources devoted to fundraising relative to resources devoted to charitable programs;
fundraising without an identifiable use or need for the proceeds;
the charity’s fundraising expenses to fundraising revenue ratio;
36
Summary –indicators and factors
inappropriate purchasing or staffing practices, including purchases of fundraising merchandise or services that do not
increase fundraising revenue,
paying more than fair market value for fundraising merchandise or services, and
sole source or not-at-arm’s length contracts with suppliers or service providers;
activities where most of the gross revenues go to contracted non-charitable parties;
37
Summary –indicators and factors
commission-based fundraiser remuneration or payment of fundraisers based on the amount or number of donations;
misrepresentations in fundraising solicitations or in disclosure about fundraising costs, revenues or practices;
fundraising initiative or arrangements that are not well documented
Spending Funds in Canada and
Abroad
39
Canadian charities and foundations can transfer resource to
qualified donees relatively easily
Canadian charity cannot gift funds to non-profit in Canada that is not a qualified donee – the Canadian rules for structured arrangements between Canadian charity and Canadian non-profit in Canada are similar to rules for foreign grantmaking by Canadian charity
Grantmaking Inside of Canada by Canadian charities and foundations
GlobalPhilanthropy.ca
40
There are CRA rules for Canadian charities operating abroad – they are especially important for Canadian charities transferring funds or resources outside of Canada
The rules are not too onerous and understanding their rationale will assist in compliance
The rules focus on written agreements, direction + control,
monitoring And records
Grantmaking Outside of Canada by Canadian charities
GlobalPhilanthropy.ca
41
we do not have equivalency determinations
Canadian “own charitable activities” test is similar to US expenditure responsibility requirements
IRS and CRA both have rules
but what about fiduciary responsibilities?
How does Canada compare to US?
GlobalPhilanthropy.ca
42
Canadian Registered Charity World Divided in Two
Qualified donees – can issue official donation receipts for Income Tax Purposes
Non-Qualified donees – cannot issue official donation receipts
GlobalPhilanthropy.ca
43
List of Qualified Donees
Canadian registered charities under the Income Tax Act;
registered Canadian amateur athletic associations;
registered national arts service organizations;
housing corporations in Canada set up exclusively to provide low-cost housing for the aged;
GlobalPhilanthropy.ca
44
List of Qualified Donees
a municipality;
a municipal or public body performing a function of government in Canada;
the United Nations and its agencies;
universities outside Canada with a student body that ordinarily includes students from Canada (these universities are listed in Schedule VIII of the Income Tax Regulations);
GlobalPhilanthropy.ca
45
List of Qualified Donees (cont)
charitable organizations outside Canada to which the Government of Canada has made a gift during the donor’s taxation year, or in the 12 months immediately before that period [IC 84-3R5]; and
the Government of Canada, a province, or a territory.
GlobalPhilanthropy.ca
46
How do I know if it is a Qualified donee?
If in doubt check CRA’s listing of charities, call CRA, or treat organization as a non-qualified donee.
85,000 registered charities listed at CRA site:
http://www.cra-arc.gc.ca/chrts-gvng/chrts/menu-eng.html
Prescribed foreign universities at Schedule VIII of the Canadian Income Tax Regulations, as provided in section 3503
http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/prscrbdnvrsts-lst-eng.html
A few Charitable organizations outside Canada to which the Government of Canada has made a gift in last 2 years [IC84-3R5];
http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/gftsfrmhrmjsty-lst-eng.html
GlobalPhilanthropy.ca
47
How do I know if it is a Qualified donee? (cont)
Lists of registered Canadian amateur athletic associations (RCAAAs) http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/RCAAA-ACESA-lst-eng.html
List of Municipalities http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/menu-eng.html
List of municipal or public bodies performing a function of government in Canada
http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/mncplpblcbds-lst-eng.html
List of low-cost housing corporations for the aged
http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/lwcsthsng-lst-eng.html
GlobalPhilanthropy.ca
48
What is a non-qualified donee?
All organizations other than qualified donees
They cannot issue official donation receipts
Examples include:
Foreign charities
Canadian non-profits with no charitable status
Businesses
Bono, Obama, Angelina Jolie
GlobalPhilanthropy.ca
49
CRA’s Guidance on Foreign Activities
Guidance on Canadian Registered Charities Carrying Out Activities Outside Canada
http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/tsd-cnd-eng.html
Bigger Font Version:
http://www.globalphilanthropy.ca/images/uploads/Guidance_for_Canadian_Registered_Charities_Carrying_Out_Activities_Outside_Canada_-_July_8,_2010.pdf
50
“Own Activities” or “Direction And Control”
When not working with qualified donee or own staff need to have:
Due Diligence of Intermediary (investigate) Written agreement Detailed description of activities Monitoring and Supervision Ongoing Instruction for changes Periodic Transfers Separate Activities and Funds Books and Records showing above
GlobalPhilanthropy.ca
Qualified Donee, eg. Canadian registered Charity, UN, prescribed University, Canadian Municipality, etc
Employee
Volunteer Intermediary – agency, JV, partner, contractor
Canadian Registered Charity
“Own Activities” [Direction and Control]
“Own Activities” [Direction and Control]
Structured Arrangement -Written agreement, etc.
GlobalPhilanthropy.ca
52
Why deal with a non-qualified donee?
Foreign Activities
You don’t have people in Malawi
You don’t have road building equipment in Haiti
Local people or organizations sometimes can do it quicker, better and more cost effectively
Canadian Activities
The best organization to implement charitable project may be a non-profit (non-charity) or a business and not another registered charity
GlobalPhilanthropy.ca
53
What is a Conduit
“a conduit is a registered charity that receives donations from Canadians, issues tax-deductible receipts, and funnels money without direction or control to an organization to which a Canadian taxpayer could not make a gift and acquire tax relief.”
Violates Income Tax Act
Can be penalties or revocation
GlobalPhilanthropy.ca
54
Types of Foreign Intermediaries
Agent Joint Venture Participant Co-operative Participant Contractor
GlobalPhilanthropy.ca
55
Description of Activities ***
Before starting an activity
agree on a clear, complete, and detailed description of the activity.
Length and detail will depend on the type, complexity, duration, and expense of an activity
GlobalPhilanthropy.ca
Receipting, Reporting and
Compliance
57
Conduct allowable charitable activities and avoid prohibited activities
Keep adequate books and records
Properly issue official donation receipts
Meet annual spending requirement (disbursement quota)
File T3010 Registered Charity Information Return
Maintain status as a legal entity
Inform CRA of certain changes
Maintaining Charitable Status
GlobalPhilanthropy.ca
58
Very specific rules on receipting in Canada
Receipts must have mandatory fields
Cannot receipt for many types of “donations”
Cash vs. in-kind gifts (FMV)
CRA concerned with inappropriate receipting
“Receipting Kit”
Receipting
GlobalPhilanthropy.ca
59
receipting (lack information, mistakes, FMV)
failure to file T3010
T3010 omissions
non-charitable activities
gifts to non-qualified donees
failure to maintain direction and control
fundraising costs (reasonable and proportionate)
inappropriate or excessive political activities
unrelated business activities
tax shelters and fraudulent tax receipts
transactions with directors
Top CRA Compliance Concerns
GlobalPhilanthropy.ca
60
Blumberg Segal LLP is a law firm based in Toronto, Ontario Mark Blumberg is a partner at Blumbergs who focuses on non-
profit and charity law Assists charities from across Canada with Canadian and
international operations and foreign charities fundraising here www.canadiancharitylaw.ca and www.globalphilanthropy.ca
Free Canadian Charity Law Newsletter. Sign up at: http://www.canadiancharitylaw.ca/index/php/pages/subscribe
(416) 361 – 1982 or 1-866-961-1982 [email protected] * Legal information not legal advice
Blumberg Segal LLP
GlobalPhilanthropy.ca