Fundraising from canada - an introduction for uk charities by Mark blumberg

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Fundraising From Canada:
An introduction for UK charities
June 12, 2014
For Chapel and York
Mark Blumberg (mark@blumbergs.ca)
Blumberg Segal LLP

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 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
 mark@blumbergs.ca
 www.twitter.com/canadiancharity
* Legal information not legal advice
Blumberg Segal LLP
GlobalPhilanthropy.ca

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 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

Introduction to
the Canadian
charity sector

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 34 million people
 2nd largest country in terms of land mass, after Russia
 Shares border with the US
Canada

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 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

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 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

Considerations
when fundraising
in Canada

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 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

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 Who are your Canadian supporters?
 What type of organization are you?
 Do you have the energy, organization and capacity to
fundraise internationally?
Some factors

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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

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 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?

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 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

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 Canadian for-profit business corporations
 Canadian government or provincial government
 Canadian individuals
 Canadian registered charities including foundations
Who are your Canadian supporters?

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 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

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 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

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 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

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 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

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 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

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UK prescribed foreign universities
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)

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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)

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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)

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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)

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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?

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 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

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 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

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 Federal vs. provincial
 Documents and information required
 Name
 Objects
 Directors
Preliminary issues

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 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.

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 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

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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

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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

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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;

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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;

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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

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 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

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 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

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 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?

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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

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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;

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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);

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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.

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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

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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

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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

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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

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“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

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.

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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

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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

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Types of Foreign Intermediaries
 Agent
 Joint Venture Participant
 Co-operative Participant
 Contractor

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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

Receipting,
Reporting and
Compliance

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 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

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 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

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 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

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 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
 mark@blumbergs.ca
* Legal information not legal advice
Blumberg Segal LLP

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