Co-opZone Legal Network Co-ops and Charities

Co-opZone Legal NetworkCo-ops and Charities Presented by Brian Iler Iler Campbell LLP May 2013

Aren’t Charities and Co-ops Mutually Exclusive? • Co-ops, by definition, provide services to their members • Charities do benevolent work – relief of poverty, advance education or religion, or other acceptable charitable goals – for public benefit, not for benefit of members • Charities with democratic governance – by those who benefit from the charity’s services – can be structured as a co-op

Charity Regulation • Mostly CRA – need registration to issue donation receipt for income tax credit • In Ontario, Public Guardian & Trustee oversees, but has limited resources • Grantors will oversee the use of their funds

Charity Rules • Non-profit: all resources used to further charitable objects • Dissolution: all net assets to qualified donees, which includes other charities • Directors can’t be paid - in Ontario, directors cannot be staff, or be paid in any capacity

Charitable PurposesThat Have CED Aspect • relieving poverty by providing employment • advancing education: employment-related training • benefiting the community in a charitable way by: • relieving unemployment • relieving conditions associated with disability • improving conditions where social and economic deprivation

Exclusively Charitable • A charity must have objects and activities that are exclusively charitable • Exceptions: • Administration, fundraising – within limits • Ancillary and incidental political activities, very carefully circumscribed – see CRA’s Policy Statement on Political Activities • No unrelated business

Public Benefit Test? Two-part Test • Does the activity provide a tangible and socially useful benefit? • Is that benefit directed to the public or sufficient section of the public? • Activity must not be concerned with conferring private advantage. • A private benefit may be okay so long as it is only incidental to achieving a charitable purpose (i.e., it’s necessary, reasonable, and not disproportionate to the public benefit delivered).

Registration as a Charitable Organization • Unincorporated organizations, trusts, and non-profit corporations are eligible to apply • Must have charitable objects and non-profit clauses in constituting document • Submit application to CRA – no fee • Examiner will respond in writing, provide comments, will discuss • Timing varies hugely

Annual Requirements • FileT3010 Registered Charity Information Return with CRA • In Ontario, that, with the specified worksheets, suffices for notices of change of directors and officers to the Ontario government as well: Charities RC232 – Ontario Corporations Information Act Annual Return Worksheet, T1235, Director/Trustees and Like Officials Worksheet • CRA does not require audit – funders, and members, might

Alternative • Affiliated Charity – e.g. TREC • Non-charity is only voting member of charity • Non-charity appoints board • Non-charitable activities in TREC, charitable activities in charity • Grants requiring charitable registration to charity, others to TREC • TREC provides services to charity through a services agreement – at or below fair market value

Community Economic Development • CRA’s Guide CG‑014 Community Economic Development Activities and Charitable Registration was released July 26, 2012. • “Community economic development (CED) activities can be charitable when they further a charitable purpose.”

What are CED activities? • Many CED activities involve improving economic opportunities and social conditions of an identified community. • CED activities: • activities that relieve unemployment • grants and loans • program-related investments • social businesses for individuals with disabilities • community land trusts

CED and Charities Key: Regardless of how a CED activity is labelled, it will only be charitable if it • directly furthers a charitable purpose, and • meets the Public Benefit Test

Resources • Richard Bridge’s Paper on Co-ops and Charities: http://coopzone.coop/files/Co-opCharityLaw.pdf • Laird Hunter’s presentation on Charities and CEDs: http://coopzone.coop/en/node/3961 • Policy Statement CPS-024 Guidelines for Registering a Charity: Meeting the Public Benefit Test (March 10, 2006),: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-024-eng.html • Guidance CG‑014 Community Economic Development Activities and Charitable Registration (released July 26, 2012):http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/cmtycnmcdvpmt-eng.html

Co-opZone Legal Network Co-ops and Charities