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 ([email protected]) Blumberg Segal LLP

mailto:[email protected]

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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 [email protected] www.twitter.com/canadiancharity * Legal information not legal advice

Blumberg Segal LLP

GlobalPhilanthropy.ca

http://www.canadiancharitylaw.ca/

http://www.globalphilanthropy.ca/

http://www.canadiancharitylaw.ca/index/php/pages/subscribe


http://www.twitter.com/canadiancharity

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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


Options for Structure

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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




http://www.cra-arc.gc.ca/tx/chrts/prtng/menu-eng.html






http://newcharity.thecentrepoint.ca/Pages/NewCharity.aspx

http://www.charitycentral.ca/

http://www.educaloi.qc.ca/en/loi/charities/

Revenue Generation

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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

http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/fndrsng-eng.html







http://tinyurl.com/8x99n2j

http://www.globalphilanthropy.ca/images/uploads/CRA_Fundraising_Guidance_April_20,_2012_-_final.pdf




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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


http://www.cra-arc.gc.ca/tx/chrts/menu-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


http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/RCAAA-ACESA-lst-eng.html















http://www.cra-arc.gc.ca/chrts-gvng/qlfd-dns/qd-lstngs/menu-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 [email protected] * Legal information not legal advice

Blumberg Segal LLP




http://www.canadiancharitylaw.ca/index/php/pages/subscribe


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

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