This article was previously published by Law For Non-Profits and is reprinted with permission.
Law For Non-Profits is a simple and low-barrier digital platform. It’s designed to help nonprofit leaders understand their legal obligations. This tool was created for nonprofits working in BC, however, many of the concepts are general in nature and may apply in other provinces of Canada that have similar laws. Read more about using these resources from other regions of Canada here.
Applying for charitable status can feel like a daunting process. However, it’s not unlike preparing a grant application albeit with key language differences. Most grants are written for a very specific audience in a specific sector. Many Program Officers come from the nonprofit sector. The audience for a charitable status application is very specific: examiners of the Charities Directorate who may not have the kind of familiarity with the kinds of activities many nonprofits undertake.
Here is Part One of some of the key takeaways from LawForNonProfit’s recent webinar with Martha Rans, K.C.
Why apply for charitable status?
In short, for the funding that may be available from foundations or potential angels. By angels we mean friends, family or supporters who would like to donate and receive a tax receipt for the donation. Most foundations require that an organization be a registered charity (or qualified donee) to access their funds. While it may now be possible for foundations to give to non-qualified donees (i.e. nonprofits) the funding under this category may be very limited.
Before you apply for charity status
Connect. Talk to related nonprofits and charities in your community with whom you might cooperate.
Sometimes working with its peers can help a new nonprofit gain administrative stability. There are over 30,000 nonprofits in BC and 180,000 charities nationwide. There may be one that is already doing what you are doing. These days with donor dollars down and ever-changing funder priorities working with a like-minded charity may make more sense in the short-term. They might also be able to give you the benefit of their experience applying for charitable status. This is especially true in light of the changes to the Income Tax Act that allow registered charities granting to non-qualified donees.
The guidance on granting to non-qualified donees is relatively new and untested but it is worth exploring depending on your organization’s readiness to pursue charitable status and maintain compliance.
Connect with your local funders, know the landscape of who is giving to whom and how you might access those funds.
Achieving charitable status is just one step in becoming a healthy charitable organization. To be well placed to fulfill your purpose, it pays to build relationships with potential community partners, foundations and other funding groups. Funding is often as much about relationships as it is about grant writing. Get to know your local funders and find out from them whether they would fund your activities.
While there are significant benefits to achieving charitable status, the benefits also come with significant responsibilities. Know what it means to stay in compliance as a registered charity.
The benefit of charitable status is money. Charitable status enables a nonprofit to issue tax receipts to donors and to access funding from foundations and individuals that will only provide funding to registered charities. The additional responsibilities that accompany charitable status include providing further transparency to donors and to the CRA. Transparency of funding sources and accounting is essential to a healthy well-run charity and requires time and resources.
You can save a lot of time by fully exploring the website of the Charities Directorate in advance.
There is guidance on just about every question you might have relating to charitable status on the website of the Charities Directorate. Familiarizing yourself with the information on the website can save time, money and work. The guidance documents and webinars are meant to be easily understood and clearly communicate how to successfully apply for and maintain charitable status. Time spent on the Charities Directorate’s website will prove useful throughout the application process.
If you’d like to learn more about keeping your nonprofit legally compliant, explore the many free resources available on our website. Our Legal Help Guides walk you through a series of plain language questions and provide you with a checklist, sample documents and helpful links for any areas your nonprofit may need to address.
Ready for more information on applying for charitable status? Part Two in our series is available here.
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Law For Non-Profits is a free low-barrier digital platform from the Pacific Legal Education & Outreach Society designed to help non-profit leaders understand their legal obligations. They offer step-by-step legal help guides, sample documents, articles, and helpful links to keep your non-profit legally compliant. The resources were created for non-profits working in BC, however, many of the concepts are general in nature and may apply in other provinces Canada that have similar laws. Learn more at lawfornonprofits.ca.