We were recently asked the following:
Q. "We are an organization that builds home for the poor. We would like to apply to the CRA for charity registration. What are the likely issues the CRA might have with our application?"
A: The Charities Directorate would likely find the following issues:
Public vs. Private benefit
Charitable purposes must possess certain essential characteristics, particularly “public benefit,” as opposed to “private benefit.”
“Public benefit” means that there is a direct and tangible benefit to the community as a whole, or a significant section of it. A “private benefit” on the other hand is one directed towards the interests of a narrowly defined group, rather than the public as a whole.
Accordingly, an organization that provides benefits to members of a particular group will not be registered as a charity.
[For more information on the CRA’s policy for Public vs. Private benefit, see CPS-024, Meeting the Public Benefit Test, available here: https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/policies-guidance/policy-statement-024-guidelines-registering-a-charity-meeting-public-benefit-test.html ]
When an organization improves a house owned by an impoverished individual, the CRA may be concerned that the home may be used for purposes other than relieving poverty, i.e., operating a for-profit venture or business.
In other words, when an organization which builds, repairs and improves homes and shelters for the poverty-stricken applies for charity status, the Charities Directorate will want the applicant to demonstrate and prove that the property will only be used for charitable purposes.
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