Q: What are the fundamental requirements that determine if an organization may apply for status as a Charity?
A: To take advantage of special tax privileges given charities under the Income Tax Act — the most significant one being the ability to issue tax receipts to donors — charities must first register with the CRA. To do so, an applicant organization must:
- Devote its resources to charitable purposes and activities;
- The organization's purposes must be exclusively and legally charitable;
- It must be established for the benefit of the public or a sufficient segment of the public.
An organization's purposes are considered legally charitable only if they fall within one of the four categories of charity set out in the 19th century decision, Commissioners for Special Purposes of Income Tax v. Pemsel.
Pemsel categories include:
- Purposes for the relief of poverty;
- Purposes for the advancement of education;
- Purposes for the advancement of religion;
- Other purposes beneficial to the community in a way the law regards as charitable.