Charities Working with Others Margaret Mason Norton Rose Fulbright Canada LLP January 18, 2017

Transcription

1 Charities Working with Others Margaret Mason Norton Rose Fulbright Canada LLP January 18, 2017

2 Overview what can t registered charities do? why? risks? methods for working with others charities/qualified donees including governments non-profit organizations businesses 2

3 What Can t Registered Charities Do? grant to non-profit organizations grant to non-qualified donees act as a fiscal sponsor provide flow through grants sponsor someone else s project if that someone else is a nonqualified donee 3

4 Why? Income Tax Act creates a framework for registered charities in Canada registered charities can: conduct their own charitable activities; or grant to qualified donees 4

5 Who/What are Qualified Donees? defined in ss (l) of the Act includes: a registered charity a municipality in Canada provincial and federal governments in Canada Registered Canadian Amateur Athletic Association (RCAAA) a municipal or public body performing a function of government in Canada that has applied (and received) registration First Nations certain (rare) types of housing corporations that have applied for registration certain foreign charities/foreign universities if registered 5

6 What is Conspicuous by its Absence? non-profit organizations if certain requirements are met, non-profit organizations are tax exempt pursuant to ss. 149(1)(l) of the Act tax exemption must be claimed annually by filing T2 Corporate Income Tax Return (for those NPOs which are incorporated) purposes cannot be exclusively charitable must not be able to qualify to be a registered charity no intention to generate a profit no income available for personal benefit of members/directors NPOs are NOT qualified donees (and can t become one) 6

7 Risk for Registered Charity a registered charity that grants to a non-qualified donee is subject to a number of potential sanctions in the Act suspension of receipting privileges financial penalty (105% of amount granted for first offence, 110% of amount granted for subsequent offences) revocation of charitable registration requires expenditure of, or transfer of, all assets to another independent, registered charity essentially a cessation of operations in most cases 7

8 Working in Collaboration - Scenarios registered charity + registered charity(ies) registered charity + municipality/province/federal government registered charity + qualified donee (registered First Nation) registered charity + NPO 8

9 Registered Charity + Registered Charity a registered charity can grant to another registered charity for the other charity s work watch political activities requirements straight-forward to work together on a project/program enter into a written contract (NOT an MOU) specifying who is doing what 9

10 Registered Charity + Municipality a registered charity can grant to a municipality (or the Province or Canada) for that government s work watch political activities requirements straight-forward to work together on a project/program enter into a written contract (NOT an MOU) specifying who is doing what 10

11 Registered Charity + Qualified Donee (First Nation) a registered charity can grant to a qualified donee for that qualified donee s work for list of First Nations who are qualified donees: straight-forward to work together on a project/program enter into a written contract (NOT an MOU) specifying who is doing what 11

12 Registered Charity + NPO a registered charity CANNOT grant to an NPO for that NPO s work if the project/program/idea is generated and intended to be performed by the NPO and the NPO is seeking funding, it is the NPO s work classic scenario we have a donor who wants to fund us but he/she needs a tax receipt can be complex to work together on a project/program the possibilities are: registered charity takes ownership of the project/program registered charity and NPO collaborate on the project/program 12

13 Registered Charity Takes Ownership a registered charity can decide to take direction and control of a project/program initiated externally to the charity such direction and control must be real and substantive it is not contracting with an NPO in this scenario the charity would employ (or hire as contractors/agents) the initiators (i.e. the humans) of the program/project all decisions made regarding the program/project made by registered charity s Board or as delegated to management ownership of all intellectual property etc., relative to the program/project must be transferred to the registered charity all branding/naming must be consistent with that of registered charity website/social media etc., all owned and controlled by registered charity 13

14 Registered Charity and NPO Collaboration a registered charity can decide to collaborate with any type of organization so long as it has proportionate direction and control over the project/program must have a collaboration/joint venture agreement in writing - NOT an MOU two organizations working together, bringing different skills and resources, to jointly conduct a charitable activity 14

15 Registered Charity and NPO Collaboration (cont.) if the registered charity is providing funding for the program/project, it must be directly engaged in the supervision/direction of the programmatic/project activities board/senior management must approve commencement of collaboration and manner in which collaboration to be conducted written agreement steering or management committee all expenditures authorized and approved by management committee financial and narrative reporting regarding project to board/senior management 15

16 What Typically Goes Wrong misconceptions/misunderstandings of initiating agents and collaborators management of relationship and expectations 16

17 Relationship and Expectations registered charity needs first to analyze the proposed relationship: is the proposed agent/collaborator credible, trustworthy and able to deliver? is proposed project charitable? is proposed activity within the charity s purposes? does the charity have sufficient resources to properly manage the relationship? 17

18 Relationship and Expectations (cont.) expectations of both parties must be clear: the charity is in charge of and ultimately responsible for the project and all expenditures (or its portion thereof) the agent/collaborator is not just receiving funding for its project and dressing it up as a collaboration all product of the project belongs to both collaborators in appropriate proportions based on contribution 18

19 Summary registered charity must understand the nature of the relationship to ensure that it can manage its risk consider creation of an internal analysis protocol the relationship must be documented in writing and all reporting must be diligently pursued obtain and maintain thorough documentation from initiation to conclusion 19

20 USA and Canada USA Austin Dallas Denver Houston Los Angeles Minneapolis New York Pittsburgh- Southpointe San Antonio San Francisco St Louis Washington DC Canada Calgary Montréal Ottawa Québec Toronto Vancouver 20

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