In Canada an organization can register for charitable status with Canada Revenue Agency (CRA) if the organization brings a benefit to the community in the areas of poverty relief, advancement of education, advancement of religion or “other” as defined by the courts. Churches would register for the major purpose of advancing religion.
With charitable status comes the expectation that your organization will be in control of its funding or pass the funding along to other Canadian charities (qualified donees) and that your charitable endeavors will benefit the public. CRA requires an application and an annual report.
The application process involves documentation including constitution and bylaws, list of directors, proposed budget, and information on your purpose and objectives. For information on how to apply and what documents need to be supplied, click here. Be sure to carefully complete the application form and provide the requested documents.
Once registered as a Canadian charity, it is important that you file an annual report, T3010, to maintain your charitable status. This report is due no later than six months after your fiscal year end. The report will summarize your income and the use of funds and report on the activity of the organization. The report will update information on directors or leadership, report on gifts to qualified donees, donation receipts issued and any foreign activity. Although the report may seem cumbersome, it is critical that it is completed and filed on time. Working papers should be kept on file to indicate what accounts relate to the reported figures and how other information was gathered so that if CRA were to question the report, the information could easily be explained.
Your church must keep accurate financial records in either English or French. Official donation receipts issued to donors must be completed accurately and provide the information that CRA requires. Official donation receipts cannot be issued for gifts of service – there must be an exchange or voluntary transfer of property. When such gifts come with donor restrictions (designated gifts), the church should accept them only where the donation is for charitable purposes that are within the corporate powers of the church or are board-authorized programs or ministries of the church.
CRA also allows your church to claim a rebate on GST/HST paid out. You do not need to be registered for GST but you can claim back 50% of GST paid out and depending on the province, between 50% and 82% of HST paid. Forms GST66 and RC7066 are used to request the rebate. Documentation to back the rebate claim must be kept on file.
By definition, charitable activity is for the benefit of the public or the community. That means that members and non-members must be treated in the same manner.
CRA guidelines and reporting are for the purpose of ensuring that charities are doing what they say they will do and that they are in control of their own funding, using those funds for their own purposes and objectives. Working to comply with CRA guidelines and reporting can help your church to do a better job in setting a good administrative foundation, to annually evaluate activity of your church and to move forward in ministry.
Visit the CRA web site, www.cra-arc.gc.ca for more information.