This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.
Authors: Erin Bokshowan, Stephen Miazga
An application to become a registered charity is made by submitting Form T2050 – Application to Register a Charity Under the Income Tax Act (“T2050“) to the Canadian Revenue Agency (the “CRA“). This form is frequently submitted incompletely or incorrectly. As such, this blog provides an overview of some of the more complex aspects of a T2050.
Part 2 of a T2050 requests information regarding the organizational structure of the applicant organization. Applicants should note that the questions asked in this part relate directly to whether the applicant organization should be classified as a charitable organization, public foundation, or private foundation.
Part 3 of a T2050 requests information regarding the purposes of the applicant organization and the corresponding activities carried on by the organization in support of its purposes. Two of the most common reasons for rejection or delay in processing of an application is because the CRA does not accept the applicant’s stated purposes as being exclusively charitable or because the description of the organization’s activities in support of those purposes is incomplete or insufficient.
Prior to submitting the T2050, it is recommended that a potential applicant conduct a review of its constating documents to ensure that its purposes will be accepted by CRA as being exclusively charitable. If there is any risk of rejection on this point, it may be necessary for the members of the non-profit organization to approve an amendment to the organization’s purposes as set out in its constating documents.
In addition, the applicant should ensure that it provides detailed information regarding the activities it carries on in support of its purposes. For example, if the applicant’s stated purpose was to “promote literacy by providing book grants to at-risk youth”, the application should include contextual information such as a description of the nature of the grants, eligibility requirements, how the grants will be advertised, the process used to selected recipients, and how much money will be distributed and when.
A properly completed T2050 also requires the submission of legal documents concerning the applicant organization. This typically includes copies of the organization’s by-laws and constating documents (most commonly, the articles of incorporation for the non-profit corporation seeking registered status).
In addition to the legal documents, an applicant is also required to provide financial and budgeting information. Compiling this information can sometimes be cumbersome, particularly for newly incorporated entities.
Once an application is submitted the CRA ensures that all the required information has been received. After reviewing the application it is classified as either complete or incomplete. If complete, the applicant is sent an acknowledgement letting containing an estimate as to the amount of time it will take for a decision on the application for charitable status to be made. If an application is incomplete, it may be rejected and returned to the applicant. Occasionally, the CRA may contact the applicant for more information or documentation. Generally, an applicant will have 60 days to respond to such a request.
Applications for registered charity status are complex. If done incorrectly, the application can be delayed or rejected outright. To help ensure a positive outcome and an efficient application process, organizations considering applying for registered charity status are encouraged to seek legal advice.