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Canada Revenue Agency (CRA) has released draft guidance for registered charities to grant non qualified donees. This guidance comes after the income tax act (ITA) was amended this year to make it possible for registered charities to work with non-charities (non-profits) in a new way; by granting financial and other resources directly to them. CRA is seeking feedback from the public on the draft guidance.

Before the amendments to the ITA, registered charities could only work with non-charities as intermediaries to carry out their charitable activities. They were required to demonstrate ownership of activities and exercise on-going direction and control over the use of the intermediaries’ resources. This way of working was administratively burdensome to both registered charities and non-profits. It hindered genuine collaboration between charities and non-profits, reinforced patriarchy and inequity in the sector.

CRA, in the new draft guidance, notes 7 ways in which the new granting regime differs from the previous way that charities were required to work with non-profits and other non qualified donees.

  1. Granting opens up opportunities for charities to work in new ways with a wide range of grantees.
  2. The relationship between a charity and grantee can be a collaboration, rather than a hierarchy with the charity in charge.
  3. Granting is not intended to make the grantee a representative of the charity, but rather allows the grantee autonomy to carry on its programs.
  4. An activity does not need to be the charity’s own initiative, carved out by the work of an intermediary; rather, the charity can support the existing activities of the grantee.
  5. A charity is not required to provide ongoing instructions to the grantee.
  6. A charity does not need to otherwise “direct and control” the grantee as it would if this were the charity’s own activities.
  7. Granting focuses on risk and accountability, rather than the charity’s “own activities.”

The majority of Black-led and Black-focused organizations are non-charities; non-profits or grassroots organizations, that provide critical services to their communities across Canada. This new change creates a pathway for registered charities to fund Black-led and Black-focused non-profits whose programs are in furtherance of a charity’s purpose. It’s important that Black-led and Black-focused organizational leaders provide critical feedback.

Although registered charities are still required to demonstrate accountability to the requirements in the ITA, CRA is taking a ‘flexible and reasonable approach’ when determining whether a charity is meeting the accountability requirements. The draft guidance provides several tools which CRA recommends for charities’ use when granting to non profits and other non qualified donees.

CRA welcomes feedback on this guidance from the public until January 31, 2023.

NABC will host an information session with Black community leaders to discuss the guidance document. The event will take place on January 19, 2023, from 2:00 PM – 3:30 PM EST. You can register for the event here. Details about a session in French will be provided soon.

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