A. INTRODUCTION
On June 24, 2013, Canada Revenue Agency Charities
Directorate (“CRA”) released a new guidance dealing with organizations that
benefit youth. The guidance, referenced as CG-020, is entitled Charitable
Purposes and Activities that Benefit Youth (“Guidance”), and replaces the earlier CPS-015 Registration of
Organizations Directed at Youth (“Former Policy”). The new Guidance describes how CRA interprets the
common law and Income Tax Act (“ITA”) in determining whether an
organization that benefits youth is eligible to become a registered charity
under the ITA or presumably can continue as a charity if subject to an audit by
CRA. While the Guidance and the Former Policy are similar in many respects, there
are several differences between the two which are explained in this Charity Law
Bulletin.
B. DEFINITION OF YOUTH
The Guidance defines “youth” in paragraph 4 as “young
people, without restriction to a specific age range, which will now depend on
the nature of the charitable purposes and activities in question. For example,
latch-key children benefit a different age group than activities for
post-secondary school students.” The Guidance also defines “at-risk youth” in
paragraph 4 as “youth who are in danger of not making a successful transition
to healthy and productive adulthood as a consequence of a range of possible
issues, including, but not restricted to, learning difficulties, socio-economic
environment, social relationships, and family/school situations.”
By contrast, the Former Policy’s definition section defined
“youth” as “people who have not fully reached an age of maturity – the range is
between 0 years of age and the early twenties – some full-time university
students can qualify as youth if they have continuously been in school.” The Former
Policy also did not define “at-risk youth” although there were references to “high-risk
youth” in the body of the Policy itself. As such, it appears that the Guidance broadens
the scope of the definition of youth and frees it from the limitations of an arbitrary
age restriction, which clearly is a positive development.
C. PURPOSES AND ACTIVITIES THAT BENEFIT YOUTH
1. Purposes that benefit youth
As is commonly understood, in order to become a
registered charity under the ITA, an organization must have clearly charitable
purposes, as set out in its governing documents, together with approved activities,
which are the means by which its purposes will be achieved. The proposed purposes
are assessed by CRA and must meet specific requirements in order to be approved
as charitable. For a detailed description on charitable purposes, reference
should be made to CRA’s recent Guidance on How to Draft Purposes for
Charitable Registration at http://www.cra-arc.gc.ca/chrts-gvng/chrts/pplyng/mdl/menu-eng.html,
summarized in our Charity Law Bulletin No. 318 available at http://www.carters.ca/pub/bulletin/charity/2013/chylb318.htm.
The Guidance differs from the Former Policy, in part, by continuously
referencing the four categories of charity listed below, especially when
providing examples of acceptable charitable activities in furtherance of each
of them.
Specifically, to be a registered charity, the Guidance
explains in paragraph 2 that an organization’s purposes must:
a) be
exclusively charitable
- to achieve this, the organization must fall under one or more of the
four categories of charity: 1) relief
of poverty; 2) advancement of education; 3) advancement of religion; and 4)
other purposes beneficial to the community in a way the law regards as charitable;
b) provide a public benefit
- this means its purpose must provide a measureable and useful
charitable benefit to the public or at least a sufficient segment of the
public; and
c) describe the scope of the organization’s activities
- the charity’s resources are only to be used for activities that
further the charitable purposes.
The organization’s purposes can exist to benefit youth or,
alternatively, to address and prevent the problems faced by youth. When
purposes benefit youth, any of the four categories of charity could apply.
However, when the purposes address youth problems, for instance substance
abuse, eating disorders, teen pregnancy, family conflict, suicide, depression
and juvenile delinquency, then the fourth category would likely apply.
2. Eligible beneficiaries
In some cases, not all people may qualify to receive
benefits from a registered charity whereas, in other situations, the whole
public may be eligible to receive the benefits. The term “eligible
beneficiaries” identifies those people who may qualify to receive the benefits
from the charitable purpose or from its respective activities. Some charities’
purposes may allow all youth to benefit while other charities’ purposes may
only function to permit particular youth to benefit. In the Former Policy,
while it was referenced therein, there was no specific section focused on “eligible
beneficiaries.” By contrast, the Guidance contains a separate section on the
issue of eligible beneficiaries, presumably meaning this is an issue being given
a greater emphasis by CRA.
The following are a few examples from paragraph 11 of the
Guidance related to the first (poverty), second (education) and third (religion)
categories of charity which restrict the youth permitted to participate in
order to achieve a particular charitable purpose:
· “relieving poverty by distributing school supplies to youth who
are poor”;
· “advancing education by operating a public school, subject to
applicable geographic, age, religious, or gender restrictions”; and
· “advancing a religious faith by operating a summer camp,
restricted to youth of that faith.”
To determine the eligible beneficiaries for the purposes
of the fourth category of charity (other purposes beneficial to the community),
an organization needs to consider whether the purposes generally benefit youth
or address and prevent problems faced by youth. If the purposes generally benefit
youth, then they should be open to all youth, whereas if the purposes are to
prevent youth problems, then they may restrict which youth can qualify when
that restriction is relevant to the purpose. The following are a few examples
from paragraph 12 of the Guidance addressing how purposes in the fourth
category of charity can restrict participation where they are focused on problems
faced by youth:
· “promoting health by providing counselling for youth who have
been victims of physical or sexual abuse”; and
· “addressing problems specific to aboriginal youth by providing
outreach and intervention programs.”
3. Activities – sufficient structure and focus
In paragraph 14, the Guidance states that the public
benefit that is delivered by a charitable purpose needs to be “a reasonably direct
result of the purpose and activities.” The public benefit cannot be vague and
must be attainable. An incidental activity that does not further the purpose
will not meet this public benefit requirement. While references to structure
and focus were made in the Former Guidance in the context of describing
specific types of youth organizations, the Guidance addresses this issue more
generally in a separate section in the first half of the document.
As described in paragraph 15 of the Guidance, an
organization must use “substantive evidence of a causal connection” to show
that an activity can provide a public benefit. This may be demonstrated when
an activity is structured and focused to address the identified youth problem.
The activity should involve some monitoring and teaching in order to show that
the activity is addressing the intended problem faced by youth.
Paragraph 17 of the Guidance then describes how an
organization can demonstrate structure and focus through:
· the activity’s form (e.g. structured group discussions);
· the communications between qualified individuals and youth (e.g.
making experienced adult supervisors available to counsel youth); and
· the youths’ roles and responsibilities in activities (e.g. allowing
youth to participate in supervisory roles in a monitored setting).
When the charitable purposes fall under the fourth
category and are restricted to particular at-risk youth, the Guidance explains
that other youth that are not at-risk can participate as role models and
helpers in order to provide structure and encourage the at-risk youth to
participate, as long as certain conditions are met. These conditions, set out in
paragraph 18, include:
· the activity should be focused on providing benefits to the
at-risk youth;
· the other youth should only be present because they help provide
benefits to the at-risk youth; and
· any benefits provided to the other youth must be incidental to
the benefits provided to the at-risk group.
The Guidance explains that there are a variety of
activities that could address or prevent problems faced by youth. A few
examples of activities from paragraph 19 are:
· “mediating disputes between youth and their family members and
others”;
· “developing anger management skills”; and
· “providing safe, supervised facilities for youth who would
otherwise be alone after school.”
D. OTHER TOPICS:
1. Advancement of education and youth
Although the Former Policy did not have a specific
“Advancement of education and youth” heading, it did discuss programs that
advance education and job skills training under its heading “Community youth
organizations.” However, the Guidance now stresses a “teaching or learning
component.”
In this regard, when the purpose involves the advancement
of education, the Guidance makes clear that the activities must be structured
and educational rather than focused on advancing a particular point of view.
The activities must have a teaching or learning component, including training,
plans of self-study and formal or informal instruction. It is not acceptable
to just provide youth with materials and have them teach themselves.The Guidance provides examples of acceptable
educational activities in paragraph 22, a few of which include:
· “teaching youth to read and write”;
· “specific career or job skills training”; and
· “teaching practical business training and experience (as part of
a structured learning program).”
The Guidance explains that the content of the activities
can be academic subjects or useful topics and skills, such as teaching
employment interview skills. Activities that are specific to youth and that
have the structured learning or teaching components are described in paragraph
23 as those that help “develop emotional and moral maturity, the ability to
effectively interact with others, teamwork, co-operation, good citizenship and
leadership skills.” An example, in paragraph 24, of an activity that advances
youth education is “a guided visit to a historical building that has a teaching
or learning component....” The Guidance makes clear that an activity without a
teaching or learning component is not permitted unless that activity is
secondary to a larger activity that has the learning and teaching components.
For instance, it would be acceptable to take the students on a day trip to
reward them for their good classroom behaviour.
2. Social or recreational activities
Social or recreational activities, such as youth dances
or movie nights, can also be charitable if they further a charitable purpose.
This is possible if the activities are structured to provide a charitable
benefit to the youth participants. For example, if the supervised dance is
part of a structured and focused plan to address the troubles of at-risk
youth. Some important factors in making this determination are listed in
paragraph 27 of the Guidance as being the degree of supervision, and the extent
to which the social activities actually further the charitable purpose. The
Guidance indicates, in paragraph 28, that when addressing problems like
substance abuse or delinquency, social or recreational activities are unlikely
to further the charitable purpose. As explained in paragraph 29, although
unstructured social or recreational activities may keep youth away from harmful
environments that trigger their problems, these unstructured activities are
only allowed if they are “ancillary and incidental” to the charity’s purposes.
3. Sports Activities
Sports activities in and of themselves are not charitable
purposes at common law.
However, the Guidance states that sports activities can further charitable
purposes that benefit youth when they improve self-esteem or prevent
addiction. However, in order to be viewed as an acceptable activity that
furthers a charitable purpose, the sports activity must be structured and
focused to address the youth problem. In this regard, the charity should have
evidence that there is a causal link between the sport activity and the
charitable benefit since participation by youth in sports on its own is not
charitable. For instance, it would be acceptable if the sport activity was
part of a structured program to prevent the misbehaviour of at-risk youth. The
aforementioned conditions for at-risk youth activities (see “3. Activities –
sufficient structure and focus” above) also apply to sporting activities.
4. Drop-in centres
Paragraphs 35 to 37 of the Guidance explain that drop-in centres
may have different charitable purposes that are each tailored to benefit
different groups of youth. For instance, a drop in centre can prevent
misbehaviour of at-risk youth through anger management skill training and also
prevent drug addiction amongst youth through peer support. A centre’s
activities must be structured, focused and designed to address or prevent youth
problems. Youth may also assist in the activities and decision-making
processes, such as planning fundraising activities. Centres often provide
counselling and/or life skills training with:
· a safe environment that prohibits violence and illicit
substances;
· adult supervision to help direct activities and deal with
conflicts or emergencies. The centres may work with social workers,
physicians, psychologists and conflict mediators; and
· participation with police, courts, schools or social services
that help youth.
The Guidance recommends that drop in centres use
screening processes or qualification standards to select who will work with the
youth, since this can be an effective way to demonstrate that activities are
structured, focused and aimed to address youth problems.
E. CONCLUSION
One aspect of the Guidance that is notable is CRA’s
frequent usage of the terms “structured” and “focused” in relation to evidencing
that a specific activity is actually achieving a charitable purpose that
benefits youth. This concept will be of great assistance to any organization
that is uncertain as to what CRA will be looking for in evaluating an
application for charitable status. As well, the Guidance does a good job of striking
the right balance between explaining what constitutes a charitable purpose to
benefit youth and what are appropriate activities to actually carry out in order
to achieve such a purpose. With the generous use of examples and relegating the
technical details to the footnotes, CRA has produced a helpful reference tool
for both practitioners and the sector in general in relation to organizations
that benefit youth.