CRA to Update Business Numbers to Provide e-Services Starting in November 2018
On September 22, 2017, following an e-mail sent to certain stakeholders on July 21, 2017, the Charities Directorate of the Canada Revenue Agency (“CRA”) announced that, once the Charities IT Modernization Project (CHAMP) is implemented, registered charities will be able to use their business numbers, through the CRA’s “My Business Account” portal, to file their information returns online, as well as to update and manage their account information, check file status and received and manage their communications with the CRA. The announcement further states that, over the next few months and until October 2018, charities’ internal divisions sharing the business numbers of their head bodies will be assigned unique business numbers so they can access these online services. This process does not require any action from impacted charities, as their internal divisions will continue to operate under the governing documents currently on file with the CRA. More information is expected to be available on the Charities Directorate website soon.
CRA Releases New Guidance on Head Bodies and Internal Divisions
On September 22, 2017, the CRA published a new guidance, CG-028, “Head bodies and their internal divisions” (the “Guidance”), which outlines the CRA’s requirements for the charitable registration of head bodies and their internal divisions. For the purpose of the Guidance, a head body is a registered charity that has authority over its internal divisions, is resident in Canada, and was either created or established in Canada. The Guidance states that a head body’s governing documents must permit it to exert authority over its internal divisions by taking actions, such as appointing and controlling their boards, approving their budgets and creating them or closing them down. Although “internal division” is not defined under the Income Tax Act (“ITA”), the Guidance considers internal divisions to be branches, parishes, sections or other divisions of a registered charity that operate as extensions of and under the authority of the head body, further its charitable purposes, are not separately incorporated but rather operate under the head body’s governing documents and receive donations on their own behalf. Internal divisions have their own charitable numbers and are registered separately with the CRA from the head body but are subordinate to it. To register an internal division, the internal division must submit to the CRA a letter of good standing from the head body outlining the internal division’s relationship with the head body, together with the governing document that created or established the head body. The Guidance also provides information concerning requirements of head bodies and internal divisions after registration, as well as a helpful chart outlining the differences between registered charities, head bodies and internal divisions, and sample scenarios to understand whether or not an organization is an internal division.
Changes to CRA’s CG-014 CED Guidance
On September 22, 2017, the Charities Directorate of the CRA announced recent changes to the CG-014 “Community Economic Development Activities and Charitable Registration” (“CED Guidance”) to include exceptions to charitable activities aimed at improving socio-economic conditions in areas affected by a disaster. According to the new Appendix A, a disaster is “a hazard that overwhelms a community’s ability to cope and may cause serious harm to people’s safety, health, welfare, property, or the environment” and it can be a natural phenomenon or the result of human action. Accordingly, the area is presumed to be in need for two years after the date of the disaster, but the charity may continue to work in the area provided it shows continuing need. The new CED Guidance describes the ability of charities to support local small businesses and it provides a list of requirements for charities to show that the benefit the businesses receive is only incidental to the work of the charity.
New Webpage Outlining B.C. Societies Act Transition Process
On September 7, 2017, the CRA updated its website to include a new webpage outlining the transition process for societies to the British Columbia Societies Act, which came into force on November 28, 2016, as reported in our February 2016 Charity & NFP Law Update. The webpage states that B.C. societies must complete their transition to the new rules to become compliant with the Societies Act by November 28, 2018, failing which they will be dissolved. To complete the transition, societies must complete an online-only Transition Application and re-file their current constitution and by-laws with the Corporate Registry in electronic format.