In some situations, a registered charity may be asked to receive donations on behalf of another organization or cause. While this may seem like a good way to generate funds and reward donors with charitable contribution receipts, it can have serious implications for the charity.
A February 1, 2023 Technical Interpretation considered a charity that would collect funds, issue receipts, and then disburse the fundsto a qualified donee (a municipality). The municipality would then direct the fundsto a non-qualified donee. The charity’s intention was to assist a non-qualified donee (in this case, a non-profit organization) in a fundraising campaign by collecting funds and issuing receipts.
A charity may have its status revoked if the charity:
- carries on a business that is not a related business of that charity;
- fails to expend amounts in any taxation year on charitable activities carried on by the charity and by way of qualifying disbursements, the total of which is at least equal to the charity’s disbursement quota for that year; or
- makes a disbursement, other than
- one made in the course of charitable activities carried on by it, or
- a qualifying disbursement.
Please see the second part of the article in our next post.
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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