Canadians are concerned about the ever-widening conflict in the Middle East, as well as the escalating humanitarian crisis in Iran and across the region.

The desire to help is strong, particularly among Canadians with families in or ties to the affected countries.

Before acting, Canadian donors and organizations need to exercise caution. The current conflict is fraught with risk – as is giving in a time of war.

Canadian registered charities looking to help, too, need to stay up to date not just on the situation on the ground, but also on the latest rules here at home. Being offside of these rules may result in deregistration.

Below we highlight four high-risk legal traps that could ensnare unwary Canadian charities, even those with the best of intentions.

1. Can my charity give directly to a foreign organization?

Canadian charities can transfer funds or otherwise make their resources available to other qualified donees, that is, other registered charities and other prescribed entities.

Charities, however, need to be careful when they give funds or resources to non-qualified donees – entities that have not been pre-vetted by the Canada Revenue Agency (CRA) as being formed and operated for exclusively charitable or public purposes.

When giving to non-qualified donees, charities need to navigate through and comply with a number of rules and restrictions. For example:

  • Charities can generally make their resources available to non-qualified donees in one of two ways. Under the “own activities” approach, a charity could deputize the non-qualified donee as the charity’s agent to carry out the charity’s own activities. Here, the charity must exercise direction and control over the agent’s use of the charity’s resources at all times. Alternatively, Canadian charities could make a qualifying disbursement to non-qualified donees. In high risk situations, both these approaches require charities to adopt various accountability measures, including but not limited to due diligence, monitoring, and reporting requirements.
  • Charities may never use their resources to support the armed forces of another country, whether directly or indirectly.

In our experience, charities are often faulted on audit for transferring resources to non-qualified donees without having the necessary accountability measures or hallmarks of direction and control in place. Any charity wishing to give funds to a non-qualified donee involved in the current conflict should obtain legal advice before doing so.

2. Can my charity raise funds for, or accept gifts earmarked for, a foreign organization?

Tax rules introduced in 2022 prohibit Canadian charities from soliciting or accepting “directed” gifts where a condition of the gift is that the charity “re-gift” it to a non-qualified donee.

The CRA is deeply concerned about charities acting as “conduits” for non-qualified donees. Charities that fundraise for or accept directed gifts may have their charitable status revoked.

The CRA has advised that, to avoid concerns about directed giving, charities should retain authority over their resources (including donor funds) and clearly communicate this message to their donors on their donation pages and in fundraising appeals.

Charities receiving or entertaining a directed gift from a donor will need to decline such gifts or consult legal counsel on alternative ways to structure the donation. One possibility is for the charity to accept the gift but exercise direction and control over how the non-qualified donee recipient uses the charity’s funds, under the “own activities” approach, described above.

3. Can my charity carry out new activities to help in the conflict?

Canadian charities can only carry out activities that are consistent with Canadian law and with the purposes set out in the charity’s formal governing documents.

Charities wishing to embark on new programs and activities must first check their existing purposes to make sure that they are worded broadly enough to permit those new programs and activities.

For instance, a charity whose purposes include relieving poverty by providing financial assistance and services to refugees will be able to help persons and families displaced by the current conflict. A church whose purposes include advancing religion through community outreach programs might also be able to conduct the same activity; it depends on the charity’s exact purposes, and a legal review may be required.

If a charity’s purposes are not framed widely enough to capture a desired activity, charities can now amend their purposes formally without the CRA’s pre-approval, so long as they send a copy of their updated purposes and a revised statement of activities to the CRA.

There’s a catch. Because CRA pre-approval is no longer needed, charities need to be careful and ensure that their new purposes and activities are indeed charitable at law, lest they face questions or challenges from the CRA in the context of an audit. 

Charities looking to conduct new activities overseas during the current conflict also need to exercise appropriate caution. Beyond the obvious risks of injury and to life, if a charity plans to send staff or volunteers into harm’s way, the CRA will consider these plans in determining whether the charity is, in fact, providing a substantial, net public benefit. If an activity’s harm outweighs its benefit, the charity could face penalties and possibly revocation.

4. Can my charity donate goods and supplies to foreign organizations operating in conflict zones?

Whether a charity can donate in-kind goods to non-qualified donees operating on the front lines depends on the nature of those goods.

In limited circumstances, charities can transfer goods to a non-qualified donee without needing to exercise direction and control over how those goods are used (under the “own activities” approach) or without having to adopt extensive accountability measures (under the qualifying disbursement rules).

At a minimum, transferring goods must fall squarely within a charity’s purposes; the goods must be of such a nature that they can reasonably be used only for charitable purposes; the recipient must understand and agree to use the goods only for specified charitable activities; and the charity can reasonably expect the recipient to use the goods only for those intended activities.

Charities should also keep sufficient records showing that the non-qualified donee actually used the donated goods in furtherance of the charity’s charitable purpose(s).

For example, can a disaster relief charity donate first-aid kits to a non-qualified donee operating in areas hit by airstrikes? Likely yes: medical supplies are likely only to be used to treat the ill and the injured. The risk needs to be considered, however, that such supplies will be used by armed forces of another country. If that was the intended use, the transfer of the kits to the armed forces could be challenged.

Before donating any good or supplies, charities should obtain the advice of an experienced charities lawyer.

Concluding comments

The unfolding conflict across the Middle East is deeply troubling. The humanitarian need is clear and growing, as is the desire to help. The fog of war is also thick.

If your charity is looking to carry out new activities or to support foreign organizations involved in the conflict, it should do so thoughtfully, not impulsively. We encourage you to speak to a member of our Charities and Non-Profits Group, who would be pleased to assist your organization.