( Disponible en anglais seulement )
Canadians are concerned about the ongoing military conflict and humanitarian crisis in Ukraine. Donors and charities are looking for ways to help – fast.
Despite the urge to help quickly, Canadian donors should refresh themselves on the rules of giving to maximize their charitable impact and to avoid surprises later on. Canadian charities, too, must be careful to respond to the crisis in ways that do not put them offside their legal obligations.
Below is highlighted four assumptions that, on the surface, appear uncontroversial and even rather sensible. However, as we will uncover, the rules are more nuanced – and risks abound.
Assumption 1: “I will receive a tax receipt for my donation”
Not necessarily.
Only donations to “qualified donees” will be eligible for a donation tax receipt. Generally, a qualified donee is a charitable organization, public foundation or private foundation that is registered in Canada. Qualified donees also include certain other prescribed entities such as the United Nations Association of Canada and some of its agencies, such as the Canadian UNICEF Committee or UNHCR Canada.
While many reputable international relief and aid organizations are qualified donees, donors should check the Canada Revenue Agency’s (CRA) list of charities to confirm whether an organization is, in fact, a qualified donee.
Will donations of supplies (such as food, clothing, or medical equipment) to a qualified donee be eligible for a donation tax receipt? It depends on the qualified donee’s gift acceptance policy and if the fair market value of these items can be determined. Donors should contact the charity of their choice to confirm whether they will accept in-kind donations and whether they can issue a donation tax receipt for the items to be donated.
Assumption 2: “I/My charity can give funds directly to organizations in Ukraine”
Possibly. But be careful.
Generally, individuals are free to give funds to organizations that are doing humanitarian work in Canada and abroad, whether or not these organizations are qualified donees.
However, non-qualified donees will not be able to issue donation tax receipts. Giving to a non-qualified donees also carries risks, and donors should perform their due diligence before giving. Canadians need to be particularly vigilant that their dollars are not financing terrorism or furthering activities that are criminal or contrary to Canadian public policy.
Giving to a qualified donee, by contrast, means giving to an organization that has been approved by the CRA. Qualified donee status means the CRA has reviewed the charity’s purposes and activities and is satisfied that all the charity’s resources will be used for recognized charitable purposes, such as humanitarian aid or the relief of poverty.
Qualified donees themselves need to be especially careful when they give funds to non-qualified donees. As a general rule, registered charities can spend funds only on their own activities or on gifts to other qualified donees. The CRA will consider a transfer of funds to a non-qualified donee to be part of a charity’s “own activities” and a permitted activity only if the charity has direction and control over the non-qualified donee’s use of the charity’s resources. “Direction and control” can usually be proved through a detailed written agreement between the charity and the non-qualified donee. Any charity wishing to give funds to a non-qualified donee should obtain legal advice in preparing such an agreement.
Assumption 3: “My charity can carry out new activities to help people in Ukraine”
Not necessarily.
While the need may be urgent, registered charities need to check their purposes to make sure that they are broad enough in scope to carry out any proposed new programs and activities. A charity’s purpose is different from a mission statement and can usually be found in the charity’s constitution or other governing document.
For example, if a registered charity wishes to raise funds for and help resettle refugees from Ukraine, there is a good argument that the charity can do these things if the charity’s purposes are to relieve poverty by providing financial aid to refugees or to help resettle refugees by providing services and supports.
If the charity is not certain whether its existing purposes allow it to carry out new programs and activities, the charity should consult with legal counsel.
Assumption 4: “My charity can donate goods and supplies to people and partners in Ukraine”
Possibly. But be careful.
In limited circumstances, a registered charity can transfer in-kind goods to a non-qualified donee without having to provide ongoing direction and control over how those goods are used. At a minimum, the goods must be of 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 charitable activities.
All this assumes that the transfers of goods falls within the charity’s stated purposes. Charities should also keep good records showing, among other things, that the distributed goods were actually used for a charitable purpose.
Can a Canadian charity whose purpose is to provide medical assistance donate medical supplies like antibiotics or first-aid equipment to a non-qualified donee in a conflict zone without directing and controlling how these supplies are used or administered? Most likely yes: medical supplies are likely only to be used to treat the ill and the injured.
Can the same charity donate body armour, helmets, night vision goggles, or walkie-talkies to the same non-qualified donee? If there is a chance that such equipment could be used by the armed forces, then the charity cannot donate such items. In an armed conflict, it would be very difficult for a Canadian charity to satisfy itself that military grade equipment like body armour or helmets can only be used for civilian purposes.
When in doubt, charities should obtain the advice of an experienced charities lawyer and, if advisable, the opinion of the Charities Directorate.
Concluding thoughts
The situation in Ukraine is tragic. The needs are urgent and growing. Hope can be found in the ongoing efforts of Canadians and Canadian charities, who have stepped up in a big way to feed, clothe, house, resettle, and heal victims and displaced persons from the conflict.
The intent of this article is not to discourage these efforts or to discount the important work of many non-qualified donees, whose contributions have been helpful and necessary.
Rather, by questioning four assumptions, Canadian donors and charities are encouraged to consider carefully the legal framework of doing good when making their next donation or carrying out a new activity. Making informed choices today will help prevent surprises later on and, for charities, avoid putting their charitable status unnecessarily at risk.
So help Ukraine. And be thoughtful about how you do so.
If you have any questions about this article, about making or receiving a gift, about carrying out a new activity, or about changing your charity’s purposes, please contact a member of our Social Impact Group.
The situation in Ukraine is ongoing, developing, and changing day-by-day – and so are Canadian charities’ responses to the crisis. Subscribe today to Miller Thomson’s Social Impact Newsletter for further updates and commentary on Canadian charity law as it relates to Ukraine.
