Verifying Legitimate Charities
Oct 23rd, 2009 by July Ono
I receive a fair amount of email from people asking me to support this or that charity. Due diligence is due diligence whether you are researching real estate investments or charities. One of my first due diligence tasks is to Google the charity. My second task is to Google the Federal Charities Directorate or to go their website at http://www.cra-arc.gc.ca/charities/ and type the name of the charity in their search bar. All legitimate charities have a Federal charitable number that is 9-digits long followed by RR0001. It looks like this: 123456789RR0001.
The following excerpt is taken from an article in The Toronto Star newspaper so you can understand how charities work:
“One of the challenges in regulating charities is that they fall between federal and provincial law. The federal government operates the Charities Directorate, part of the Canada Revenue Agency. Charities are tax exempt and can issue federal tax receipts to donors. Provincial authorities, usually through the Public Guardian’s office, also have the power to step in and take a charity to court if it is doing something wrong. The guardians across Canada rarely take action. The Star found the primary regulator, the federal Charities Directorate, is virtually powerless to deal with problem charities. To begin, tax law forbids it from warning the public about bogus or wayward charities. The directorate, which is part of the Canada Revenue Agency, treats charities the same way the taxman treats personal taxpayers. So, even when auditors have found a charity is doing little or no good work at all they cannot tell the public. Each year about 800 to 1,000 charities are audited and half are told they have done something wrong, but the public can’t find out, even if it would be of major importance. Kevin Donovan can be reached at 416-869-4425 or charity@thestar.ca”
This excerpt from The Earth Times posted August 10, 2009:
“Registered charities in Canada perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates registered charities through the Income Tax Act and is committed to ensuring that charities operate in compliance with the law. Where a registered charity is found not to comply with its legal requirements, the CRA may apply monetary penalties or may suspend or revoke the charity’s status under the Income Tax Act.
The CRA is reviewing all tax shelter-related donation arrangements (for example, schemes that typically promise donors tax receipts worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, go to the CRA’s Tax alert Web page at www.cra.gc.ca/alert. For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at www.cra.gc.ca/charities.
Contact: Canada Revenue Agency, Noel Carisse, Media Relations, 613-952-9184.”
To read the full article, http://www.earthtimes.org/articles/show/the-canada-revenue-agency-revokes,921485.shtml.
Under the Canada Income Tax Act Article 188.1 Undue Benefits explains what does not qualify as a charitable deduction.
There are some 80,000+ charities in Canada. It is impossible for auditors to review all these charities on a timely basis and can take up to 7 years to stop a fraudulent charity. It is up to you and your due diligence to determine where you wish to donate your hard earned monies.
