Is Preventing Poverty Charitable?
Ask a random person on the street if an organization’s goal was to prevent poverty, would they be considered charitable and you would likely get a resounding yes. Ask Canada Revenue Agency however, and you will get the exact opposite answer. That’s exactly what happened to Oxfam Canada recently when they attempted to continue under the Canada Not-For-Profit Corporations Act, a process that all federally incorporated not-for-profit corporations must do by October 17th or face dissolution.
One may have trouble wrapping their mind around this decision. However, it all boils down to the application of different interpretations of the word ‘charitable’. When we think of a charitable organization, we think of an organization that helps people or makes the world a better place, basically does some sort of good. When Canada Revenue Agency refers to a charitable organization, they mean charitable at law. It is important to note that the term ‘charitable’ is not defined in any Canadian statute, so Canada Revenue Agency relies on court decisions to determine what is ‘charitable’. The courts have identified four categories of charity, those being: 1) relief of poverty, 2) advancement of education, 3) advancement of religion, and 4) certain other purposes that benefit the community in a way the courts have said is charitable.
Now you may be thinking preventing poverty clearly falls under the first category of charity, but like Oxfam Canada, you would be wrong. Again the issue boils down to semantics. Relief of poverty implies that the individual receiving the service is impoverished. For the prevention of poverty, the individuals receiving the service are not necessarily impoverished, i.e. a non- impoverished person could use the service to avoid ever being in poverty. For example, consider a soup kitchen that serves the poor. If that same soup kitchen opened its doors to everyone, they would simply be a restaurant with really bad business sense. Therefore who the individuals are that you are helping becomes paramount under the relief of poverty category and if that person isn’t in need then you are not charitable, at least according to Canada Revenue Agency.
From a technical point of view did Canada Revenue Agency make the correct decision in Oxfam Canada’s case? While we don’t have access to the details of their documents, based on the parameters that have been set out for Canada Revenue Agency, the basic answer is yes. Now whether those parameters are the correct ones is a whole other argument.
So how are organizations supposed to deal with Canada Revenue Agency when they essentially speak a different language? Thankfully there are charity lawyers that understand both sides and can act as an interpreter. Once we understand what your organization does or wants to do we can translate that into a form that Canada Revenue Agency is authorized to accept. It’s not an easy task, as many individuals and organizations who have tried to do it alone will attest, and it requires the skill and experience that we possess. And if Oxfam Canada’s situation proves anything, it’s that even the largest charities need some help.