Is Preventing Poverty Charitable?

September 4, 2014 Posted by Jessica Shofler in Board, Director Duties, News, Nonprofits

According to the Canada Revenue Agency (CRA), the answer is No. CRA recently told Oxfam Canada that its mission to prevent poverty was too broad in that it could benefit people who are not already poor. The review was part of a standard filing to renew Oxfam Canada’s nonprofit status as required under a Canadian law passed in 2011.

CRA warned Oxfam Canada that “relieving poverty is charitable, but preventing it is not.” Oxfam Canada conceded and changed “prevent” to “alleviate” in its mission. But the organization’s executive director called it an “absurd conversation” and promised that their programs and activities have not changed despite the revised mission statement.

A representative of CRA maintained that charitable activities still include teaching money management, budgeting, and other life skills that could lead to the prevention of poverty.

One of Canada’s leading newspapers, The Globe and Mail, reports that the debate reflects the deteriorating relationship between the government and some parts of Canada’s charitable sector due to certain groups’ criticism of the government’s programs and policies, especially on the environment. The list of critics includes Oxfam Canada, Amnesty International Canada, and Canada Without Poverty.

A corporation’s Articles of Incorporation effectively limit the activity the organization may undertake. In particular, it may not conduct any activity that can’t be described by the corporation’s statement of purpose in its Articles. In addition, substantially all of an exempt organization’s activity and expenditures must be in furtherance of the purpose it provided to the IRS in its exemption application. Deviation from this purpose – even if the new activity would clearly qualify as tax exempt – can result in loss of exemption as well as other penalties (including penalties payable by board members).

Do your organization’s programs and activities fall within the purposes it set forth in its Articles of Incorporation and exemption application?

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

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