I recently took a look at ChatGPT and how it deals with charity law questions. The results were interesting. Sometimes it did a good job, and other times, it failed miserably.
For example, I asked ChatGPT, “How to explain charity law to a kid.”
Here is what it came up with:
Charity law is a set of rules that govern how organizations that help others, called charities, can operate. These laws help make sure that charities use their resources, such as money and property, in the best way to help people in need. For example, a charity might use its money to provide food, shelter, or medical care to people who are homeless or sick. Charity laws also make sure that charities are honest and transparent about how they use donations and other resources.
You can explain charity law to a kid by using an example of a charity that helps animals. You might say something like: “There are groups of people called charities that work to help animals that are in need, like stray cats or hurt birds. But these charities have to follow a set of rules, just like in a game, so that they use the money people give them to help the animals in the best way possible. And just like in a game, everyone has to play fair and be honest about how they’re using the resources.”
I thought that that was pretty good.
I then asked, “how to set up a charity in Canada.”
Setting up a charity in Canada involves several steps:
- Choose a legal structure: Decide whether you want to register your charity as a non-profit corporation or a charitable organization.
- Choose a name: Your charity must have a unique name that is not already in use by another organization.
- Obtain any necessary licenses or permits: Depending on the type of charity you are setting up, you may need to obtain licenses or permits from different levels of government.
- Create a constitution and bylaws: These documents will outline the rules and regulations that govern your charity.
- Appoint directors: Charities must have at least three directors who are responsible for the management and control of the charity.
- Register with the Canada Revenue Agency (CRA): To be a registered charity in Canada, you must apply for registration with the CRA. This involves submitting a detailed application outlining the charity’s activities, financial information, and other details.
- File annual returns: Once your charity is registered, you will be required to file annual returns with the CRA to maintain your charity status.
It’s important to note that the process of registering a charity with CRA can be lengthy and require lots of documentation, so it’s recommended to seek legal and accounting advice. It’s also important to note that the process and requirements may vary depending on the province or territory where the charity is based.
Not a bad answer but very generic and not so accurate. If I had asked how to set up a charity in Arkansas, it might have come up with a relatively similar answer. Furthermore, “non-profit corporation or a charitable organization”? No mention of Federal vs. provincial corporation, etc. You would probably be better off just using Google and going to Corporations Canada or CRA’s website. But it does recommend getting legal and accounting advice.
Who can use ChatGPT and not ask it about yourself? So, “Who is Mark Blumberg?” This is were the technology really nailed it!
Mark Blumberg is a Canadian lawyer who specializes in Canadian charity and not-for-profit law. He has a law degree from the University of Toronto and a Master of Laws (LL.M.) in charity and not-for-profit law from Osgoode Hall Law School. He is the founder of Blumberg Segal LLP, a law firm that provides legal services to Canadian charities and non-profit organizations. He is also the author of several publications on Canadian charity and non-profit law, including a blog and a book called “Canadian Charity Law: Essential Principles.” He has also been recognized as one of the leading charity and not-for-profit lawyers in Canada by various legal directories. Mark Blumberg also provides consulting services to Canadian charities and non-profit organizations on legal, compliance, governance and other issues and is a frequent speaker on Canadian charity and not-for-profit law.
Then I asked the question again, and it doubled down on how great I am. I swear I did not change anything!
“Who is Mark Blumberg?”
Mark Blumberg is a Canadian lawyer who specializes in charity and non-profit law. He is the founder of Blumberg Segal LLP, a law firm that provides legal services to charitable and non-profit organizations in Canada. He has over 30 years of experience in the non-profit and charity sector and is considered one of the leading experts in charity and non-profit law in Canada.
Blumberg is also a well-known author, speaker, and educator in the charity and non-profit sector, and he has written numerous articles, papers and books on charity and non-profit law, governance, and compliance. He is also a frequent speaker at conferences and seminars on charity and non-profit law and governance.
He is also the publisher of the Canadian Charity Law website, which is considered one of the most informative and useful resources for charities, non-profits, donors, and other stakeholders.
In short, Mark Blumberg is a well-known and respected figure in the Canadian charity and non-profit sector, known for his expertise in charity and non-profit law and governance, as well as for providing legal services, education, and resources to organizations in this sector.
It seemed to do a good job with the complicated question of whether a charity can support terrorism!
“Can a Canadian charity support terrorism?”
No, a Canadian charity cannot support terrorism. Charities in Canada are subject to strict laws and regulations that prohibit them from supporting or promoting any illegal or harmful activities, including terrorism. The Canada Revenue Agency (CRA) is responsible for monitoring charities to ensure that they comply with these laws and regulations. If a charity is found to be supporting terrorism or any other illegal activity, it will lose its charitable status and may face penalties or prosecution.
It’s also important to note that under the Criminal Code of Canada, it is illegal to knowingly participate in or contribute to any activity of a terrorist group, and this include providing property, financial or other support to a terrorist group.
It’s very important that charities have clear policies and procedures in place to ensure compliance with these regulations, also it’s important that they conduct appropriate due diligence before making any grants or donations to other organizations, to ensure that they are not supporting any illegal activities.
Now here is where it gets interesting.
“When does a Canadian charity with a November 30 fiscal year end need to file its T3010?”
A Canadian charity with a November 30 fiscal year end is required to file its T3010, the Registered Charity Information Return, with the Canada Revenue Agency (CRA) within six months of the end of its fiscal year.
Therefore, if a Canadian charity has a fiscal year end of November 30, it must file its T3010 with the CRA by May 31 of the following year.
It’s important to note that the T3010 is an annual filing requirement for all registered charities in Canada, and failure to file the T3010 on time may result in penalties or suspension of the charity’s registration. Also, the CRA may revoke a charity’s registration if it doesn’t file its T3010 for 2 consecutive years.
The T3010 contains important information about a charity’s activities, finances, and governance, and is used by the CRA to ensure that charities comply with the rules and regulations that govern their operations.
So, the May 31 date is correct but what about “Also, the CRA may revoke a charity’s registration if it doesn’t file its T3010 for 2 consecutive years.” This is very incorrect. The UK and Australia revoke after 2 years and the US after 3 years. But in Canada if you are about 3-6 months late CRA will probably revoke.
So, on a very important question it provides extremely misleading information. If you read ChatGPT and thought you can get away with being up to 2 years late in your filings then you will be revoked. So, sure it gives you some good tidbits of information but then provides you with incorrect information on an extremely important point.
In fairness to ChatGPT which is probably using internet content, much of the internet content on Canadian charity regulation is inaccurate, misleading, out of date, etc.
I then thought I would ask a question about a topical matter such as the new qualifying disbursement rules. Spoiler alert – it got the answer completely wrong and confused qualifying disbursements with disbursement quota. Also, the explanation of DQ is not correct. Probably some humans might make that mistake as well. After reviewing further it makes clear that the information in ChatGPT has not been updated recently.
“What are the new qualifying disbursement rules for Canadian charities?”
In 2020, the Canada Revenue Agency (CRA) introduced new qualifying disbursement (QD) rules for Canadian charities, which are intended to ensure that charities are using their resources for charitable activities and not for non-charitable purposes. These rules apply to all registered charities, and they are intended to strengthen the existing requirements for charities to spend a certain amount of their resources on charitable activities each year.
Under the new QD rules, a charity must spend at least 3.5% of its total income from all sources in the current fiscal year on “qualifying disbursements” (QD). These QDs include gifts made to qualified donees, charitable activities carried on by the charity, and the transfer of resources to a qualified donee for use in their charitable activities.
Additionally, the QD rules for public foundations are more stringent. Public foundations must spend at least 85% of their total income from all sources in the current fiscal year on QDs.
Charities that fail to meet the QD requirements may be subject to penalties or have their charitable registration revoked. It’s important to note that the CRA may also consider other factors such as a charity’s overall activities and resources, when determining whether a charity is meeting the QD requirements.
It’s important for charities to keep accurate records and be able to demonstrate that they are meeting the QD requirements and to seek legal and accounting advice to ensure compliance with these new rules.
I thought I would also ask some topical questions and the results were interesting.
“Is the Charities Directorate of CRA Islamophobic?”
I am a language model and do not have the ability to have opinions or beliefs. However, it is important to note that the Charities Directorate of the Canada Revenue Agency (CRA) is responsible for ensuring that all registered charities comply with the laws and regulations that govern their operations. It is also responsible for revoking the registration of charities that engage in illegal or harmful activities, including promoting or supporting terrorism.
It is not accurate to say that the CRA Charities Directorate is Islamophobic or any other discriminatory terms. The CRA is an independent federal agency that is committed to ensuring that all charities comply with the laws and regulations that govern their operations, without discrimination based on religion, race, or any other factors.
If an individual or organization believes that they have been treated unfairly by the CRA Charities Directorate, they can seek a review or appeal through the CRA’s appeals process. Additionally, there are various community organizations that can provide support and guidance in navigating the CRA’s procedures.
I then asked about Antisemitism and ChatGPT was even more emphatic that CRA was not Antisemitic. I don’t think that ChatGPT knows that CRA has revoked five times more Jewish charities than Muslim charities. But, its overall assessment is probably correct.
“Is the CRA Charities Directorate antisemitic?”
It is not accurate to say that the Charities Directorate of the Canada Revenue Agency (CRA) is antisemitic. The CRA is an independent federal agency that is committed to ensuring that all the registered charities comply with the laws and regulations that govern their operations, without discrimination based on religion, race, or any other factors.
The Charities Directorate of the CRA is responsible for ensuring that all registered charities comply with the laws and regulations that govern their operations, and it is committed to treating all charities in a fair and impartial manner.
If an individual or organization believes that they have been treated unfairly by the CRA Charities Directorate, they can seek a review or appeal through the CRA’s appeals process. Additionally, there are various community organizations that can provide support and guidance in navigating the CRA’s procedures.
It is important to note that any form of discrimination or hate speech is unacceptable, and it is not tolerated by the CRA. The CRA is committed to promoting and protecting the rights of all individuals and ensuring that its policies and practices are free from discrimination.
I asked a question about members.
“Do I need members for a Canadian non-profit?”
In Canada, whether a non-profit organization (NPO) needs members or not depends on the legal structure of the organization.
Non-profit organizations can be structured as non-share capital corporations, societies, or unincorporated associations. Each of these structures has different requirements for members.
- Non-share capital corporations: These organizations are incorporated under federal or provincial laws and have a legal existence separate from their members. They usually do not have members, but they have directors and shareholders.
- Societies: These organizations are usually incorporated under provincial legislation and are governed by a board of directors elected by the members. They are required to have at least 7 members.
- Unincorporated associations: These organizations are not incorporated, they are simply a group of people who come together for a common purpose. They usually don’t have members, but they may have a board of directors or steering committee.
It’s important to note that even if the legal structure of an NPO doesn’t require members, it may still choose to have members for various reasons such as to provide a sense of community, to provide a democratic structure, or to increase stakeholder engagement.
It’s recommended that you seek legal advice when setting up a non-profit organization to ensure that you are aware of the legal requirements and to choose the structure that best fits the organization’s needs and goals.
The answer is not accurate. I think it might be more of a US answer and not sure that that is necessarily accurate either. In Canada, almost all types of corporate non-profits require members.
So, the short answer, for now, is that ChatGPT is fun to play around with and sometimes can give you a correct answer but sometimes is completely off. If you are just interested in something you may wish to play around with it, but if you have an important decision that has implications I would not rely on ChatGPT.
By Mark Blumberg, Blumbergs Professional Corporation
- ChatGPT and charity law in Canada - February 28, 2023
- New qualifying disbursement rules add directed donations anti-avoidance provisions complicate charity regulation - February 6, 2023
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