The CRA has released an updated or “finalized” version of Guidance CG-032, Registered charities making grants to non-qualified donees today. As with all CRA guidance, it is subject to review and changes. We will be writing about and presenting the new rules, but here is a very high-level summary for those working in the charity sector.
Generally, we would suggest that most Canadian registered charities not use the new grant to grantee system except in exceptional cases and most charities would be far better off using the direction and control rules if they wish to provide resources to non-qualified donees.
There are many advantages of using the direction and control rules. Specifically, it provides much greater certainty and more flexibility in certain important circumstances. Also, CRA seems to be indicating that their position is that if you use direction and control that the new directed donation rules don’t apply. Don’t ask me how they got to that position, but it is another major benefit of the direction and control approach.
It is unlikely that many groups will wish to use both direction and control and the new grant to grantee rules as there are some differences between the two systems and keeping track of the use of two different systems for many groups will be much more complicated than just using one system.
If you will be using the grant to grantee system, then unfortunately, while the new CRA guidance is somewhat helpful, there is no question that there is much greater certainty when it comes to the direction and control rules as we have at least five court cases that deal with those rules and decades of experience.
In a few years, there may be greater certainty about the grant to grantee rules through court decisions or legislative changes, and we may have a different view. At the moment, we are finding that when we file a charity application that involves grants to grantees or put in a request to Client Assistance at CRA, if it involves direction and control, we get answers much more quickly than when it involves grants to grantees. It took CRA over a year to put out this revised guidance, and it appears they are still trying to grapple with many of the complexities of this new legislation.
Kudos to CRA for putting out the revised guidance; it is a very difficult task.
By Mark Blumberg, Blumbergs Professional Corporation
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