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Charitable donations to Ukraine: Four problematic assumptions

Thursday, March 17, 2022 @ 1:33 PM | By Stephen Hsia

Stephen Hsia %>
Stephen Hsia
Canadians are concerned about the armed conflict and humanitarian crisis in Ukraine. Donors and charities want to help — fast. Despite the urge to help quickly, Canadian donors should refresh themselves on the rules of charitable giving to maximize their impact and to avoid surprises later. Canadian charities, too, must take care to respond to the crisis in ways that do not put them offside their legal obligations. Below are four assumptions that appear uncontroversial. However, the rules are more nuanced — and risks abound.

Assumption 1: I will receive a tax receipt for my donation

Not always. Only donations to “qualified donees” will be eligible for a tax receipt.

Generally, a qualified donee is a charitable organization, public foundation or private foundation that is registered in Canada. Qualified donees also include certain prescribed entities such as the United Nations Association of Canada and some of its agencies, such as the Canadian UNICEF Committee or UNHCR Canada. Donors should check the Canada Revenue Agency’s (CRA) list of charities to confirm whether an organization is, in fact, a qualified donee.

Will donations of food, clothing or medical equipment to a qualified donee be eligible for a tax receipt? It depends on the qualified donee’s gift acceptance policy and if the fair market value of these items can be determined. Before making an in-kind gift, donors should contact the registered charity of their choice to confirm.

Assumption 2: I/my charity can give funds to organizations in Ukraine

Possibly. But be careful.

Generally, individuals are free to give funds to organizations of their choosing, whether or not they are qualified donees. However, non-qualified donees cannot issue donation tax receipts. Giving to non-qualified donees also carries risks. Canadians need to be vigilant that their dollars are not financing terrorism or furthering activities that are criminal or contrary to Canadian public policy.

Giving to a qualified donee, by contrast, means giving to a charity approved by the CRA. The CRA has reviewed the charity’s purposes and activities and is satisfied that the charity will use all its resources for recognized charitable purposes at law, such as humanitarian assistance or the relief of poverty.

Registered charities themselves need to be especially careful when they give funds to non-qualified donees. As a general rule, registered charities can spend funds only on their own activities or on gifts to other qualified donees. The CRA will consider a transfer of funds to a non-qualified donee to be part of a charity’s “own activities” if the charity has direction and control over the non-qualified donee’s use of the funds.

“Direction and control” can usually be proved through a detailed written agreement between the registered charity and the non-qualified donee. Any registered charity wishing to give funds to a non-qualified donee should obtain legal advice in preparing such an agreement.

Assumption 3: My charity can carry out new activities to help people in Ukraine

Not necessarily.

Registered charities need to check their purposes to make sure that they allow them to carry out new programs and activities. A charity’s purpose is different from a mission statement and can usually be found in the charity’s constitution or other governing document. For example, if a registered charity wants to raise funds for and help resettle refugees from Ukraine, there is a good argument that the charity can do these things if the charity’s purposes are to relieve poverty by providing financial aid to refugees or to help resettle refugees by providing services and supports.

If the charity is not certain whether its existing purposes allow it to carry out new programs and activities, the charity should consult with legal counsel.

Additionally, Canadian charities sending volunteers or staff to Ukraine need to be extremely careful about putting their personnel and others in harm’s way. If an activity’s risk of harm to staff, beneficiaries and anyone else outweighs the activity’s potential benefit, then the charity’s registration may also be at risk. Canadian charities also cannot support the armed forces of another country.

Assumption 4: My charity can donate goods and supplies to people and partners in Ukraine

Possibly. But be careful.

In limited circumstances, a registered charity can transfer goods in-kind to a non-qualified donee without having to provide ongoing direction and control over how those goods are used. At a minimum, the goods must be of a nature that they can reasonably be used only for charitable purposes; the recipient must understand and agree to use the goods only for specified charitable activities; and the charity can reasonably expect the recipient to use the goods only for those intended charitable activities. All this assumes that the transfers of goods falls within the charity’s stated purposes. Charities should also keep good records showing, among other things, that the distributed goods were actually used for a charitable purpose.

Can a Canadian charity donate body armour, helmets, night vision goggles, or walkie-talkies to a non-qualified donee in Ukraine? The charity cannot donate these items if there is any chance they could be used by combatants. In an armed conflict, it would be very difficult for a Canadian charity to satisfy itself that military grade equipment like body armour or helmets can only be used for civilian purposes.

When in doubt, charities should obtain the advice of an experienced charities lawyer and, if advisable, the opinion of the Charities Directorate.

Canadians and Canadian charities have stepped up in a big way to feed, clothe, house, resettle and heal victims and displaced persons from the conflict in Ukraine. The intent of this article is not to discourage these efforts or to discount the important work of many non-qualified donees, whose contributions have been helpful and much-needed. Rather, by questioning some basic assumptions about giving and helping, Canadian donors can avoid surprises later and charities can avoid putting their charitable status unnecessarily at risk.

So help Ukraine. And be thoughtful about how you do so.

Stephen Hsia is a charities, tax, trusts and estates lawyer with Miller Thomson LLP in Vancouver. He advises donors, families, not-for-profits, charities, foundations and businesses across Canada on gift planning, succession planning and governance and tax issues.

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