The Charities Directorate of the Canada Revenue Agency issued new guidance on July 26, 2012 for organizations that have or are seeking charitable registration under the Income Tax Act in Canada.
This guidance replaces Guide RC4143, Registered Charities: Community Economic Development Programs, issued on December 23, 1999.
Community economic development (CED) activities can be charitable when they further a charitable purpose.
Organizations that carry out CED activities may be eligible for charitable registration under the Income Tax Act if all their activities further charitable purposes.
Generally, CED activities involve improving economic opportunities and social conditions of an identified community.
CED activities may further charitable purposes that:
- relieve poverty,
- advance education; or
- benefit the community in other ways the law regards as charitable.
CED activities generally fall into five areas:
- activities that relieve unemployment;
- grants and loans;
- program-related investments;
- social businesses for individuals with disabilities; and
- community land trusts.
To be charitable, CED activities must be undertaken in a way that ensures that any resulting private benefit is incidental, meaning that it is necessary, reasonable, and not disproportionate to the public benefit that is delivered. If a private benefit is more than incidental, an organization can face sanctions or have its charitable registration revoked.
When CED activities are undertaken in areas of social and economic deprivation, it may be easier to show that a private benefit is incidental. Each situation will be evaluated in its own context.