Canada Revenue Agency Issues New Guidance on Arts Activities and Charitable Registration

The CRA has now posted the final version of a new Guidance on arts activities which clarifies the requirements for charitable registration.

Background

On November 1, 2011, Canada Revenue Agency (CRA) released for consultation a draft Guidance on Arts Organizations and Charitable Registration under the Income Tax Act, inviting feedback from the public in January 2012. CAPACOA submitted comments in response to the CRA proposed Guidance on January 23, 2012. On March 14, CAPACOA also submitted an addendum to this brief, in order to support it with new findings from The Value of Presenting study. The CRA now issued the final Guidance, which clarifies the requirements for charitable registration.

The Outcome

The CRA responded favourably to four of ten specific recommendations in CAPACOA's submission. Although the distinction between presenters and producers isn’t made much clearer in the final guidance, some wording which may have prevented presenting organizations from obtaining (or from maintaining) charity registration was amended. Most importantly, the CRA made significant changes to the Art forms and styles appendix, so as to more explicitly open the door to multidisciplinary activities and culturally-diverse activities. All in all, the CRA proved to be responsive to comments made by the arts community, even though there would still be room for improvement in recognizing support to local artists as a public benefit that enhances an arts industry as a whole.

Arts organizations whose activities further charitable purposes and who are considering applying for charitable status should review the new Guidance. Those who are currently operating as registered charities should also review the Guidance to ensure that they are well-positioned to maintain their status.

A summary of the new Guidance is listed below (Background, Outcome and links courtesy of CAPACOA).

Previous and Related News Articles

Survey Results Support Submission to the Canada Revenue Agency

CAPACOA Provides Input on Charitable Registration for Presenters

CAPACOA Submits Brief on Tax Incentives for Charitable Giving

Reference number

CG-018

Issued
December 14, 2012

This guidance replaces Summary Policy CSP-A08, Arts, and Summary Policy CSP-A24, Artists.

Summary

Organizations that carry out arts activities may be eligible for charitable registration under the Income Tax Act if all their activities further charitable purposes.

Teaching or training artists, art students, or the public through sufficiently structured activities may further a charitable purpose under the second category of charitable purposes—the advancement of education.

Exhibiting, presenting, or performing artistic works are activities that may further a charitable purpose under the fourth category of charitable purposes—advancing the public’s appreciation of the arts.

Activities that enhance an art form and style within the arts industry for the benefit of the public may further a charitable purpose under the fourth category of charitable purposes—promoting the commerce or industry of the arts.

Activities that further the fourth category charitable purpose of advancing the public’s appreciation of the arts must satisfy two criteria: art form and style and artistic merit.

Art form and style: Art form means the field or medium in which an artist works, while style means the different disciplines or methods of expression within an art form. To meet the art form and style criterion, an organization must show a common or widespread acceptance of the form and style of art within the Canadian arts community.

Artistic merit: Artistic merit means the quality of an artistic exhibition, presentation, or performance. Once an organization has established common or widespread acceptance of an art form and style, it must be able to show that the quality of its exhibitions, presentations, or performances is sufficiently high to be considered charitable under common law.

Activities that further the fourth category charitable purpose of promoting the commerce or industry of the arts must satisfy the art form and style criterion and may need to satisfy the artistic merit criterion depending on the particular facts.

To be charitable, arts 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.