'Preventing poverty' not a valid charitable goal, CRA tells Oxfam Canada

[Malthus]

They are attempting to enforce a distinction, yes. Whether or not this distinction is meaningful is certainly a topic for debate - I think they have a point, and it isn't a trivial one: when an organization enters the realm of politics it should be treated as a political entity and not a charitable one.

Let's say we agree with your proposition above.
It seems that the distinction they are actually making -- between prevention and alleviation of poverty -- is orthogonal to the distrinction between delivering services and engaging in political advocacy.  One can seek to alleviate poverty by advocating for poor relief payments or housing ("bad"), and one can seek to prevent poverty by running targeted educational clinics, free day care centers, or other things of a traditional charitable nature ("good").  Claiming the words of the mission statement are in themselves inherently political is rather bizarre and rather disturbing because it puts the government in the position of deciding what is (or is not) a worthy charitable cause.  If the goal is to keep charities out of politial advocacy, then put in place rules that bar such activity.  Sure there is a good size grey area, but the editing of mission statements doesn't fix that problem.

Also:  what the Baron says  ^

Huh? For tax (and other) purposes, governments worldwide  decide "what is (or is not) a worthy charitable cause" all the time. This is known as a charity's "charitable objects". Here is an example from the UK.

http://www.charitycommission.gov.uk/detailed-guidance/registering-a-charity/example-charitable-objects/

Review of the charity's charter is the traditional, and indeed most simple, method of dealing with this issue. Then, if it uses the money for another purpose, it can be nicked for breach of its charter.

I know nothing of US Tax Law, but allegedly it is the same there:

There are several requirements that must be met for a charitable organization to obtain 501(c)(3) status. These include the organization being organized as a corporation, trust, or unincorporated association, and the organization's organizing document (such as the articles of incorporation, trust documents, or articles of association) must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes. The organization must refrain from undertaking a number of other activities such as participating in the political campaigns of candidates for local, state or federal office, and must ensure that its earnings do not benefit any individual.[28] Most tax exempt organizations are required to file annual financial reports (IRS Form 990) at the state and federal level. A tax exempt organization's 990 and some other forms are required to be made available to public scrutiny.

The types of charitable organization that are considered by the IRS to be organized for the public benefit include those that are organized for:

Relief of the poor, the distressed, or the underprivileged,
Advancement of religion,
Advancement of education or science,
Erection or maintenance of public buildings, monuments, or works,
Lessening the burdens of government,
Lessening of neighborhood tensions,
Elimination of prejudice and discrimination,
Defense of human and civil rights secured by law, and
Combating community deterioration and juvenile delinquency.
A number of other organizations, including those organized for religious, scientific, literary and educational purposes, as well as those for testing for public safety and for fostering national or international amateur sports competition, and for the prevention of cruelty to children or animals, may also qualify for exempt status.

[Emphasis]

[grumbler]

They are attempting to enforce a distinction, yes. Whether or not this distinction is meaningful is certainly a topic for debate - I think they have a point, and it isn't a trivial one: when an organization enters the realm of politics it should be treated as a political entity and not a charitable one.

Let's say we agree with your proposition above.
It seems that the distinction they are actually making -- between prevention and alleviation of poverty -- is orthogonal to the distrinction between delivering services and engaging in political advocacy.  One can seek to alleviate poverty by advocating for poor relief payments or housing ("bad"), and one can seek to prevent poverty by running targeted educational clinics, free day care centers, or other things of a traditional charitable nature ("good").  Claiming the words of the mission statement are in themselves inherently political is rather bizarre and rather disturbing because it puts the government in the position of deciding what is (or is not) a worthy charitable cause.  If the goal is to keep charities out of politial advocacy, then put in place rules that bar such activity.  Sure there is a good size grey area, but the editing of mission statements doesn't fix that problem.

Also:  what the Baron says  ^

Huh? For tax (and other) purposes, governments worldwide  decide "what is (or is not) a worthy charitable cause" all the time. This is known as a charity's "charitable objects". Here is an example from the UK.

http://www.charitycommission.gov.uk/detailed-guidance/registering-a-charity/example-charitable-objects/

Review of the charity's charter is the traditional, and indeed most simple, method of dealing with this issue. Then, if it uses the money for another purpose, it can be nicked for breach of its charter.

I know nothing of US Tax Law, but allegedly it is the same there:

There are several requirements that must be met for a charitable organization to obtain 501(c)(3) status. These include the organization being organized as a corporation, trust, or unincorporated association, and the organization's organizing document (such as the articles of incorporation, trust documents, or articles of association) must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes. The organization must refrain from undertaking a number of other activities such as participating in the political campaigns of candidates for local, state or federal office, and must ensure that its earnings do not benefit any individual.[28] Most tax exempt organizations are required to file annual financial reports (IRS Form 990) at the state and federal level. A tax exempt organization's 990 and some other forms are required to be made available to public scrutiny.

The types of charitable organization that are considered by the IRS to be organized for the public benefit include those that are organized for:

Relief of the poor, the distressed, or the underprivileged,
Advancement of religion,
Advancement of education or science,
Erection or maintenance of public buildings, monuments, or works,
Lessening the burdens of government,
Lessening of neighborhood tensions,
Elimination of prejudice and discrimination,
Defense of human and civil rights secured by law, and
Combating community deterioration and juvenile delinquency.
A number of other organizations, including those organized for religious, scientific, literary and educational purposes, as well as those for testing for public safety and for fostering national or international amateur sports competition, and for the prevention of cruelty to children or animals, may also qualify for exempt status.

[Emphasis]

Huh?

The US does as Minsky suggests.  So does the UK.  Canada does not.  In the US, charitable organizations must be permanently organized as charitable organizations, just as the rule states, and must refrain from engaging in political activities as specified in the rules.  There is nothing in the IRS rules that would prohibit an organization from attempting to prevent poverty, so long as the other restrictions (no politics, no benefits to any particular individual) are met.

[Malthus]

Huh?

The US does as Minsky suggests.  So does the UK.  Canada does not.  In the US, charitable organizations must be permanently organized as charitable organizations, just as the rule states, and must refrain from engaging in political activities as specified in the rules.  There is nothing in the IRS rules that would prohibit an organization from attempting to prevent poverty, so long as the other restrictions (no politics, no benefits to any particular individual) are met.

The argument was about whether or not judging a charitable object by a charity's originating documents makes sense.

Claiming the words of the mission statement are in themselves inherently political is rather bizarre and rather disturbing because it puts the government in the position of deciding what is (or is not) a worthy charitable cause.  If the goal is to keep charities out of politial advocacy, then put in place rules that bar such activity.  Sure there is a good size grey area, but the editing of mission statements doesn't fix that problem.

All three nations do this. From the US example:

... the organization's organizing document (such as the articles of incorporation, trust documents, or articles of association) must limit its purposes to being charitable ...

Now, it may well be the case that the US has additional rules prohibiting "political activity" (as may Canada). This does not prevent the US from engaging in requiring "... the editing of mission statements", to limit US charities to ostensibly "charitable purposes".

It could well be that "preventing poverty" can be, in fact, a "charitable purpose" in the US. That I have no idea. It does not appear to be so from the description of "The types of charitable organization that are considered by the IRS to be organized for the public benefit", but that is not an exclusive list, and I'm no expert.

[alfred russel]

An ounce of prevention is worth a pound of cure, so I'm going to focus on poverty prevention. As charity starts at home, I'm going to focus on my own poverty prevention. No I am not poor, in fact I am stinking rich, but you can never be too careful, can you?

I do believe I deserve tax deductions, and any prosecutorial efforts regarding misappropriation of charitable funds are entirely misguided.

[Malthus]

Here is the "organizational test" under the IRS.

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Organizational-Test-Internal-Revenue-Code-Section-501(c)(3)

To be organized exclusively for a charitable purpose, the organization must be a corporation (or unincorporated association), community chest, fund, or foundation. A charitable trust is a fund or foundation and will qualify. However, an individual will not qualify. The organizing documents must limit the organization's purposes to exempt purposes in section 501(c)(3) and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that are not in furtherance of one or more of those purposes.  This requirement may be met if the purposes stated in the organizing documents are limited by reference to section 501(c)(3).

[Barrister]

There's no way in hell I'm going to start debating tax policy.

*slams door behind him*

[Razgovory]

They still have a valid point: "preventing poverty" is quite a generous fit-all-sizes thing open to all kinds of embezzlement-happy interpretations.

a) "Alleviating poverty" is not?

b) What does this have to do with not being a charity because it might help non-poor people?

dunno. Can't say I care much.

And that's why we need a welfare system.

[The Minsky Moment]

Huh? For tax (and other) purposes, governments worldwide  decide "what is (or is not) a worthy charitable cause" all the time. This is known as a charity's "charitable objects". Here is an example from the UK.

They are deciding what is "charitable" but not what is "worthy"

The former inquiry is essentially circular, as demonstrated by the US tax document you linked to, which rather amusingly says that in order to be a charitable organization, the organization's documents "must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes" The actual IRS code section you cited to just adds a level of obfuscation by replacing "charitable purpose" with the equally circular "exempt purpose"

This is basically Potter Stewart land (the US jurist who famously applied the "I know it when  I see it" test for defining obscenity).   The point here is that a charity is supposed to be about the general good; you can't set up a "charity" whose goal is something like "finance a vacation home for Malthus.". The same doc indicates that restrictions on political advocacy are handled under a different set of rules.  That is apparent given that one of the cited example of a permitted charitable purpose is "Lessening the burdens of government" which certainly seems at least "political" on its face as "preventing poverty".

[dps]

They are attempting to enforce a distinction, yes. Whether or not this distinction is meaningful is certainly a topic for debate - I think they have a point, and it isn't a trivial one: when an organization enters the realm of politics it should be treated as a political entity and not a charitable one.

Clearly, some line must be drawn, or our local socialist party could claim charitable status rather than the rather different rules applicable to political parties: after all, their goal is basically to end poverty (or at least, that is one of their goals).

You see this sort of mission creep in an extreme form when charities get involved in stuff like middle eastern politics.

There does need to be a distinction, but the distinction should be on actual or planned activities of the group, not mission statements.  If a group does not directly participate in the political process it is not a political organization.  And yes, even that is a swamp of interpretation.  It's still based on action.

Yeah, I agree with this.  The distinction being made by the CRA seems to be based mostly in semantics, not in actual differences between organizations that primarily provide aid to the poor, and those which mostly engage in political advocacy.  There also seems to be a whiff of targetting--at least, the article suggests that the Conservatives are going after organizations which take political positions the party doesn't agree with, while presumably ignoring similar levels of political activity by organizations which agree with the party's positions. 

[grumbler]

The former inquiry is essentially circular, as demonstrated by the US tax document you linked to, which rather amusingly says that in order to be a charitable organization, the organization's documents "must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes" The actual IRS code section you cited to just adds a level of obfuscation by replacing "charitable purpose" with the equally circular "exempt purpose"

The key there, I think is the words "limits" and "permanently."  "A charitable organization... [must be] charitable" is obviously purely circular if you ignore those.

[Ed Anger]

I give to the Human Fund.

[Malthus]

Huh? For tax (and other) purposes, governments worldwide  decide "what is (or is not) a worthy charitable cause" all the time. This is known as a charity's "charitable objects". Here is an example from the UK.

They are deciding what is "charitable" but not what is "worthy"

The former inquiry is essentially circular, as demonstrated by the US tax document you linked to, which rather amusingly says that in order to be a charitable organization, the organization's documents "must limit its purposes to being charitable, and permanently dedicate its assets to charitable purposes" The actual IRS code section you cited to just adds a level of obfuscation by replacing "charitable purpose" with the equally circular "exempt purpose"

This is basically Potter Stewart land (the US jurist who famously applied the "I know it when  I see it" test for defining obscenity).   The point here is that a charity is supposed to be about the general good; you can't set up a "charity" whose goal is something like "finance a vacation home for Malthus.". The same doc indicates that restrictions on political advocacy are handled under a different set of rules.  That is apparent given that one of the cited example of a permitted charitable purpose is "Lessening the burdens of government" which certainly seems at least "political" on its face as "preventing poverty".

It defines what "exempt purposes" are.

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exempt-Purposes-Internal-Revenue-Code-Section-501(c)(3)

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

I don't see this as "circular" at all.

Indeed, it is exactly the same exercise (albeit in perhaps different terms) as in Canada: an charitable organization's originating documents must disclose a tax-exempt "charitable purpose", which is defined in the legislation. This is the process of determining what is "charitable" for tax-exemption purposes, not what is "worthy".

The US legislation has three types of protection, accordong to the IRS website:

(1) A charity must have an "exempt purpose" in its originating docs - this is the test you appear to be complaining about in Canada - in the US it is called the "organizational test";

(2) A charity must be operated exclusively for one of these "exempt purposes" - the "operational test"; and

(3) A charity must not be an "action organization" - that is, must refrain from political lobbying.

http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-501(c)(3)-Organizations

Canada has much the same approach - a charity must be for "charitable purposes", and certain "political purposes" are specifically excluded.

http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-022-eng.html

[The Minsky Moment]

Malthus - the US organizational test is broad and vague and yes it is essentially circular.

The first exempt purpose is "charitable".  That is pure circularity.  It says charitable is "used" in "its generally accepted legal sense.".  But there is no such thing. The IRS regs indicate what is being referenced here is the "common law" definition of charitable, without further elaboration.  As you know, that is a very elastic concept, it would include English law going back to the Norman Conquest, the statutes and case law of all 50 states, federal case law and statute, treatises, hornbooks, restatements, and so on.  To reinforce the elasticity, there is a long list of purely illustrative purposes listed without limitation.

As I said, Potter Stewart land.

One thing is quite clear, however.  Under the US rules, it would not pass the laugh test to suggest that poverty prevention is not a valid charitable purpose, given the inclusive list.  Although the definition is broad and vague, it is that way to avoid precisely the kind of favorites picking nonsense that the Harper government is trying to pull here.

[Malthus]

Malthus - the US organizational test is broad and vague and yes it is essentially circular.

The first exempt purpose is "charitable".  That is pure circularity.  It says charitable is "used" in "its generally accepted legal sense.".  But there is no such thing. The IRS regs indicate what is being referenced here is the "common law" definition of charitable, without further elaboration.  As you know, that is a very elastic concept, it would include English law going back to the Norman Conquest, the statutes and case law of all 50 states, federal case law and statute, treatises, hornbooks, restatements, and so on.  To reinforce the elasticity, there is a long list of purely illustrative purposes listed without limitation.

As I said, Potter Stewart land.

One thing is quite clear, however.  Under the US rules, it would not pass the laugh test to suggest that poverty prevention is not a valid charitable purpose, given the inclusive list.  Although the definition is broad and vague, it is that way to avoid precisely the kind of favorites picking nonsense that the Harper government is trying to pull here.

I do not agree that the definition of "charitable purpose" is circular in the US. The US, as apparently most Western nations, require organizations to meet certain criteria in their enabling documents, and while that definition includes many activities I do not agree that this requirement is essentially circular, open ended, or meaningless. In fact, it provides the basis for determining the results of an audit - that the money goes to the actual purposes alleged in the originating documents (and not to some other purposes).

The expressed concern is that by adding "preventing poverty" to the originating docs, the charity would be allowed to legally expand its activities into areas traditionally seen as 'not charitable' and thus not eligible for tax treatment as a charity. I don't know whether this is right or wrong, but it is not, on its face, absurd.

[grumbler]

I do not agree that the definition of "charitable purpose" is circular in the US. The US, as apparently most Western nations, require organizations to meet certain criteria in their enabling documents, and while that definition includes many activities I do not agree that this requirement is essentially circular, open ended, or meaningless. In fact, it provides the basis for determining the results of an audit - that the money goes to the actual purposes alleged in the originating documents (and not to some other purposes).

I am not sure what you are arguing here.   Is someone arguing that the requirement of charitable organizations to be permanently dedicated to charitable activity, and that such activity be the only activity engaged in by the charity, is "circular, open ended, or meaningless?" If so, you are ready for them, I guess.

The expressed concern is that by adding "preventing poverty" to the originating docs, the charity would be allowed to legally expand its activities into areas traditionally seen as 'not charitable' and thus not eligible for tax treatment as a charity. I don't know whether this is right or wrong, but it is not, on its face, absurd.

What is absurd is the idea that adding to a phrase such as, say, "combating poverty" to "preventing and combating poverty" completely changes the nature of an organization, such that it was no longer charitable.  I simply don't see how one can come up with an exhaustive list of phrases that define charitable or non-charitable causes, and I think that the Harper government is silly to try. If an organization claims to "prevent poverty" by means that are not seen as charitable, then you can go after them, just as if they claim to "alleviate poverty" by those same measures.