On August 27, 2013 the Canada Revenue Agency (“CRA”) released CG-021, a new Guidance that sets out CRA’s interpretation of the law pertaining to the promotion of health and charitable registration. Both existing health care organizations that are registered as charities, as well as health organizations that are considering charitable registration, should review the Guidance carefully. The Guidance replaces a number of previously-released guidances and policy statements on different aspects of the promotion of health and charitable registration.
CRA states that to be charitable and eligible for registration, a purpose of promoting health and the activities conducted in furtherance of this purpose must meet the following criteria:
- they must directly prevent or relieve a physical or mental health condition through the provision of effective health care services or products to eligible beneficiaries;
- the health services provided must meet specific standards for effectiveness and quality and safety;
- the health services must also be offered to the public as a whole or a sufficient segment of the public; and
- the health services must not confer an unacceptable private benefit.
CRA states that “effectiveness” is the benchmark for determining whether the service or product delivers a sufficient charitable public benefit. This refers to the efficacy of the product or service in reducing or eliminating symptoms or preventing injury or loss. Quality and safety relate to existing standards in the Canadian health care system and those that normally apply to health services and products. The Appendices attached to the Guidance deserve particular attention as they clarify the factors considered for compliance with the effectiveness and quality and safety requirements.
CRA confirms that services or offerings that are funded under the Canada Health Act or covered by a provincial or territorial medical insurance plan within Canada will meet CRA’s standards for effectiveness, though not necessarily for quality and safety.
The Guidance explains the criteria for assessing these requirements with respect to purposes that fall within the following groups:
- core health care, which includes the diagnosis and treatment of health conditions through medical services, equipment, infrastructure and in-patient or out-patient services;
- supportive health care, which relates to purposes and activities that provide health-related support, such as extra comfort items, assisting with the delivery of health care services or promoting access to various support and information programs;
- protective health care, which captures health-related emergency services, such as ambulance, paramedic, lifesaving or fire-fighting services; and
- health care products, which are products for the prevention or relief of health conditions that minimize serious threats to survival and health or respond to large-scale emergencies are deemed to promote health.
The Guidance also suggests that complementary or alternative health care such as mind-body techniques, manipulative and body therapy, traditional medicine, spiritual healing, natural health products and certain medical services can be considered to promote health as long as they meet the effectiveness and quality and safety requirements.
Similarly, initiatives encouraging and facilitating physical fitness and wellness may be considered to promote health. CRA states that the facilities, programs and activities used to encourage and facilitate physical fitness must always be designed to develop general physical fitness directly, as opposed to doing so indirectly or as a by-product, and be available to the general public (not being limited based on skill level or unduly exclusionary participation costs). Organizations will be expected to demonstrate the existence of a direct link between the purpose of the program and the activities they offer, and that the effectiveness and quality and safety requirements have been satisfied.
CRA states that awareness-raising initiatives are generally not considered charitable activities since they do not provide sufficient charitable benefits to the public. However, they can be considered to promote a charitable health purpose if they satisfy the criteria of content, audience and distribution set out by the Guidance. In terms of content, the information must be “unbiased, factual, sufficiently detailed” and must encourage the audience to take certain actions or adopt specific behaviours. The audience targeted must not only be receptive to the information, but also be reasonably expected to act upon the information provided. With respect to distribution, it is not sufficient to merely make the information available to the public. Instead, dissemination is required to be “active and targeted”.
CRA notes finally that providing medical clinics can be a charitable activity when services or products are made available to the public at large or to a restricted category of eligible beneficiaries that can be justified by the charitable purpose of the project. Particular attention should be given to avoiding the provision of “unacceptable private benefit” such as the payment of salaries and wages at rates exceeding fair market value, unnecessary expenses and the reliance on services, materials or facilities provided by third parties. Specific guidelines for the provision of health care services in underserviced or underprivileged areas and for the charging of fees are also made available.
The Guidance also provides additional information pertaining to health-related activities that further other charitable purposes, namely the relief of poverty as well as the advancement of education and religion, which are also expected to comply with the effectiveness and quality and safety requirements in order to qualify as charities under the Income Tax Act.