Article XXI of the Canada–US Tax Convention allows us to make this happen. The legal analysis is that a 501(c)(3) qualifies as a registered charity pursuant to Article XXI which reads: “For the purposes of Canadian taxation, gifts by a resident of Canada to an organization which is resident in the United States, which is generally exempt from United States tax and which could qualify in Canada to receive deductible gifts if it were created or established and resident in Canada shall be treated as gifts to a registered charity;”.
However, Canadians cannot directly receive a tax benefit from donations to a 501(c)(3) charity unless they have U.S. source income. Rethink Charity Forward works with the CHIMP Foundation, a registered Canadian Charity (845528827 RR0001) to create donor-advised funds for non-Canadian charities that that are registered 501(c)(3) organizations. As a tax-exempt Canadian registered charity, CHIMP is able to facilitate cross-border grants composed of donor-advised funds. Since charities are not required to issue tax-receipts to other charities, this decision to only move charity-to-charity grants cross-border protects the Foundation from any disputes related to the issuance of charitable donation receipts to individual donors giving to non-qualified donees.
As a tax-exempt Canadian registered charity, CHIMP is able to facilitate cross-border grants composed of donor-advised funds. Since charities are not required to issue tax-receipts to other charities, this decision to only move charity-to-charity grants cross-border protects the Foundation from any disputes related to the issuance of charitable donation receipts to individual donors giving to non-qualified donees.
This seems to contradict the Canadian Income Tax Act:
According to the Income Tax Act, a registered charity can only use its resources (for example, funds, personnel, and property) in two ways, whether inside or outside Canada:
(1) on its own activities (those which are directly under the charity’s control and supervision, and for which it can account for any funds expended)
(2) on gifts to qualified donees
Neither of these scenarios apply to what CHIMP is doing. Maybe I’m missing something?
P.S. In case you were wondering why I’m digging deeper on this question, here is some context. I fully support donating to EA and RC Forward, but I recently read a number of problematic stories about the CHIMP Foundation (linked below). I’m curious what you / the team think of these allegations.
The missing link seems to be on what the Income Tax Act defines as a qualified donee. As mentioned, the Canada-US Tax Convention opens up US registered charities as qualified donees provided they are a 501(c)(3) in good standing with the IRS. Using the 501(c)(3) registration as the backbone of our due diligence package ensures that the work we are supporting in the US is generally exempt from tax and would reasonably be considered tax-exempt in Canada. However, this convention only allows us to facilitate partnerships with US based organizations, or organizations who have a fiscal sponsor that is registered as a 501(c)(3).
Related to CHIMP specifically, we’re not in a place to comment on the financials of a given charity, but we have built in a variety of measures to ensure 100% of our donors’ donations will be passed onto our partner charities, such as:
We make sure that all of the funds raised for our partner charities come to us in cheque form before being distributed to our partners. We do this to ensure that CHIMP has disbursed the exact amount that matches our internal records, and we provide unique tracking codes for our partners to ensure the cheques reach their intended destination, in full.
We also follow up with a confirmation email from our partners to ensure the cheque was able to be deposited with no issues. We also provide our full donor analytics to our partner charities so they can confirm the amounts raised match their distribution.
RC Forward independently covers 100% of CHIMP’s fees out of our own operational budget. These funds are raised with the sole focus of covering operations costs and cross-border fees, which allows us to guarantee that 100% of a donation goes to the intended high-impact charity.
While we are aware of the links provided above, we don’t feel well-placed to comment on CHIMP operations beyond the scope of our specific, well-documented arrangement. We have yet to encounter a formal reason to reconsider this collaboration and take great care in working with organizations verified by the CRA. John Bromley (CHIMP CEO) was introduced to us at EA Global in 2017 and he seemed genuinely interested in supporting EA. RC Forward and our beneficiary charities have yet to have an experience that suggests otherwise. We look forward to maintaining our organizational relationship.
Article XXI of the Canada–US Tax Convention allows us to make this happen. The legal analysis is that a 501(c)(3) qualifies as a registered charity pursuant to Article XXI which reads: “For the purposes of Canadian taxation, gifts by a resident of Canada to an organization which is resident in the United States, which is generally exempt from United States tax and which could qualify in Canada to receive deductible gifts if it were created or established and resident in Canada shall be treated as gifts to a registered charity;”.
However, Canadians cannot directly receive a tax benefit from donations to a 501(c)(3) charity unless they have U.S. source income. Rethink Charity Forward works with the CHIMP Foundation, a registered Canadian Charity (845528827 RR0001) to create donor-advised funds for non-Canadian charities that that are registered 501(c)(3) organizations. As a tax-exempt Canadian registered charity, CHIMP is able to facilitate cross-border grants composed of donor-advised funds. Since charities are not required to issue tax-receipts to other charities, this decision to only move charity-to-charity grants cross-border protects the Foundation from any disputes related to the issuance of charitable donation receipts to individual donors giving to non-qualified donees.
Thanks for the reply!
Everything makes sense up until this:
This seems to contradict the Canadian Income Tax Act:
Neither of these scenarios apply to what CHIMP is doing. Maybe I’m missing something?
P.S. In case you were wondering why I’m digging deeper on this question, here is some context. I fully support donating to EA and RC Forward, but I recently read a number of problematic stories about the CHIMP Foundation (linked below). I’m curious what you / the team think of these allegations.
The Globe and Mail—Inside The Charity Network That Has Helped Wealthy Donors Get Big Tax Breaks – And Their Donations Back
The Globe and Mail—Ottawa urged to tighten charity rules after multimillion-dollar tax break revelations
Monkey Business at Chimp Foundation: Part 1
Open Letter to Blake Bromley RE: Monkey Business at Chimp Foundation & Affiliated Charities
The missing link seems to be on what the Income Tax Act defines as a qualified donee. As mentioned, the Canada-US Tax Convention opens up US registered charities as qualified donees provided they are a 501(c)(3) in good standing with the IRS. Using the 501(c)(3) registration as the backbone of our due diligence package ensures that the work we are supporting in the US is generally exempt from tax and would reasonably be considered tax-exempt in Canada. However, this convention only allows us to facilitate partnerships with US based organizations, or organizations who have a fiscal sponsor that is registered as a 501(c)(3).
Related to CHIMP specifically, we’re not in a place to comment on the financials of a given charity, but we have built in a variety of measures to ensure 100% of our donors’ donations will be passed onto our partner charities, such as:
We make sure that all of the funds raised for our partner charities come to us in cheque form before being distributed to our partners. We do this to ensure that CHIMP has disbursed the exact amount that matches our internal records, and we provide unique tracking codes for our partners to ensure the cheques reach their intended destination, in full.
We also follow up with a confirmation email from our partners to ensure the cheque was able to be deposited with no issues. We also provide our full donor analytics to our partner charities so they can confirm the amounts raised match their distribution.
RC Forward independently covers 100% of CHIMP’s fees out of our own operational budget. These funds are raised with the sole focus of covering operations costs and cross-border fees, which allows us to guarantee that 100% of a donation goes to the intended high-impact charity.
While we are aware of the links provided above, we don’t feel well-placed to comment on CHIMP operations beyond the scope of our specific, well-documented arrangement. We have yet to encounter a formal reason to reconsider this collaboration and take great care in working with organizations verified by the CRA. John Bromley (CHIMP CEO) was introduced to us at EA Global in 2017 and he seemed genuinely interested in supporting EA. RC Forward and our beneficiary charities have yet to have an experience that suggests otherwise. We look forward to maintaining our organizational relationship.
Thanks for the response!