In August 2017, the Canada Revenue Agency ("CRA") updated its Guidance CG-014 on community economic development ("CED") activities and charitable registration. There were a number of updates to the Guidance, but the most significant was the inclusion of the statement that charities are now able to support, on a more long-term basis, the efforts of businesses that are helping to rebuild communities affected by disaster.

Prior to these changes, CG-014 focused on charities providing relief, in the immediate aftermath of disasters, in the form of distributing food, water, medical supplies, and other needed basics of life. The updated Guidance now defines "disaster relief" as providing relief during the period immediately following a disaster and recovery assistance thereafter.

The widening of this definition and the specific changes to the Guidance effectively expand the criteria that determines whether a CED activity is considered charitable. CRA cites as a reason for the updates the need for resources in communities that have recently faced a disaster and the need not only to repair impacted communities, but to prevent further devastation as well. The inclusion of language focussed on the rebuilding of businesses in affected communities illustrates the increased importance that CRA, and government agencies as a whole, are placing on areas impacted by disasters. The devastation this year from hurricanes in the United States and Latin America, and flooding and monsoons in South Asia, to name only a few of the catastrophic events that occurred around the world, as well as the subsequent government spending on relief efforts, exemplify how disaster relief has continued to be at the forefront of social discourse.

It is important to note that CG-014 now sets out requirements for businesses to qualify for funding from charities. CRA states that the overarching goal in this regard is to restore businesses so that they can provide goods, services, and employment to residents of the affected area. According to the Guidance, it will be presumed that support for businesses is needed for a period of two (2) years following a disaster. As stated in the updated Guidance, "the need for social and economic development to improve socio-economic conditions and prevent community deterioration can usually be presumed in a disaster area for two years after the date of the disaster." Furthermore, CG-014 provides guidelines for organizations to have processes in place to ensure that requirements for funding – which, for example, can be in the form of donations or interest-free loans – are met. When money or loans are provided, CRA states that there must be a reasonable prospect that the business will be restored by the funds (either alone or when combined with funds from other sources). Among the other qualifications, the funds must be available to all small businesses in the disaster area, the funds must be used for expenses directly related to the business resuming operations in the affected area, and there must be a reasonable prospect of the businesses being restored by the funds provided.

Given the number of criteria in the Guidance, and the fact that relief is only presumed to be required for a period of two (2) years following a disaster, it will likely be difficult for disaster relief charities to assess and document, for purposes of complying with their own record-keeping requirements, whether a business meets all of the criteria. For example, in the case of large and small charities that respond to disasters in their immediate aftermath, they will need to do some internal planning if they wish to expand the scope of their activities to provide assistance to businesses. This planning may include drafting a guidance that addresses how the charity will ensure that it has the processes in place to adhere to CRA's Guidance and assist businesses as permitted by the Guidance.

The recent focus on disaster relief is a welcome update to CG-014 and signals an increased emphasis on providing assistance to businesses helping to rebuild their communities. Furthermore, CRA goes beyond merely allowing for funding by including guidance as to how funding should be provided. The goal is to ensure both the nature of the relief conforms to charitable requirements, and the relief is efficiently distributed to make a lasting impact on the affected community.

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