Canada: Doing Business With A Cause

Last Updated: May 28 2015
Article by Amir Fathollahzadeh

Firms have many options for contributing to social causes while driving their own growth—from incorporating a registered charity within their business structure, to donating time to charitable causes.

In today's marketplace, doing business with a cause is good for business. Progressive architecture and design firms are looking to engage in charitable projects that complement their core business activities. A well-implemented plan that is aligned with a firm's goals and initiatives can have a significant impact on how it is perceived in the crowded marketplace.

When we think about a cause-driven business, certain terminology comes to mind. From a marketing standpoint, cause marketing, conscious capitalism and social business venture are terms to describe a business or plan specifically conceived to drive social change. All may be considered profit-oriented businesses, with part of the profits invested in a cause. We may also think of charitable organizations, not-for-profit organizations (NPO) and private or public foundations. We may assume that registered charities and NPOs should not generate a surplus. On the contrary, many registered charities and NPOs are focused on generating surplus funds to gain financial stability, in order to meet their missions and to provide for their programs.

Consumers are demanding more from companies: purchasing, recommending or promoting those that commit to social change. The retail sector has effectively used social initiatives to drive business and bring awareness to many different causes.

One retail company that exemplifies the successful utilization of the NPO structure is TOMS, a shoe manufacturer that has expanded into eyewear. It also operates a non-profit subsidiary called Friends of TOMS. For every shoe or piece of eyewear sold, they donate the same to a needy child. This is a great example of how a for-profit business can co-exist with a not-for-profit and at the same time drive sales.

Another example is the eyeglass company Warby Parker, which has the same type of model as TOMS, but with a twist. Instead of giving away a pair of glasses for every one sold, they fund the production of a pair of eyeglasses by an unaffiliated non-profit organization called VisionSpring.

How can these ideas apply to the architecture and design fields, as firms seek to support and enhance their communities? There are several examples of not-for-profits that already exist in Canadian design, including the organizations Architecture for Humanity, Habitat for Humanity, and in Toronto, developer Artscape.

ABOVE A pavilion in Botwood, Newfoundland is a tangible outcome from last year's Culture of Outports project. ERA Architects and the Centre for Urban Growth + Renewal—a non-profit organization that the architects co-founded—spearheaded the community build initiative.

Less frequent, but equally viable, is an organization such as the Centre for Urban Growth and Renewal, which is directly supported by ERA Architects and planningAlliance (see case study below). In this model, to facilitate "doing business with a cause," a for-profit architecture or design firm co-exists with a not-for-profit organization, each one complementing the other. Profits and contributions from the for-profit firm fund the NPO's cause, while in return, the NPO brings awareness to social issues that could provide projects and revenue for the firm.

Doing business with a cause isn't just about making more profits or driving business. First and foremost, it's about supporting a cause that your firm and your team believe in—any increased profits are an added bonus. Other advantages may include increased client awareness, lower marketing costs, opportunities for innovation, improved productivity, employee morale and retention, and talent recruitment.

Case Study: Centre for Urban Growth and Renewal

The Centre for Urban Growth and Renewal (CUG+R) is a non-profit organization based in Toronto, founded by members of ERA Architects and planningAlliance. CUG+R conducts focused research to enhance public policy and enables private initiatives that together foster healthy urban, suburban and rural environments. The founding partners started the organization in order to collaborate with academic, government and NPO partners on an equal and shared footing—without the perception that as private-sector businesses, they were solely motivated by for-profit interests. Since its establishment in 2009, CUG+R has produced landmark reports for the United Way, the City of Toronto's Health Department and the Province of Ontario's Growth Secretariat, as well as assisting with an educational and research project in Newfoundland. The organization is currently exploring other opportunities across Canada. According to ERA partner Michael Mc- Clelland, CUG+R's focus on research has encouraged staff to appreciate the value the firm places on public-interest design. More information on CUG+R can be found at www.cugr.ca.

Incorporating a Not-for-Profit or Registered Charity into Your Firm

In order to implement an NPO into a firm's overall business structure, it's essential to understand the building blocks and technical aspects of the various NPOs available. The optimum structure depends on the firm's mission. For example, if social housing is a subject the firm wants to tackle, it may make sense to set up an NPO to research and create awareness around the subject, whereas a registered charity framework could be used to raise funds to build social-housing projects. The chart above provides a summary of the differences between a registered charity and an NPO.

Within the registered charity framework, there are three types of entities that can be registered with the Canada Revenue Agency: charitable organizations, public foundations and private foundations. Private foundations are a popular choice for many organizations, as they provide a high degree of flexibility over how funds may be used. A private foundation may be governed by a small group of people who already do business together, and may carry on its own charitable activities as well as funding other registered charities.

There are unique compliance and administrative requirements to consider when setting up a registered charity:

  • The organization's purpose and objectives must be documented in an application for charitable status made with the Canada Revenue Agency. It's recommended that the application be prepared by a lawyer specialized in this area.
  • There are ongoing administrative costs, such as accounting and legal fees, similar to running a corporation.
  • There are governance requirements, including the need for the directors to hold regular meetings and maintain minutes.
  • Donors may be entitled to receive a tax receipt for their contribution if the funds qualify as a gift. This may enable the for-profit business to make a donation to the registered charity and receive a charitable tax receipt to reduce its income taxes—there is an immediate financial benefit.

For those companies who may prefer to explore less intensive opportunities for corporate social responsibility, there are options for charitable and not-for-profit support that are beneficial both in terms of creating social change and from a tax standpoint. Following are some examples:

Donor-Advised Fund

A donor-advised fund (DAF) is an alternative to setting up a private foundation. It provides simplicity and flexibility, since it removes the administrative duties and costs associated with running a foundation. To set up a DAF, an up-front donation is made and is invested by the DAF management entity, similar to an investment fund. Many financial institutions, community foundations and charitable organizations offer this service. Each year, the donor recommends grants to their designated registered charities. A contribution to the DAF is tax-deductible, and a charitable tax receipt is issued at the time the contribution is made.

Donations by Corporations

Firms making a donation to a registered charity such as the Royal Architectural Institute of Canada (RAIC) Foundation will receive a charitable tax receipt. The amount of the donation is deductible for tax purposes but the firm must meet an income test in order for the donation to be fully deductible within the year. The deduction is limited to 75% of the firm's net income before the donation expense is claimed. Therefore, in a year that the company has a loss, the donation would carry forward to be claimed in the next five years.

Donations by Partnerships

If a partnership (which is not a taxable entity) makes a donation to a registered charity, the donation amount will be allocated to the partners in the same proportion as the partnership's income is allocated. If the partner is an individual, the personal tax rules will apply, and she will receive a tax credit. If the partner is a corporation, the corporate tax rules will apply, and the corporate partner will treat the donation as an expense.

Gift of Property

A gift of property to a registered charity, such as the donation of your archive to the Canadian Centre for Architecture, is considered a disposition by the donor and may result in a capital gain on disposition. In return, the donor will receive a charitable tax receipt for the fair market value of the donated property. If the donated property has qualified as "Canadian Cultural Property," the gain on the disposition of the property is deemed to be nil, and the donor can still claim the donation credit.

This tax treatment also applies to donation of publicly traded securities. Under normal circumstances, when you sell a publicly traded security, you are subject to capital gains tax. However, when you donate an appreciated investment to a registered charity, you don't have to pay tax on any capital gain and you still receive a charity receipt for the fair market value of the security donated.

Sponsorships

Sponsorships to registered charities and NPOs are not eligible for a tax receipt as there are commercial benefits received, such as advertising and promotion of the firm. This is the case if the firm was to sponsor Canada's entry to the Venice Architecture Biennale, for example. Therefore, the business making the sponsorship will claim the contribution as a business expense rather than a charitable donation.

Performing Services for a Registered Charity

When a business performs services (such as working pro bono) for a registered charity or NPO, it must issue an invoice and charge HST as for its other customers. We've seen many arrangements whereby registered charities will engage a firm for services with the expectation that the firm will donate back the value of the contract/invoice. In this case, the company's revenue and expense for the donation is offset, and the company will ultimately realize a net expense equivalent to the cost of its employees' time. There is no other deduction available to the company under this scenario.

The use of these different forms of giving will continue to grow as government funding for programs decreases and social responsibility becomes a more important factor for many businesses. Whether implementing a not-for-profit structure as part of a for-profit business, setting up a donor-advised fund, or donating services to registered charities, many opportunities exist for practicing corporate social responsibility. The result: helping specific causes championed by business owners, while at the same time creating win-win propositions for both for-profit and not-for-profit organizations.

Originally published in Canadian Architect, February 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions