What is a Charitable Purpose?
The legal interpretation of “charity” has evolved through common law decisions made by judges. This definition holds significance as registered charitable organizations are required to have a constitution and operate solely for charitable purposes. Additionally, it holds relevance for charitable trusts, regardless of their registration status, as a valid charitable trust must be established with the intention of serving a charitable purpose.
The foundation for determining the legal interpretation of charity begins with the classification outlined in the landmark 1891 ruling of Pemsel v. Special Commissioners of Income Tax. This case defined the “four heads of charity“:
- Alleviation of poverty
- Promotion of education
- Development of religion
- Other endeavors that bring about benefits to the community
The inclusion of the fourth category, known as “other purposes beneficial to the community,” requires that the intended purpose is aligned with the underlying “spirit and intention” of the preamble to the Statute of Elizabeth, a charitable uses statute enacted in 1601. Furthermore, the purpose must contribute to the welfare of the public.
Our understanding of charity is largely dependent on the evolving interpretations provided by courts over time. Nevertheless, cases pertaining to charitable matters are relatively rare, and the development of laws in this domain occurs gradually, through incremental changes.
The case of Jim Crerar Charitable Trust (Re), 2022, represents a recent judgment issued by the British Columbia Supreme Court regarding charitable purposes. The trust, created by Mr. Crerar, aimed to provide assistance to impoverished individuals in pursuing legal actions against their former employers for wrongful dismissal. The Court was tasked with assessing whether the trust qualified as a valid charitable trust based on its charitable purpose. The trust’s stated purpose was to distribute funds to impoverished individuals who require financial assistance to pursue legal action for wrongful dismissal against their former employer, aiming to alleviate their prevailing poverty.
In its deliberation, the Court examined whether the stated purpose fell within the categories of “relief of poverty” and “other purposes that bring about benefits to the community,” as defined by charitable law.
Relief of poverty
The Court determined that providing financial support for individuals to pursue wrongful dismissal claims did not fulfill the criteria of relieving poverty. According to the Court’s interpretation, activities considered as “proper” for poverty relief in cases of job loss should provide immediate financial assistance, such as funding for retraining, job search, daily living expenses, or even compensation for a reasonable termination notice period. The Court opined that supporting an individual in a wrongful dismissal claim was too removed from directly alleviating poverty since it relied on the uncertain outcome of the claim, where the individual could only hope for a successful resolution resulting in a monetary settlement or judgment.
Purpose beneficial to the community
Also, the Court examined whether the trust could be deemed charitable based on its potential to benefit the community in a manner recognized as charitable under the law. Previous case law, such as Cassano v. Toronto-Dominion Bank, (2007), has established that promoting access to justice can be considered charitable. In this context, facilitating access to justice involves aiding individuals who would otherwise be unable to secure legal representation or enforce their legal rights. Financial constraints can be a significant obstacle, but other barriers may also exist, preventing individuals from accessing justice.
After careful consideration, the Court concluded that the trust did not serve a purpose that was beneficial to the community. According to the requirements for a purpose to be considered charitable under the fourth category, it must bring about benefits to the community or the public, with an emphasis on a significant or substantial portion of society receiving those benefits. The Court determined that there was insufficient evidence to establish that a substantial segment of society, consisting of economically disadvantaged individuals who had been wrongfully dismissed, lacked the financial resources to hire legal representation.
This decision is quite disappointing, especially because it implies that an activity must offer immediate financial or economic relief to be considered effective in alleviating poverty. Such a narrow interpretation fails to recognize the various ways in which activities can provide relief from poverty. While not legally binding, the guidance from the Canada Revenue Agency acknowledges that providing basic amenities necessary for a decent standard of living can indeed alleviate poverty. These activities can manifest in different forms, including the provision of legal services.
Moreover, the decision acknowledges that offering access to justice for individuals facing barriers to legal representation is also recognized as a charitable purpose. Therefore, it is unexpected that the trust was considered non-charitable based on the rationale that there exists an inadequate portion of the population who could derive benefits from its intended purpose.
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Payroll tax responsibility
Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state. Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.
*Payroll deductions and benefits
We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data. We do not assist in state registrations, benefits, or advise on deductions. Those service areas are provided directly by either QBO or Gusto.
Preparation of W2s
Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.
Sales tax reporting
For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.
Donation recording
We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.
Administrative tasks
We cannot provide administrative services unrelated to our bookkeeping function.
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Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.
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About Northfield
Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.
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