50 Most Common Questions About Starting a Canadian Charity (Answered by Lawyers)

Get expert answers to the 50 most common questions about starting a charity in Canada, from registration requirements to governance best practices.

Starting a charity in Canada involves navigating complex regulations, making critical decisions about governance, and planning for long-term sustainability. As charity lawyers, we've helped hundreds of founders through this process and have heard the same questions time and again.

In this comprehensive guide, I'll answer the 50 most common questions people ask when starting a Canadian charity. Whether you're just beginning to explore the idea or are already deep in the application process, you'll find practical, lawyer-approved answers to help you move forward with confidence.

General Canadian Charity Registration Questions

Let's start with the fundamentals of charity registration in Canada.

What is a registered charity in Canada?

A registered charity is an organization that has been approved by the Canada Revenue Agency (CRA) to issue official donation receipts for income tax purposes. To qualify, the organization must be established and operate exclusively for charitable purposes and activities. Registered charities receive a registration number and are listed in the CRA's public database of charities.

How long does the charity registration process take?

The charity registration process typically takes 6-12 months from submission to approval. Simple applications with clearly charitable purposes may be processed in 4-6 months, while complex applications (such as those with international activities or novel purposes) can take 18 months or longer. The timeline depends on application completeness, clarity of charitable purposes, complexity of activities, and current CRA processing volumes.

What are the benefits of charity registration?

Registered charities enjoy several significant benefits:

• Ability to issue tax receipts for donations, making fundraising easier
• Complete exemption from income tax
• Eligibility for special GST/HST rebates
• Enhanced credibility with donors, funders, and the public
• Access to funding sources restricted to registered charities
• Potential property tax exemptions (varies by municipality)
• Ability to receive gifts from other registered charities

These advantages make charity status highly desirable for organizations with charitable purposes.

Can any nonprofit become a registered charity?

No. To become a registered charity, a nonprofit must have exclusively charitable purposes that fall within categories recognized by law (relief of poverty, advancement of education, advancement of religion, or other purposes beneficial to the community). Many nonprofits have worthwhile purposes that don't qualify as charitable under these legal definitions. Additionally, the organization must devote its resources to charitable activities that further these purposes and meet other CRA requirements.

How much does it cost to register a charity?

The direct costs of registering a charity include:

• Incorporation fees: $200-$250 (federal) or $155-$255 (provincial, varies by province)
• Name search: $20-$100
• Legal fees: $500-$15,000+ depending on complexity and whether professional assistance is used

Indirect costs include time spent preparing documents, developing programs, and responding to CRA inquiries. While it's possible to register without legal assistance, many applicants find professional help valuable, especially for complex applications.

Charitable Purposes and Activities in Canada

The foundation of any charity is its purposes and activities.

What purposes qualify as charitable in Canada?

Charitable purposes in Canada must fall within one of four categories established by law:

1. Relief of poverty: Helping those in need
2. Advancement of education: Structured educational activities with public benefit
3. Advancement of religion: Promoting spiritual teachings with a public element
4. Other purposes beneficial to the community: Various purposes courts have recognized as charitable, including:
   
   • Promoting health
   • Supporting the armed forces
   • Protecting the environment
   • Advancing arts and culture
   • Community development

A purpose must provide a demonstrable public benefit to qualify, and private benefit must be incidental to the charitable purpose.

Can we have both charitable and non-charitable purposes?

No. To qualify for charitable registration, all of your organization's purposes must be exclusively charitable. Any non-charitable purpose, no matter how minor, will result in rejection of your application. If your organization has both charitable and non-charitable goals, consider either:

1. Restructuring to focus exclusively on charitable purposes
2. Creating separate organizations (one charitable, one nonprofit) for different purposes
3. Operating as a nonprofit without charitable status

This exclusivity requirement is strictly enforced by the CRA.

How specific must our charitable purposes be?

Charitable purposes must be specific enough to:

• Clearly fall within recognized charitable categories
• Define the scope of your activities
• Identify who will benefit from your work
• Demonstrate public benefit
• Provide meaningful constraints on how you use resources

Vague purposes like "helping the community" or "doing good works" are insufficient. Instead, specific purposes like "relieving poverty by operating a food bank for low-income residents of Halifax, Nova Scotia" are more likely to be approved. For more on defining charitable purposes, see our guide to Canadian charity registration.

Can we change our charitable purposes after registration?

Yes, but any changes to your charitable purposes require:

1. Board approval
2. Member approval (if applicable)
3. Filing corporate amendments with the appropriate corporate authority
4. Obtaining CRA approval before implementing the changes

Operating outside your approved purposes without CRA approval can lead to compliance issues or even revocation of charitable status. The CRA will evaluate new purposes using the same criteria as in the initial application.

What activities are prohibited for registered charities?

Registered charities are prohibited from:

• Partisan political activities (supporting or opposing a political party or candidate)
• Activities primarily benefiting private individuals rather than the public
• Illegal activities
• Activities contrary to public policy
• Unrelated business activities (with limited exceptions)
• Providing undue benefits to directors, staff, or related persons
• Gifting resources to non-qualified donees (with limited exceptions)
• Activities outside their approved charitable purposes
• Accumulating excessive funds without justification

These restrictions help ensure charitable resources are used for public benefit as intended.

Incorporation and Structural Questions for Canadian Charities

The legal structure of your charity matters significantly.

Do we need to incorporate before applying for charity status?

Incorporation is not legally required for charity registration, as unincorporated associations and trusts can also register. However, incorporation is strongly recommended because it:

• Provides limited liability protection for directors and members
• Creates a more sustainable structure for long-term operations
• Is often required by funders and financial institutions
• Provides a clearer governance framework
• Is preferred by the CRA (incorporated organizations typically face fewer questions)

Most successful charities operate as incorporated entities.

Federal vs. provincial incorporation: which is better?

The choice between federal (under the Canada Not-for-profit Corporations Act) and provincial incorporation depends on your specific circumstances:

Federal incorporation advantages:

• Name protection across Canada
• Ability to operate in all provinces
• Consistent governance framework
• Modern legislation

Provincial incorporation advantages:

• Sometimes lower fees and simpler process
• Potentially fewer ongoing filing requirements
• May better align with local operations
• Some provinces offer specialized nonprofit legislation

If you plan to operate nationally, federal incorporation often makes more sense. For more details on this decision, see our guide to ONCA compliance for Ontario organizations.

Can an existing nonprofit convert to a charity?

Yes, an existing nonprofit can apply for charitable registration, but the process requires:

1. Reviewing and potentially amending purposes to ensure they're exclusively charitable
2. Ensuring bylaws and governance meet CRA requirements
3. Developing charitable programs aligned with purposes
4. Completing the charity application process
5. Obtaining approval from the CRA

This is not truly a "conversion" but rather a nonprofit obtaining charitable registration while maintaining its corporate identity. The organization will need to adapt operations to comply with the additional charity requirements.

What's the difference between a charitable organization and a foundation?

Registered charities in Canada fall into three categories:

1. Charitable Organizations: Primarily carry out their own charitable activities
2. Public Foundations: Primarily give funds to qualified donees, with arm's length directors and diverse funding sources
3. Private Foundations: Primarily give funds to qualified donees, typically controlled by a related group (often a family) and funded by a single source

Key differences include control structure, funding sources, and operational focus. The designation affects certain regulatory requirements, particularly around governance and disbursement quotas. For a detailed comparison, see our guide on private vs. public foundations.

How many directors are required for a charity?

The minimum number of directors depends on your incorporation legislation:

• Federal incorporation (CNCA): Minimum of 3 directors (at least 2 not officers)
• Ontario incorporation (ONCA): Minimum of 3 directors
• BC incorporation: Minimum of 3 directors
• Other provinces: Generally 3-5 directors (varies by province)

While unincorporated charities technically could have fewer directors, the CRA typically expects at least 3 arm's length directors to ensure proper governance. Having more directors provides better oversight and reduces the risk of conflicts of interest.

Canadian Charity Application Process Questions

Understanding the application process helps you navigate it successfully.

What forms are needed for the charity application?

The primary form for charity registration is Form T2050 (Application to Register a Charity Under the Income Tax Act). This 20+ page form requires detailed information about:

• Organizational structure and governance
• Charitable purposes and activities
• Financial information
• Directors and trustees
• Relationships with other organizations
• Fundraising plans
• Assets and property

Additional forms may be needed for specific situations, such as operating in Quebec or conducting foreign activities.

What supporting documents must accompany the application?

A complete charity application package typically includes:

• Governing documents (articles of incorporation, bylaws, constitution, or trust deed)
• Financial statements or proposed budget
• List of current or proposed directors/trustees with contact information
• Detailed description of activities and programs
• Copies of fundraising materials
• Agreements with agents, contractors, or other organizations
• Minutes showing approval of application
• Any publications, brochures, or promotional materials
• Additional schedules as needed for specific activities

Thorough documentation speeds the review process by answering potential CRA questions upfront.

How detailed must the activity descriptions be?

Activity descriptions should be extremely detailed, including:

• Specific programs and services you will provide
• Who will benefit from each activity
• Where activities will take place
• Who will carry out the activities
• How activities further your charitable purposes
• Resources required for implementation
• Measures for effectiveness
• Timelines for implementation

Vague descriptions like "we will help the homeless" are insufficient. Instead, provide concrete details: "We will operate a 40-bed shelter at 123 Main Street, providing temporary accommodation, two meals daily, and case management services to homeless individuals in Vancouver."

What financial information is required for new charities?

New charities must provide:

• Proposed budget for first fiscal year
• Current financial statements (if already operating)
• Anticipated sources of funding
• Expected expenditures by category
• Assets and liabilities
• Major capital expenditures planned
• Fundraising costs and revenue projections
• Reserve fund plans

The CRA wants to ensure you have realistic financial plans to sustain your charitable activities and meet regulatory requirements like the disbursement quota.

How should we respond to CRA follow-up questions?

When responding to CRA questions:

1. Respond promptly within the timeframe provided
2. Answer each question specifically and completely
3. Provide supporting documentation when helpful
4. Maintain consistency with your original application
5. Be honest and transparent
6. Consider obtaining professional assistance for complex inquiries
7. Request clarification if you don't understand a question
8. Keep copies of all correspondence

Professional, cooperative responses demonstrate your commitment to compliance and help move your application forward.

Governance and Compliance Questions for Canadian Charities

Good governance is essential for charity success and compliance.

What qualifications must charity directors have?

At minimum, charity directors must:

• Be at least 18 years old
• Not be declared incapable by a court
• Not be in bankruptcy status
• Be individuals (not corporations)
• Meet any additional requirements in your governing documents

While not legally required, directors should ideally have:

• Commitment to the charitable mission
• Relevant skills and expertise
• Understanding of director duties
• Ability to attend meetings and participate actively
• No significant conflicts of interest

Many charities establish additional qualifications in their bylaws to ensure an effective board.

Can charity directors be paid?

Generally, charity directors serve without compensation in Canada, but there are nuances:

• Charitable organizations can pay reasonable compensation to directors who provide services in another capacity (e.g., as staff), provided there's no conflict with duties as a director
• Foundations (both public and private) face stricter limitations on director remuneration
• All charities can reimburse directors for reasonable expenses incurred in performing their duties
• Excessive or inappropriate compensation can trigger compliance concerns

Always ensure any director compensation is clearly documented, reasonable, and approved through proper channels.

What policies should a new charity have in place?

Essential policies for new charities include:

• Conflict of interest policy
• Financial management and control policies
• Donation receipting policy
• Privacy policy
• Record retention policy
• Investment policy (if applicable)
• Volunteer management policy
• Code of conduct
• Whistleblower policy
• Gift acceptance policy

Additional policies may be needed based on your specific activities, such as international activities policy, fundraising policy, or child protection policy.

What are the annual filing requirements?

Registered charities must file:

• Form T3010 (Registered Charity Information Return) within six months after fiscal year-end
• Financial statements with the T3010
• Form T1235 (Directors/Trustees Worksheet)
• Form T1236 (Qualified Donees Worksheet) if gifts were made to qualified donees
• Form T1241 (Information Return for Related Business Activities) if applicable
• Form RC232 (Registered Charities in Quebec) if operating in Quebec

Additionally, charities must file corporate returns required by their incorporating jurisdiction and other reports based on their specific activities.

What records must charities maintain?

Charities must maintain:

• Governing documents (articles, bylaws, etc.)
• Minutes of board and member meetings
• Copies of all T3010 returns
• Financial statements and records
• Copies of official donation receipts
• Records of all financial transactions
• Supporting documentation for all expenses
• Copies of all communications with the CRA
• Staff and volunteer records
• Program activity documentation
• Inventories of valuable property

These records must be kept at your registered address or another designated location and retained for the minimum period required by law (generally at least 6 years, but longer for many documents).

Financial and Operational Questions for Canadian Charities

Understanding financial requirements helps ensure compliance and sustainability.

What is a disbursement quota and how is it calculated?

The disbursement quota is the minimum amount a registered charity must spend on its charitable activities or gifts to qualified donees each year. Currently:

• The basic quota is 3.5% of the average value of property not used directly in charitable activities or administration
• This applies to property exceeding $25,000 for charitable organizations and $100,000 for foundations
• Private foundations face different and sometimes higher requirements
• Failure to meet the quota can result in penalties or revocation of registration

The quota ensures charities use their resources for charitable purposes rather than accumulating funds indefinitely.

Can charities engage in business activities?

Charities can engage in business activities with significant restrictions:

• Related business activities (directly connected to charitable purposes or substantially run by volunteers) are generally permitted
• Unrelated business activities (not connected to charitable purposes) are generally prohibited
• The scale of business activities should remain secondary to charitable activities
• Profits must be used for charitable purposes
• Business activities shouldn't consume substantial charitable resources
• Some provincial legislation may impose additional restrictions

Seek professional advice before launching any business activity to ensure compliance.

How are charitable funds restricted in their use?

Charitable funds must be used for:

• Activities that directly further your charitable purposes
• Reasonable administration expenses
• Gifts to qualified donees
• Meeting the disbursement quota

Funds cannot be used for:

• Private benefit to individuals
• Non-charitable purposes
• Political activities beyond allowable limits
• Undue benefits to directors, staff, or related parties
• Accumulation beyond reasonable reserves without CRA approval

Additionally, donor-restricted funds must be used according to the specific restrictions imposed by donors.

What donation receipting rules must be followed?

Official donation receipts must:

• Include the charity's name, registration number, and address
• Show the date the donation was received
• Indicate the value and description of the donation
• State the name and address of the donor
• Be signed by an authorized person
• Include the CRA's website address
• Be numbered sequentially
• Include additional information for non-cash gifts (fair market value, description)

Receipts can only be issued for eligible gifts (voluntary transfers of property without consideration) to the charity. Improper receipting is a common compliance issue that can lead to serious penalties.

Can charities pay staff and how much is reasonable?

Yes, charities can pay staff reasonable compensation:

• Salaries should be comparable to similar positions in similar organizations
• Compensation should be based on skills, experience, and responsibilities
• Total compensation package (including benefits) should be considered
• The process for setting compensation should be documented
• Performance reviews should support compensation decisions
• Excessive compensation can trigger CRA scrutiny

There's no specific salary cap, but compensation should be justifiable based on market comparisons and the charity's financial resources.

International Activities Questions for Canadian Charities

Operating internationally adds complexity to charity management.

Can Canadian charities operate internationally?

Yes, Canadian charities can operate internationally, but they must:

• Have purposes that permit international activities
• Maintain direction and control over their resources
• Ensure activities further their charitable purposes
• Follow Canadian laws and the laws of countries where they operate
• Maintain detailed records of all international activities
• Report international activities on the T3010
• Meet additional CRA requirements for international operations

International activities face greater CRA scrutiny due to risks of improper resource use and terrorism financing concerns.

What additional requirements apply to international activities?

International activities require:

• Written agreements with all intermediaries
• Detailed activity plans and budgets
• Regular reporting from intermediaries
• Ongoing monitoring and oversight
• Separate books and records for international activities
• Documentation of all fund transfers
• Evidence of results achieved
• Compliance with anti-terrorism financing laws
• Foreign activity schedules with the T3010

These additional requirements help ensure proper use of charitable resources internationally.

Can we fund foreign organizations directly?

Generally, no. Canadian charities can only make gifts to "qualified donees" (primarily other registered Canadian charities and a few specific categories of recipients). Most foreign organizations are not qualified donees.

However, Canadian charities can work with foreign organizations by:

1. Using them as intermediaries who carry out the Canadian charity's own activities
2. Establishing structured arrangements that maintain the Canadian charity's direction and control
3. Setting up agency, contractor, or joint venture relationships with appropriate agreements

The key is maintaining direction and control over resources, not simply funding the foreign organization's own programs.

What documentation is needed for international programs?

International programs require extensive documentation:

• Written agreements with all foreign partners or intermediaries
• Detailed project plans with clear deliverables
• Budgets and financial controls
• Regular financial and activity reports
• Proof of fund transfers and receipts
• Evidence of site visits and monitoring
• Photos, videos, or other evidence of activities
• Communications between the charity and intermediaries
• Board approvals for significant projects
• Background checks on foreign partners

Thorough documentation demonstrates the required direction and control over international activities.

How can we work with non-qualified donees abroad?

To work with non-qualified donees abroad, establish one of these arrangements:

1. Agency relationship: Foreign organization acts as your agent, carrying out specific activities under your instruction
2. Contractor relationship: Foreign organization provides specific services under a contract
3. Joint venture: Structured partnership with defined roles and responsibilities
4. Cooperative participant: Collaborative arrangement to achieve common charitable goals

Each arrangement requires:

• Written agreement defining the relationship
• Clear description of activities to be carried out
• Detailed financial arrangements
• Reporting requirements
• Provisions for monitoring and oversight
• Termination clauses
• Evidence of ongoing direction and control

The arrangement must be real and substantive, not merely a paper exercise to flow funds.

Common Problems and Solutions in Canadian Charity Registration

Understanding common pitfalls helps you avoid or address them.

What to do if your application is rejected

If your charity application is rejected:

1. Review the CRA's detailed explanation of the rejection
2. Determine if the issues can be addressed through modifications
3. Consider requesting a reconsideration with additional information
4. Revise your purposes, activities, or governance to address concerns
5. Reapply with a completely new application
6. Consider seeking professional assistance
7. Explore alternatives like operating as a nonprofit or through a fiscal sponsor

Many successful charities were initially rejected but succeeded after revising their application with professional help.

How to handle CRA audit concerns

If facing a CRA audit:

1. Take it seriously but don't panic
2. Gather all requested documentation promptly
3. Cooperate fully with the auditor
4. Consider engaging professional representation
5. Address any identified issues immediately
6. Request clarification on unclear findings
7. Develop a compliance plan for any deficiencies
8. Follow up diligently on all commitments made

Proactive cooperation often leads to better outcomes than defensiveness or delay.

Addressing governance disputes

When governance disputes arise:

1. Refer to your bylaws and governance policies
2. Follow established dispute resolution procedures
3. Consider third-party mediation
4. Document all discussions and decisions
5. Maintain focus on the charitable mission
6. Ensure compliance obligations continue to be met
7. Consider board development or governance training
8. Seek professional advice for complex disputes

Unresolved governance disputes can paralyze organizations and create compliance risks.

Managing donor restrictions

To properly manage donor-restricted funds:

1. Have clear gift acceptance policies
2. Document restrictions at the time of donation
3. Track restricted funds separately in accounting systems
4. Establish approval processes for using restricted funds
5. Report regularly on restricted fund use
6. Maintain documentation of compliance with restrictions
7. Seek legal advice when restrictions become problematic
8. Communicate transparently with donors about fund use

Misuse of restricted funds can damage donor relationships and create legal liability.

Correcting compliance issues

When compliance issues are identified:

1. Address them promptly and transparently
2. Document the steps taken to correct problems
3. Implement new policies or procedures to prevent recurrence
4. Consider voluntary disclosure to the CRA if issues are serious
5. Maintain detailed records of corrective actions
6. Train board and staff on compliance requirements
7. Create monitoring systems for ongoing compliance
8. Seek professional assistance for complex issues

Proactive correction often prevents minor issues from becoming major problems.

Long-term Canadian Charity Management

Planning for the long term is essential for charity success.

Strategic planning best practices

Effective strategic planning includes:

1. Involving key stakeholders (board, staff, members, beneficiaries)
2. Assessing internal and external environments
3. Reviewing and potentially refining your mission and vision
4. Establishing clear, measurable goals and objectives
5. Developing specific strategies and action plans
6. Aligning resources with strategic priorities
7. Creating evaluation frameworks to measure progress
8. Regularly reviewing and updating the plan

A good strategic plan provides direction while remaining flexible enough to adapt to changing circumstances.

Board succession planning

Sustainable board succession requires:

1. Regularly assessing board composition and skills
2. Identifying future leadership needs
3. Creating role descriptions for key positions
4. Establishing a nomination process and committee
5. Recruiting potential directors before they're needed
6. Developing current directors for leadership roles
7. Creating term limits and staggered terms
8. Documenting organizational history and knowledge

Thoughtful succession planning prevents leadership gaps and maintains organizational continuity.

Fundraising strategy development

Comprehensive fundraising strategies include:

1. Diversifying revenue sources (individual donations, grants, events, etc.)
2. Aligning fundraising with your mission and values
3. Building sustainable donor relationships
4. Investing in appropriate fundraising infrastructure
5. Training staff and volunteers in effective fundraising
6. Measuring fundraising efficiency and effectiveness
7. Complying with applicable fundraising regulations
8. Communicating impact to donors and stakeholders

The best fundraising strategies balance short-term needs with long-term sustainability.

Risk management approaches

Effective risk management involves:

1. Identifying potential risks across all areas of operation
2. Assessing likelihood and potential impact of each risk
3. Developing mitigation strategies for significant risks
4. Implementing appropriate policies and procedures
5. Obtaining necessary insurance coverage
6. Training staff and volunteers on risk management
7. Creating emergency response plans
8. Regularly reviewing and updating risk assessments

Proactive risk management protects your organization's resources and reputation.

When and how to revise your charitable purposes

Consider revising charitable purposes when:

1. Your mission has evolved significantly
2. Current purposes restrict necessary activities
3. External conditions have changed substantially
4. New opportunities align with your mission but not your formal purposes
5. Purposes are outdated or unclear

The revision process includes:

1. Board discussion and approval
2. Member approval (if applicable)
3. Corporate filing of amendments
4. CRA approval before implementation
5. Communication with stakeholders

Purpose revisions require careful planning to maintain compliance while meeting evolving needs.

Working with Professional Charity Advisors in Canada

Professional advisors can provide valuable expertise at key points in your charity's development.

When to engage a charity lawyer

Consider engaging a charity lawyer when:

1. Drafting or revising governing documents
2. Preparing charity registration applications
3. Conducting complex international activities
4. Facing CRA audits or compliance concerns
5. Undertaking major organizational changes
6. Developing complex governance structures
7. Managing significant donor restrictions
8. Addressing potential liability issues

The cost of professional legal advice often pales in comparison to the cost of compliance problems or ineffective governance.

Finding the right accountant for charity finances

Look for an accountant with:

1. Specific experience with registered charities
2. Understanding of charity accounting standards
3. Knowledge of CRA charity requirements
4. Experience with T3010 filings
5. Familiarity with your type of organization
6. Ability to provide strategic financial advice
7. Proactive approach to compliance
8. Good references from other charities

Financial expertise specifically tailored to charities saves time and prevents costly mistakes.

Cost-effective professional support options

Access professional expertise affordably through:

1. Initial consultations to identify key issues
2. Limited-scope engagements for specific projects
3. Template policies and documents with professional review
4. Workshops and training for staff and board
5. Shared services with other charities
6. Pro bono or reduced-fee services (where available)
7. Professional support at critical junctures only
8. Clear fee arrangements and budgeting for professional services

Strategic use of professional services maximizes value while managing costs.

Questions to ask potential advisors

When selecting advisors, ask:

1. What percentage of your practice focuses on charities?
2. How many charity registrations have you completed?
3. What is your success rate with CRA applications?
4. Do you offer fixed-fee services for standard matters?
5. How do you stay current on charity law developments?
6. Can you provide references from similar organizations?
7. What is your approach to CRA communications?
8. How will you transfer knowledge to our organization?

The right fit involves both technical expertise and a working style that matches your organization's needs.

Value of ongoing professional relationships

Ongoing professional relationships provide:

1. Continuity of knowledge about your organization
2. Proactive identification of emerging issues
3. Access to updates on regulatory changes
4. Strategic advice aligned with your history and goals
5. Efficiency through familiarity with your operations
6. Support during leadership transitions
7. Objective perspective during internal discussions
8. Peace of mind for directors and officers

The best professional relationships function as partnerships in advancing your charitable mission.

Ready to start your Canadian charity? Work with B.I.G. Charity Law Group for guidance through the registration process, governance setup, and ongoing compliance, ensuring your organization builds a strong foundation for charitable impact.

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