Information on Charities

Act: Income Tax Act, R.S.C. 1985, c. 1, 5th Supp.
Regulation: Not applicable.

To Whom Does This Apply?

To qualify for registration, an organization must be established and operated for charitable purposes, and it must devote its resources to charitable activities. The charity must be resident in Canada, and cannot use its income to benefit its members. A charity may be incorporated or governed by a trust or constitution.

Summary

Through the Charities Tax Incentive, which gives Canadians tax relief when they donate to charity, the government supports the charitable community in Canada. The Charities Directorate of the Canada Revenue Agency (CRA) is the federal regulator of registered charities in Canada. The Charities Directorate is responsible for the application of the provisions of the Income Tax Act (ITA) pertaining to the registration, revocation and annulment of charities.To support this role, the Charities Directorate also undertakes Education, Client Assistance, and Monitoring activities.

More than 83 000 registered charities operate in Canada, in areas such as welfare, health, education and religion.

Registration

There are two basic advantages of being a registered charity:

• Registration allows an organization to issue official receipts for gifts received. This reduces the individual donor's income tax payable, and reduces the taxable income of a corporate donor. 
• Once the organization is registered, it is exempt from paying income tax (under Part I of the ITA).

Registration may also provide the charity with advantages under Excise Tax Act, e.g., it may qualify for a GST rebate. For more information on GST rebates, please contact your nearest Tax Services Office.

Types

There are three designations of registered charities: charitable organizations, public foundations and private foundations. The designation of a charity depends on its structure, its source of funding and the charity's mode of operation.

Charitable Activities

A registered charity may only use its resources (funds, personnel, and property) inside or outside Canada in two ways:

1. It can carry on its own charitable activities. These activities are conducted under the charity's direction and control. Such activities may be carried out by the charity's employees or volunteers, or by its intermediaries (agents, contractors, or partners).
2. It can make gifts to qualified donees (usually other registered charities).

A registered charity is not permitted to carry out its purposes by simply handing over its money or other resources to an individual or to another organization that is not a qualified donee. Gifting to a non-qualified donee will put the registered status of the charity in jeopardy.

Revoking registration

To maintain its registered status, a charity must continue to operate for charitable purposes and to comply with the requirements of the ITA. These requirements include:

• devoting all of its resources to charitable activities; 
• operating for the benefit of the public and not for private gain;
• following the requirements of the ITA when issuing official donation receipts; and 
• filing a Registered Charity Information Return each year within six months of the charity's fiscal period end.

Where CRA has grounds to propose revoking a charity's registration, the charity will be given an opportunity to respond to the concerns before CRA makes a final decision.

Where CRA has issued a notice of proposed revocation to a charity for not filing the required annual Form T3010, Registered Charity Information Return, the charity will have 30 days to file the missing return.

A registered charity can also apply in writing to have its registration revoked, for example, when it is winding up its operations ("voluntary revocation").

Revocation takes effect when CRA publishes a notice, naming the charity, in the Canada Gazette. Such publication occurs:

• immediately after CRA mails the notice of proposed revocation to a charity that requested revocation (voluntary revocation); or 
• in any other case, not earlier than 30 days after CRA mails the notice of proposed revocation.

A charity can appeal the notice of proposed revocation of registration to the Federal Court of Appeal. It must file its appeal within 30 days from the date CRA issued the notice.

On revocation of a charity's registration:

• the charity is no longer exempt from tax, unless it qualifies as a non-profit organization; 
• it cannot issue official donation receipts; and 
• it may be subject to a tax equivalent to the full value of its remaining assets (revocation tax).

Public Information

Under the ITA, information contained in the public part of a registered charity's information return is available to the public. Certain other information, such as a charity's governing documents, statement of directors, etc. is also available to the public. In releasing information about a registered charity, the confidentiality provisions (section 241) of the ITA, have to be followed.

The public part of a registered charity's information return is available on the Web site through the Charities Listings. Other information can be requested by calling the toll free number. Requests can also be made by fax or in writing to the Client Service Section of the Charities Directorate.

The CRA also provides online the following:

• a list of Canadian registered charities;
• a list of charities that were registered within the previous 12 months;
• a list of charities whose registered status was revoked within the previous 12 months;
• a list of charities whose status has been permanently annulled; and
• a list of charities whose status has been suspended or who have been assessed a penalty.

The CRA provides a number of guides, publications and forms relating to charities, as well as a significant number of policy papers and documents, on its Web site. It also provides a toll-free nation-wide telephone enquiry service.

DISCLAIMER
Information contained in this section is of a general nature only and is not intended to constitute advice for any specific fact situation. For particular questions, the users are invited to contact their lawyer. For additional information, see contact(s) listed below.

Manitoba Contact(s):
See National Contact.

National Contact(s):
Client Services
Charities Directorate
Canada Revenue Agency
Ottawa, Ontario  K1A 0L5
Telephone: 613-954-0410 (English) / 613-954-6215 (Bilingual)
Fax: 613-954-8037
Toll-free (information): 1-800-267-2384 (English) / 1-888-892-5667 (Bilingual)
Web site: http://www.cra.gc.ca/charities