Information on Charities

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 responsible for charities under the Income Tax Act.  It reviews applications for charitable registration, processes charities annual financial returns, provides technical advice to registered charities and the public, and monitors charities to ensure ongoing compliance with the law.

More than 80 000 registered charities operate in Canada, in areas such as welfare, health, education and religion.

Registration

Charitable registration provides two main advantages under the Income Tax Act:

• it can issue official donation receipts for gifts received. This reduces the individual donor's income tax payable, and reduces the taxable income of a corporate donor; and 
• it is exempt from paying income tax.

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 (see the document Business Window - Supplement)

Types

There are three designations of registered charities: charitable organizations, public foundations and private foundations. The designation of a charity depends on factors such as its mode of operation, e.g. whether it primarily gives money to other registered charities or carries out its own charitable activities; and whether the directing officers are closely related or if it is funded primarily from a single private source.

Activities

The Income Tax Act requirements vary depending on the charity's designation. Generally speaking, charities must devote their resources to either their own charitable activities or make gifts to other registered charities or qualifying organizations. Charitable organizations and public foundations may operate businesses related to their mandate or managed by volunteers.  Charities may engage in limited, non-partisan political activities that are subordinate to their charitable purposes and activities.

Revoking registration

To maintain its registration, a charity must:

• spend a minimum amount of funds each year on charitable activities;
• file an annual return (form T3010) within 6 months of its year end;
• meet other performance requirements under the Income Tax Act .

The CRA may revoke the registered status of a charity that fails to comply with the Income Tax Act. In such cases, the CRA will inform a charity if it is not meeting the requirements of the Act. The charity has an opportunity to respond before the CRA takes any further action. The CRA's decisions may be appealed to the Federal Court of Appeal.
 
If the CRA revokes a charity's registration, its remaining assets and funds must be used for charitable purposes. A revocation tax of 100% is applied on the value of those assets not distributed to other charities or otherwise spent as provided by the law.

The Department of Finance released draft legislation in September 2003 that will provide for intermediate sanctions for non-compliance.

Public Information

The Income Tax Act provides for certain information about registered charities or revoked charities, to be available to the public. This includes the charity’s governing documents and statements of activity, as well as its annual information return. Information returns, from 2000 onward, are now available on line. Copies of other publicly available documents may be obtained by contacting the Charities Directorate at 1-800-267-2384.

The CRA also provides, on line, a list of registered charities, a list of charities that were registered within the previous 12 months; and a list of charities whose registered status was revoked within the previous 12 months.

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 toll-free nation-wide telephone enquiry service at 1-800-267-2384.