Summary Policy

Date
October 25, 2002 (Revised September 13, 2005)

Reference Number
CSP - B02

Key Words
Business - Related business - Sanctions

Under the Income Tax Act, charitable organizations and public foundations can carry on related businesses that accomplish or promote their charitable objects. They can carry on any other business activities if substantially all (i.e., at least 90%) of the staff involved in these activities are volunteers. Private foundations cannot carry on any business activities.

A charitable organization or public foundation that carries on an unrelated business is liable to a penalty equal to 5% of its gross revenue for a taxation year from any unrelated business that it carries on in the taxation year. This penalty increases to 100% and the suspension of tax-receipting privileges for a repeat infraction within 5 years.

A private foundation that carries on business activities is liable to a penalty equal to 5% of its gross revenue for a taxation year from any business that it carries on in the taxation year. This penalty increases to 100% and the suspension of tax-receipting privileges for a repeat infraction within 5 years.

• Financial Penalties, CSP-F17.
• Related Business, CSP-R05.
• Sanctions, CSP-S17.
• Suspension, CSP-S18.
• What is a Related Business? CPS-019.
• Related Business, CPC-002.
• Business, CIL-1997-010, CIL-1998-032.
• Church of Christ Development Company Limited v. Minister of National Revenue, [1982] 82 D.T.C. 1461.
• Earth Fund v. Canada (Minister of National Revenue) (2002 FCA 498), 2002-12-16 (http://www.fca-caf.gc.ca/index_e.shtml).
• Income Tax Act, R.S.C. 1985 (5^th supp.) c. 1, ss. 149.1(1), 188.1(1), (2) and para. 188.2(1)(a).