Consultations on Modernizing the Framework for the Charitable Sector

Participate in the consultation

The Spring Economic Update 2026 announced that the Government of Canada will undertake an exercise to modernize the framework for the charitable sector in 2026-27.

The Government of Canada's tax incentives for charitable giving are intended to mobilize private capital for public needs, creating an attractive environment for donors while supporting affordability, social security, and communities across the country. The government recognizes that the charitable sector and non-governmental organizations are important contributors to the Canadian economy, create well-paying jobs, and supplement the social safety net.

With advances in technology and digitization, the government is seeking views on how the legislative framework for registered charities under the Income Tax Act and its administration can better support the important work of the charitable sector, reduce unnecessary administrative burdens, adapt to advances in technology and digitization, and strengthen transparency and public trust.

To help inform this work, the Department of Finance and the Canada Revenue Agency ("CRA") are seeking feedback from Canadians, registered charities, and other interested stakeholders.

Purpose of the Consultation

This consultation is intended to seek views on how the tax rules for registered charities and the CRA's administration of these rules could be modernized while continuing to protect the integrity of the charitable donation tax incentives provided through the tax system.

The consultation will focus on four key areas:

The registration process
Digital service delivery
Audit and compliance activities with respect to charities
The revocation and objections processes for charities

Background

Charities and non-profit organizations play a vital role in Canadian society. There are more than 86,000 registered charities in Canada that deliver essential programs and services, relieve poverty and support vulnerable populations, advance education and religion, and carry out a wide range of activities that strengthen communities.

Canada's charitable and non-profit sector is a significant economic driver. Statistics Canada reports that non-profit institutions contributed approximately $244 billion to GDP, representing about 8.4 per cent of Canada's overall GDP. The sector also represents a significant source of jobs and employment, supporting more than 2.5 million jobs across the country.

Recognizing the important contribution that charities make to Canadian society and Canada's economy, the Income Tax Act ("ITA") provides a number of important tax benefits that support the work of charities. This includes providing a complete exemption from income tax to qualifying organizations, and encouraging donations to these entities through tax incentives, mainly the Charitable Donation Tax Credit (for individuals) and Deduction (for corporations). Canada's tax incentives for donations are amongst the most generous in the world.

Given the generosity of these tax supports, it is important to have strong and effective rules to safeguard the tax system, ensure that donated funds are used for charitable purposes and ensure broad public trust in charities.

As such, in order to access these tax supports, charities must register with the CRA and demonstrate, amongst other requirements, that they are established for exclusively charitable purposes. Once registered, charities are required to follow a particular set of rules. This includes requirements that charities devote all of their resources to their charitable activities, maintain books and records to support their activities, file annual information returns which are made available to the public and issue official donation receipts in accordance with the ITA.

The CRA and registered charities have a shared responsibility for compliance. For its part, the CRA is responsible for administering the tax rules that apply to registered charities, including ensuring that charities devote their resources to their exempt purposes and operate in compliance with the ITA. The CRA is also responsible for providing charities with the necessary information, tools and resources to comply with the rules. For their part, charities have a responsibility to ensure that they understand the obligations that come with registration and take proper steps to ensure they comply with the rules.

As the majority of charities follow the rules and only need guidance at times, the CRA uses a risk-based approach to promote and address compliance within the charitable sector. This involves various interventions based on the risk of non-compliance. Balancing its compliance program in this way allows the CRA to proactively ensure charities are able to meet their obligations and to interact with a greater number of charities.

Where a charity does not comply with the requirements for registration, the CRA has a range of tools available, depending on the nature and seriousness of the issue. These tools can include education letters, compliance agreements, financial penalties, or the suspension of a charity's receipting privileges.

Ultimately, in cases of serious or repeated non-compliance, including where a charity cannot or will not bring itself into compliance, the CRA may decide to revoke its charitable registration.

An organization whose registration is revoked must disburse its remaining assets on its own charitable activities or as gifts to arm's length registered charities, generally within one year, or face a 100% tax on any assets remaining. Given these serious consequences, revocation is generally reserved as an action of last resort by the CRA.

This regulatory framework for charities under the ITA helps to ensure that Canadians can give to charities and have confidence that their donations will be used for charitable purposes as intended.

In recent years, there have been significant advances in technology and digitization. At the same time, the rules for charities under the ITA and how they are administered have not necessarily kept pace. For example, a substantial amount of interaction with the CRA continues to be paper-based, including the filing of annual information returns, despite the availability of online services. Additionally, the legislative framework relating to intermediate sanctions, revocations, and objections has not been comprehensively reviewed in over 20 years.

Accordingly, the government is seeking views on modernizing the legislative framework for registered charities under the ITA. This includes consideration of the charitable registration process, digital service delivery, and the CRA's audit and compliance activities, including subsequent revocation and objections processes.

Key Questions for Consideration

The government is seeking feedback from stakeholders on the following topics.

1. The registration process for charities

The registration process for charities serves as the gateway to the tax benefits associated with charitable status. The government believes that charitable status and the associated benefits should be accessible to organizations that qualify, meaning that the registration process should be easy to understand and navigate, and decision-making should be transparent, understandable, and fair.

At the same time, the CRA plays an important role in reviewing applications to ensure that only organizations that meet the legal requirements are registered, and to protect the tax base by preventing those that seek to abuse the tax system for personal gain from accessing tax incentives for registered charities.

During the 2025-26 fiscal year, the CRA received 3,077 applications for registration as a charity. The CRA generally approves the vast majority of applications for charitable registration it receives, with 79% being approved in this period. In contrast, very few organizations have their registration refused by the CRA, with less than 1% of applications being denied. The remaining outcomes included applications that were abandoned (7.96%), withdrawn (3.74%), and those determined to be incomplete (8.35%).

As part of its service standards the CRA aims to provide a final decision on a complete application within nine months of receipt. In 2025–26, the CRA met this standard approximately 80% of the time.

The CRA has recently prioritized internal process improvements to enhance efficiency and service delivery. Streamlined handling of incoming applications has led to faster processing times, while upgrades to internal technical tools are supporting more consistent treatment and decision outcomes.

The government is interested to hear the sector's views on whether the application process for charitable registration strikes the right balance between enabling charities to access the benefits of registration to which they are entitled and ensuring the integrity of these tax benefits, including where improvements to this process could be made. In particular, we are interested in:

The CRA currently provides comprehensive guidance for charities on topics relating to what qualifies for registration. Are these resources clear and understandable? In what way could these be made more accessible for applicants and charities?
Is the online registration process for charities easy to use and, if not, what are the key problems encountered by organizations?
What supports could the CRA offer to applicants for registration that would help to clarify the process and improve accessibility?
Are letters explaining the CRA's decisions clearly explained and understandable to charities? Should the CRA's decisions in this area be more transparent (e.g., more information be available to the public to provide greater transparency into this process)?
How should the CRA approach applications for charitable registration, where there is a genuine desire to pursue charitable purposes, but the application is incomplete or otherwise has not satisfied the conditions for registration?

2. Digital service delivery

In recent years, the CRA has made significant improvements to the manner in which it delivers services to taxpayers, including expanding the availability of its digital services. Around 23 million users are currently registered for a CRA account, enabling them to track their tax return status, view notices, access live agent support, and more.

The CRA also offers many digital services to charities through My Business Account (MyBA):

Since 2019, charities have been able to apply for registration online, and currently the vast majority (approximately 85%) of applications are received electronically.
Registered charities are now able to send and receive correspondence electronically through MyBA, as well as view and update account information including the organization's address, list of directors, fiscal period-end, designation, purposes and activities, and more.
Charities are also able to file their Registered Charity Information Return (T3010), online.
Charities or their authorized representatives can now file their T3010 information return online using CRA-certified software.

The availability of digital services offered through MyBA makes it faster and easier to handle the charity's tax matters and to correspond with the CRA securely. Digital services can be delivered more efficiently, reliably, and at a lower cost, allowing resources to be redirected to higher priority areas.

Despite the availability of digital services, a large number of charities continue to submit information to the CRA in paper form. For example, in 2025-26, much of the correspondence received by the Charities Directorate was in paper form, and just under 31% of T3010 Registered Charity Information Returns were submitted electronically.

The government is interested to hear the sector's views on the delivery of digital services to charities and what conditions would be necessary to encourage charities to make greater use of digital services, including digital filing of returns. In particular, we are interested in:

If your charity currently uses My Business Account, is the service provided simple and user-friendly? Are there particular areas that need improvement?
If your charity does not currently use CRA's digital services, why not? Are there particular barriers to accessing these digital services?
What support, training, or guidance from the CRA would help charities adopt digital services and use them with greater confidence?
Are there particular services that should be offered by the CRA for registered charities that are not currently available?
How can charities and the CRA work together to ensure that charities' contact information remains accurate and up to date, so that important communications can be received on time and by the right people?
How can the CRA expand the reach of its communications, including the charities newsletter, to ensure charities and their directors stay informed about regulatory, policy, and legislative changes?

The T3010, Registered Charity Information Return is one of the primary ways Canadians can access information about how registered charities operate and use tax-assisted donations, supporting informed donor decision making and fostering public trust in charities. The information on the return is also critical for the CRA to verify that charities are meeting their obligations under the ITA.

In addition to understanding how the government can support online filing of returns by charities, the government is interested in practical ways to improve the quality, clarity, and consistency of information reported through the annual information return.

What challenges does your charity face in completing the return and in ensuring the accuracy of the data submitted?
What practical steps could help charities provide more accurate, complete, and consistent information when completing the return (for example, validation checks for online filing, clearer instructions, or better guidance)?
What challenges contribute to late or missed filings, including financial, staffing, or technical barriers, and how can the CRA help charities file complete returns on time?
Are there elements of reporting frameworks internationally that Canada should consider adopting?

3. Audit and compliance activities with respect to charities

The CRA is responsible for administering the tax rules that apply to registered charities, including ensuring that they devote their resources to their charitable purposes and operate in compliance with the ITA. The CRA uses a risk-based approach to promote and address compliance within the charitable sector (see Compliance within the charitable sector). This involves various interventions based on the risk of non-compliance.

Where the CRA identifies minor issues, the CRA aims to promote voluntary compliance by charities using interventions such as education letters and telephone calls to charities.

The CRA reserves audits for cases where there is potential evidence that a charity has engaged in more serious misconduct. These audits may result in measures ranging from education letters, the imposition of a monetary penalty or suspension, or the revocation of charitable registration.

In 2025-26, the CRA completed 227 audits of registered charities. The most common audit outcome was an education letter being issued to the registered charity. During the same period, there were 52 revocations as a result of an audit.

Throughout the CRA's audit and compliance activities, charities are given a full opportunity to make representations to the CRA and respond to any identified concerns. Depending on the gravity of the issues identified, charities are generally given the chance to take corrective actions through education or a compliance agreement before the CRA resorts to stronger measures such as sanctions or revocation.

The government is seeking views on how its audit and compliance activities could continue to safeguard the tax system and uphold public confidence in the charitable sector, while at the same time supporting transparency, procedural fairness, and confidence in the administration of the compliance process.

Are there additional steps the CRA could take to strengthen voluntary compliance and help charities better understand and meet their obligations?
What additional measures, if any, could help improve stakeholder confidence in the procedural fairness, consistency, and effectiveness of the CRA's audit process?
Beyond the CRA's risk-based approach, what other regulatory approaches should the government consider to modernize and promote compliance within the charitable sector (e.g., are there opportunities for collaboration with the charitable sector)?

The ITA contains various "intermediate sanctions" that permit the CRA to apply monetary penalties and suspend a charity's receipting privileges in certain circumstances (see Penalties and suspensions). These intermediate sanctions are meant to provide the CRA with additional tools to ensure that charities follow the rules, and provide an alternative to revocation, given its serious consequences (i.e., potential liability for the revocation tax).

However, since their introduction, intermediate sanctions have been applied in a relatively small proportion of CRA audit outcomes. Their limited use raises questions about whether they are effective in their intended objectives of deterring non-compliance and providing additional compliance tools to the CRA, or as a viable alternative to revocation. We welcome views on whether changes to the application of the intermediate sanctions would be desirable.

Do the existing intermediate sanctions provide an effective deterrent for non-compliance by registered charities?
Should intermediate sanctions be more broadly applied by the CRA as a compliance tool to address moderate forms of non-compliance?
Should the CRA provide the public with more information about its use of intermediate sanctions, including the circumstances in which they are imposed?
Is the CRA's current level of oversight of registered charities sufficient to support public confidence in the charitable sector?

Transparency has long been an important part of Canada's approach to the regulation of charities, as it helps the public understand why particular decisions are made. For many years, the CRA has been able to publicly release information pertaining to its decisions to take particular actions with respect to charities, specifically where it applies monetary penalties or suspends or revokes a charity's registration. At the same time, much of the CRA's audit and compliance work with respect to charities takes place behind the veil of taxpayer confidentiality, as required by law. This does not provide the public with a complete picture of CRA's audit activities and may give the impression that certain, often high profile, non-compliance is being left unaddressed, or that the CRA is conducting its audits unfairly. Conversely, the confidentiality of audit actions can help protect against public presumptions of malfeasance in cases where a charity is under audit; 39% of audits in the charitable sector result in no corrective action or an education letter.

Should the CRA be more proactive in publicizing the results of charity audits where it identifies serious non-compliance, resulting in a monetary penalty or the suspension or revocation of a charity's registration?
Should more information about CRA's audit and compliance activities with respect to charities be publicly available in order to increase transparency around its compliance activities? If so, what additional information should be available and at what stage of the audit process?

4. The revocation and objections processes for charities

In cases of serious or repeated non-compliance, including where a charity cannot or will not follow the rules, the CRA may propose to revoke its charitable registration by issuing a Notice of Intention to Revoke the organization's charitable status ("NITR").

Under the ITA, the CRA must follow a prescribed process before revocation can take effect. This process is intended to ensure procedural fairness for charities, while also allowing the CRA to act in a timely and decisive manner to protect the integrity of the tax system.

Following the issuance of a NITR, the CRA must wait 30 days before effecting the revocation by publishing notice in the Canada Gazette^{Footnote 1}. During this period, a registered charity may seek to delay the proposed revocation by applying for, and obtaining, a stay order from the Federal Court of Appeal.

A charity may also file an objection to the NITR with the CRA's Appeals Branch within 90 days of the notice or assessment. This can occur regardless of whether the charity has sought or obtained a delay of the revocation through the courts. The Appeals Branch undertakes formal and impartial reviews of decisions made by the CRA, including those relating to charities.^{Footnote 2} Through the objection process, a charity may present additional information, submit new facts and advance further arguments to support its position. Following its review, the Appeals Branch may ultimately confirm (uphold), vary (change) the reasons for a decision, or vacate (cancel) the decision entirely.

Outcomes over the past five fiscal years (2021-22 to 2025-26) illustrate the role of the objections process as an impartial dispute resolution mechanism. After an objection, approximately 21% of the time the original decision was upheld and 22% of the time the decision was overturned. Over 50% of objections were determined to be invalid. For example, if an organization filed an objection after having been revoked for failure to file their annual return, and subsequently re-applied for registration and was registered, the CRA would consider this objection invalid. These results demonstrate that the objections process provides charities with a meaningful opportunity to have decisions reconsidered, while also ensuring that only valid objections proceed through the formal review process.

If a CRA decision on registration or revocation is confirmed by the Appeals Branch, the charity can appeal the decision at the Federal Court of Appeal based on the information that was before the CRA at the time of its decision.

The government is interested to hear the sector's views on the following:

Are the current processes around revocation (including the objection process) working well? If not, what are areas for improvement?
Should the CRA be able to take quick action against organizations found to be misusing charitable tax incentives or that present a risk to the tax system? If yes, what tools should be available to the CRA while providing administrative fairness for charities?
Does the objections process for charities (including those with respect to refusals to register) provide sufficient administrative and procedural fairness for charities, and are these sufficiently accessible? If not, what could be done to improve this process?
Should the current objection timelines be modified to improve timeliness and reduce administrative burden? For example, would a longer period for filing an objection, but with no extensions, be preferable to the current 90 day filing deadline (but that provides the CRA the authority to extend this deadline on a discretionary basis)?

As noted earlier, the CRA generally uses revocation as a tool of last resort given the serious consequences associate with revocation. A charity whose registration is revoked not only loses its tax-exempt status and its ability to issue charitable donations receipts, but must also disburse its remaining assets on its own charitable activities or as gifts to arm's length registered charities, generally within one year, or face a 100% tax on any assets remaining.

While the revocation tax generally works well, concerns have been noted that the revocation tax may sometimes be avoided where a charity transfers funds to another registered charity that is closely related or may be established for this purpose, thereby limiting the effectiveness of CRA's compliance actions.

In certain cases, an organization whose registration is revoked may re-apply for registration in order to avoid the application of the revocation tax. This process is intended to recognize situations where organizations are revoked for more "routine" non-compliance, such as failing to file an annual information return, but applies more broadly to any organization whose registration is revoked.

In 2025-26, 1,219 organizations had their registration revoked for failure to file their information return, whereas in the same period approximately 30% re-applied for registration. This process creates unnecessary work for both the CRA and charities, slowing down the registration process for other applicants and diverting resources away from higher priority areas.

Should the revocation tax continue to be able to be reduced by disbursements to other charities? If yes, should the rules be tightened to prevent disbursements to closely related or newly established entities?
Should the CRA continue to revoke organizations for failing to file their information return or should it instead use monetary penalties or have the ability to suspend an organization's registration to encourage organizations to file?
Should registration be available to organizations whose registration has been revoked for serious non-compliance or should the availability of re-applying for registration be more limited?

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2026-10-08

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