Investments by registered charities in limited partnerships

Notice to the Reader

This measure has received Royal Assent.

1. Can registered charities invest in limited partnerships now?

Currently, charitable organizations and public foundations are permitted to engage in business activities, as long as the activities qualify as a related business. Private foundations are not permitted to engage in any business activities. A charity that holds an interest in a partnership is considered to be carrying on a business. As a result, few registered charities are in a position to hold an interest in a partnership.

2. What is Budget 2015 proposing for investments made by registered charities?

For investments in limited partnerships that are made or acquired after April 20, 2015, a registered charity will not be considered to be carrying on a business solely because it holds an interest in a partnership, as long as it meets all of the following conditions:

  • The liability of a charity as a member of a partnership is limited under any law governing the arrangement in respect of the partnership.
  • The charity—together with all non-arm’s length entities—holds 20% or less of the interests in the limited partnership.
  • The charity deals at arm’s length with each general partner of the limited partnership.
3. What does this proposed change mean for registered charities?

This proposal will allow registered charities to hold 20% or less of the interests in a limited partnership without being considered to be carrying on a business solely because they hold that interest.

4. What other conditions or restrictions will apply for an investment in a limited partnership?

Starting after April 20, 2015, Budget 2015 also proposes a rule for qualified donees that deems each member of a partnership to own the part of the property of the partnership equal to the proportion that the fair market value of the member’s interest in the partnership is of the fair market value of all interests in the partnership. This deeming rule will effectively apply the excess corporate holding regime in respect of an interest in a partnership held by a private foundation. The non-qualifying security rules and loanback rules will also apply to limited partnership interests.

5. Will the Canada Revenue Agency (CRA) permit registered charities to take advantage of this proposal before it receives Royal Assent?

Yes. Consistent with its general approach for other proposed income tax changes, the CRA will allow registered charities to act upon the proposals before the law is passed.

6. Will these changes apply to other qualified donees?

The proposal will also apply to investments in limited partnerships by registered Canadian amateur athletic associations.

7. Where can I find more information?

For more information on the meaning of related persons and dealing at arm’s length, go to Income Tax Folio, S1-F5-C1: Related persons and dealing at arm's length.

For more information on the meaning of related business, go to What is a Related Business?

For more information on charities, go to Charities and giving.

For information on the new reporting requirement, go to the New Reporting Requirement.

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada’s Budget 2015 documents for details.


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