Relief of poverty and charitable registration

Guidance

Reference number
CG-029

Issued
November 27, 2020 (Revised October 23, 2024)

Summary

A purpose to relieve poverty is furthered by providing a charitable benefit that relieves poverty to a person experiencing poverty.

A person experiencing poverty does not have the means to acquire basic necessities of life and simple amenities that allow for a modest but adequate standard of living.

The following are examples of basic necessities of life and simple amenities in Canada:

• affordable housing
• internet access
• home appliances
• public transportation

A charity may need to apply selection criteria and processes to assess whether its beneficiaries are experiencing poverty. Deciding whether to apply such selection criteria and processes can depend on:

• the value of the charitable benefit
• the frequency at which that benefit is provided
• the location where that benefit is provided
• the charity’s operational circumstances

A charity can use any of the following selection criteria to assess whether a beneficiary is experiencing poverty:

• poverty indicators that have been introduced or used by government agencies operating in Canada for one of their social programs
• poverty indicators the charity itself has developed

For affordable housing provided in Canada, a charity can use provincial or municipal criteria that are consistent with Government of Canada funded affordable housing programs.

A purpose to prevent poverty is not charitable. However, many charitable activities have the effect of preventing poverty. Charitable activities that have the effect of preventing poverty can further a purpose that fits in one of following categories of charity:

• advancement of education
• advancement of religion
• other purposes beneficial to the community in a way the law regards as charitable

A beneficiary of a charitable purpose that advances education, advances religion or benefits the community does not have to be experiencing poverty.

1. Introduction

1. This guidance explains how the CRA interprets the requirements an organization with a purpose to relieve poverty must meet to be eligible for registration as a charity. 

2. The guidance provides general information only. All decisions about specific organizations are made individually, applying the Income Tax Act (Act) and the common law to the facts in each case.

2. The experience of poverty

3. A person experiencing poverty needs help acquiring basic necessities of life and simple amenities that allow for a modest but adequate standard of living.^{Footnote 1}  

4. The courts have not set a uniform measure of poverty.^{Footnote 2}  Rather, a person may or may not experience poverty depending on environment and individual circumstances. For example, between countries, or within a country there may be wide variances in environmental and individual circumstances, such as:

• income
• wealth
• education
• health
• social opportunities
• economic opportunities
• the cost of basic necessities of life and simple amenities
• geographic location (between countries, or even within a country)

Such particular environmental and individual circumstances should be taken into considered when developing criteria and processes for determining whether a person is experiencing poverty.

3. Charitable benefits that relieve poverty

5. A purpose to relieve poverty is furthered by providing a charitable benefit that relieves poverty, to a person experiencing poverty. 

6. A charitable benefit that relieves poverty is a basic necessity of life^{Footnote 3}  and simple amenity^{Footnote 4}   that allows for a modest but adequate standard of living, or promote social inclusion.

7. A charitable benefit that relieves poverty can:

• take many different forms
• vary greatly between countries, or within a country
• vary over time 

8. A charitable benefit that provides more than what is needed to relieve poverty might result in incidental or non-incidental private benefit.^{Footnote 8} A charity may provide incidental private benefit, but it cannot provide non-incidental private benefit.

For more information, see Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test.

4. The ways to prevent poverty

9. Although a purpose to prevent poverty is not charitable,^{Footnote 9}  many charitable activities have the effect of preventing poverty.

10. Charitable activities that have the effect of preventing poverty can further a charitable purpose that fits in one of the other three categories of charity:

• the advancement of education
• the advancement of religion
• other purposes beneficial to the community in a way the courts have recognized as charitable

A beneficiary of a charitable purpose that advances education, advances religion, or benefits the community does not have to be experiencing poverty.

5. Eligible beneficiaries of a purpose to relieve poverty

11. An organization that relieves poverty must consider how:

• its purpose defines the eligible beneficiary group
• it selects its charitable beneficiaries

12. An eligible beneficiary of a purpose to relieve poverty is a person that is experiencing poverty. ^{Footnote 11}

13. While the eligible benefit group does not have to be defined in a purpose, ideally it is defined by a term that clearly describes persons in need of poverty relief.

14. For more information, see Guidance CG-019, How to draft purposes for charitable registration.

5.1 The “poor relations” exception

15. The eligible beneficiary group of a purpose to relieve poverty can be subject to the “the poor relations” exception.^{Footnote 15}   This exception allows members of the eligible beneficiary group to be connected by one of the following:

• family
• employment (current or former)
• membership in certain groups

16. To meet the poor relations exception the eligible beneficiary group cannot be restricted to named, or particular individuals. Indicators that the eligible beneficiary group meets the poor relations exception include:

• the fact that all members of the beneficiary group are not immediately known
• the benefit provided by furthering the purpose is ongoing
• the benefit is not limited to persons who are alive and known when the purpose takes effect

For more information, see Policy statement CPS-024, Guidelines for registering a charity: Meeting the public benefit test.

5.2 A restrictions must be relevant to furthering the charitable purpose, and not contrary to Canadian public policy

17. Any restrictions in the eligible beneficiary group must be relevant to furthering the charitable purpose, and not contrary to Canada’s public policy.

5.3 Benevolent funds

18. A charity can establish a benevolent fund to help persons that are experiencing poverty. A gift to a benevolent fund can only be subject to a general direction that the gifted property be used in a particular charitable program, not for the benefit of a named individuals. In addition, all decisions regarding the use of a donation, including which specific beneficiaries will be provided charitable benefits, must rest with the charity.

6. Selecting charitable beneficiaries that are experiencing poverty

19. A charity may need to apply selection criteria and processes to assess whether its beneficiaries are experiencing poverty. Deciding whether to apply such selection criteria and processes can depend on factors such as:

• the value of the charitable benefit that relieves poverty
• the frequency at which that benefit is provided
• the location where that benefit is provided
• the charity’s operational circumstances

These factors help assess the likelihood the charitable benefit provides only incidental private benefit. If the charity determines that the potential of providing non-incidental private benefit is negligible, it may not be necessary to apply selection criteria and processes.

20. To determine whether a beneficiary is experiencing poverty, a charity can use poverty indicators used by government agencies operating in Canada for one of their social programs. For example:

• Low-Income Cut-Offs
• Low Income Measures
• Market Basket Measures

21. Alternatively, a charity can develop its own selection criteria for assessing whether a beneficiary is experiencing poverty.

22. To determine whether person or household is eligible for affordable housing in a particular community or area, a charity can use provincial, or municipal criteria that are consistent with Government of Canada funded affordable housing programs across Canada, such as:

• Quebec — core need income threshold
• British Columbia — housing income limits
• Alberta — income thresholds
• Toronto — rent-geared-to-income-housing

23. Applying selection criteria and processes can involve collecting and analysing the following information:

• employment income and status
• total household income (including pension, social assistance, child support, spousal support)
• number of dependents
• value of assets (for example, investments and registered retirement savings plans)
• medical expenses
• child care expenses
• commuting expenses to and from employment

24. Documenting the following is an important part of maintaining adequate books and records:^{Footnote 16}

• the selection criteria used to select beneficiaries that are experiencing poverty
• how the charitable benefits are provided to beneficiaries that are experiencing poverty

7. Charitable benefits that relieve poverty provided to non-charitable beneficiaries

25. There are instances where providing a charitable benefit that relieves poverty to a non-charitable beneficiary is an incidental private benefit.

26. Providing charitable benefits that relieve poverty to non charitable beneficiaries must be shown to support, facilitate, or contribute to a charity’s ability to further a purpose to relieve poverty. In addition, providing the charitable benefit should be necessary, reasonable, and proportionate to the public benefit that results from furthering the purpose. 

8. Other considerations

8.1 Operating in collaboration with a non-qualified donee (grantee or intermediary)

27. A charity that furthers its charitable purpose or conducts activities in collaboration with a non‑qualified donee (grantee or intermediary) should be aware of the following:

Grantee

• accountability requirements set out in Guidance CG-032, Registered charities making grants to non-qualified donees

Intermediary

• direction and control requirements set out in guidances:
  • CG‑002, Canadian registered charities carrying out activities outside Canada
  • CG‑004, Using an intermediary to carry out a charity’s activities within Canada

8.2 Community economic development

28. A charity can further a purpose to relieve poverty in an area of social and economic deprivation.

For more information see Guidance CG-014, Community economic development activities and charitable registration.

8.3 Tax implications

29. A charity that provides financial assistance to beneficiaries may need to provide a T5007, Statement of Benefits slip to their beneficiaries. For more information, see Guide T5007, Return of Benefits.

9. Version history