Factors that will prevent an organization from being registered as a charity
On June 23, 2022, Budget Implementation Act, 2022, No. 1, received Royal Assent. This change in legislation includes new rules that allow charities to make grants to non-qualified donees. As a result, some of the information on this page could change.
On November 30, 2022, the Canada Revenue Agency (CRA) posted the draft guidance document CG-032, Registered charities making grants to non-qualified donees for feedback. This document explains how the CRA expects to administer the recent changes to the Income Tax Act.
The CRA is in the process of reviewing and updating all related guidance products and web pages to ensure they are consistent with the new rules.
To qualify for registration as a charity, an organization must:
- be resident in Canada
- be established and operated for charitable purposes
- devote its resources (funds, personnel, and property) to charitable activities
The Canada Revenue Agency considers common law (court decisions) to determine what is charitable at law.
During the review process, we examine both the purposes and activities of an organization. The following factors will prevent an organization from being registered as a charity:
- non-resident organizations
- purposes that are not charitable at law
- gifting to organizations that are not qualified donees
- personal benefits
- private benevolence
- activities that support or oppose a political party or candidate
- business activities
- activities that are illegal or contrary to Canadian public policy
Organizations established and resident outside Canada will not qualify for registration.
Organizations established for the purpose of making a profit will not qualify for registration. To qualify for registration, an organization must be non-profit and have purposes (also called objects) that are charitable at law.
To be charitable at law, an organization must have purposes that fall under one or more of the four heads (categories) of charity:
- the relief of poverty
- the advancement of education
- the advancement of religion
- certain other purposes that benefit the community
The last category is limited to purposes that have been determined by the courts to be charitable at law.
For more information and examples, go to Charitable purposes.
Organizations that gift funds or resources to organizations that are not qualified donees will not qualify for registration. A registered charity can only use its funds and resources in two ways:
- it can carry on its own charitable activities (activities conducted under the charity's direction and control)
- it can make gifts to other organizations that are qualified donees (usually other registered charities)
Individuals and most organizations outside Canada are not qualified donees. For more information, see Guidance CG-002, Canadian registered charities carrying on activities outside Canada.
Organizations that provide personal benefits (directly or indirectly) by making any part of their income payable to or available to any of their members, shareholders, directors, or trustees will not qualify for registration. This does not include providing benefits to persons who qualify as legitimate recipients of a charitable program.
Examples of personal benefits
- an organization that only awards scholarships to its members (direct)
- an organization run by a group of artists who want to promote only their own work (indirect)
An organization may be allowed to pay for services provided by its members, shareholders, directors, or trustees. It may also be able, to incur and pay other expenses that are associated with the normal operation of the organizaton.
Organizations created to benefit a particular individual or a private group, are considered to be created for private benevolence and will not qualify for registration. To qualify for registration, an organization must show that its purposes and activities provide a tangible benefit to the public as a whole or a significant section of it.
Examples of private benevolence
- an organization creates a fund to help a specific family that has lost its house in a fire
- an organization creates a fund to cover the travel and hospital expenses for a particular child's surgery
For more information, see CPS-024, Guidelines for registering a charity: Meeting the public benefit test.
Organizations that devote any part of their resources to the direct or indirect support of or opposition to any political party or candidate for public office will not qualify for registration.
A charity may publicly agree or disagree with a decision or position of a Government, but in doing so, must not support or oppose any political party or candidate for public office. As a general guideline, a charity’s communications should focus on the policy issue under discussion, and not refer to any candidate or political party.
For more information, see Guidance CG-027, Public policy dialogue and development activities.
Organizations created to primarily operate a commercial activity (revenue-generating) with the intent to earn a profit will not qualify for registration.
Charitable organizations and public foundations may carry on related business activities that accomplish or promote their charitable purposes. A related business activity is a commercial (revenue-generating) activity that is either related to a charity's purposes, or substantially run by volunteers.
Private foundations cannot carry on any business activities.
For more information and examples, see Policy statement CPS-019, What is a related business?
Organizations that take part in illegal activities (for example, fraud, or money laundering) will not qualify for registration.
Organizations with activities that go against Canadian public policy will not qualify for registration. A public policy would be found in an act of Parliament, or a regulation.
Organizations that make their resources available either directly or indirectly to further terrorism will not qualify for registration. This is according to the 2001 Anti-terrorism Act.
For more information, see Charities in the International Context.
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