31 January 2025 External T.I. 2024-1024421E5 - Registered charities and 149(1)(l)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: The filing requirements for a registered charity and non-profit organization.

Position: General comments provided.

Reasons: Question of fact.

XXXXXXXXXX									2024-102442
										Karri Lea Estabrooks

January 31, 2025

Dear XXXXXXXXXX:

Re: Registered charities and non-profit organizations – filing requirements

We are writing in response to your correspondence of June 24, 2024, where you requested our comments on the filing requirements for a registered charity and non-profit organization in the following described situation. We apologize for the delay in our response.

In your correspondence, you describe the following:

• a national organization is a registered charity;
• the national organization has provincial affiliates (Provincial Affiliates) that are registered charities; and
• at a municipal level, the Provincial Affiliates have local affiliates (Local Affiliates) that may or may not be incorporated but are constituted and operated for charitable purposes.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Registered charity

Subsection 248(1) of the Act defines a “registered charity” as a

(a) charitable organization, private foundation or public foundation (within the meanings of these terms in subsection 149.1(1) of the Act), resident in Canada, and created or established in Canada; or

(b) branch, section, parish, congregation or other division of an organization or foundation described in paragraph (a), that is resident in Canada and was either created or established in Canada and that receives donations on its own behalf.

Moreover, the registered charity definition requires the entities described in paragraphs (a) or (b) to have applied to the Minister in prescribed form for registration and to have been registered as a charitable organization, private foundation or public foundation. A registered charity is exempt from tax under paragraph 149(1)(f) of the Act.

Subsection 149.1(1) of the Act sets out the conditions for an organization to be a “charitable organization”. Among the conditions, an organization, whether incorporated or not must be constituted and operated exclusively for charitable purposes and no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof.

In addition, the terms “public foundation” and “private foundation” are defined in subsection 149.1(1) of the Act by reference to a charitable foundation. A “charitable foundation” is defined in subsection 149.1(1) of the Act as a corporation or trust that is constituted and operated exclusively for charitable purposes, no part of the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof, and that is not a charitable organization.

Subsection 149.1(14) of the Act requires each registered charity to annually file an information return and a public information return (T3010 Registered Charity Information Return), containing prescribed information, part of which the Minister of National Revenue may disclose to the public under subsection 149.1(15) of the Act. The returns are required to be filed within six months from the end of the taxation year of the charity.

Non-profit organization

In general, an organization is exempt from tax under paragraph 149(1)(l) of the Act for a period throughout which the organization meets all of the following conditions:

(a) it is a club, society or association;

(b) it is not a charity;

(c) it is organized exclusively for social welfare, civic improvement, pleasure, recreation or any other purpose except profit;

(d) it is in fact operated exclusively for the same purpose for which it was organized or for any of the other purposes mentioned in (c); and

(e) it does not distribute or otherwise make available for the personal benefit of a member any of its income unless the member is an association which has as its primary purpose and function the promotion of amateur athletics in Canada.

In this regard, the term “charity” is defined in subsection 149.1(1) of the Act as a charitable organization or charitable foundation (see previous section). An organization may be considered to be a charity even if it is not a registered charity or if its designation as a registered charity has been revoked. If, during a period in a particular taxation year, the Minister considers a particular organization to be a charity, then the organization cannot qualify in that period as a non-profit organization.

In general terms, subsection 149(12) of the Act requires a non-profit organization, which is exempt from tax under paragraph 149(1)(l) of the Act, to file an information return (T1044, Non-Profit Organization (NPO) Information Return) if the organization has received dividends, interest, rentals or royalties in excess of $10,000 in a fiscal period or if the total assets of the organization exceed $200,000 at the end of the immediately preceding fiscal period. For these reporting purposes, the amount of total assets of an organization is the book value of such assets as determined in accordance with generally accepted accounting principles. Subsection 149(12) of the Act also requires that once an organization has been required to file an information return in respect of a fiscal period, it will be required to file returns for all subsequent periods. The information return is to be filed within 6 months of the end of the fiscal period.

Further information on the differences between a registered charity and non-profit organization is available on the CRA webpage at https://www.canada.ca/en/revenue-agency/services/charities-giving/about-registered-charities/what-difference-between-a-registered-charity-a-non-profit-organization.html.

We trust that these comments will be of assistance.

Yours truly,

Bob Naufal
Manager
Financial Institutions Section
for Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch