Section 149.1

Subsection 149.1(1) - Definitions

Charitable Foundation


Public Television Association of Quebec v. Canada (National Revenue), 2015 FCA 170

appellant failed to control its alleged agent (a US public television station) and was its conduit

The objects of a Quebec-based corporation ("PTAQ") focused on advancing education through the production and distribution of educational television programming. Agreements with a Vermont public television station ("VPT") provided that VPT would produce non-commercial television as agent for and at the direction of PTAQ and engage in fund-raising for PTAQ.

Scott JA upheld the Minister's revocation of PTAQ's registration as a charitable organization. In finding that PTAQ was not carrying on charitable activities thorough VPT, as its agent, and after stating (at para.44) that "the control over the agent's activities is a key element to establish that it maintained direction and control over its resources" (para. 44), Scott JA stated (at para. 46) that evidence did "not indicate any form of control over the choice of programs offered to PTAQ by its agent" and instead revealed "that VPT presented ‘predetermined packages' to PTAQ every year." Furthermore, PTAQ failed to establish "that it exercised monthly financial monitoring and control of expenditures… that it funded " (para. 48), and "the fundraising documents… indicated that VPT was conducting the fundraising activities on its own behalf" (para. 50). PTAQ instead was a "conduit" for VPT, i.e., "only used to issue receipts for donations received by VPT from Canadian donors" (para. 55).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Agency appellant failed to control its alleged agent (a US public television station) 41

Prescient Foundation v. Canada (National Revenue), 2013 DTC 5101 [at 6044], 2013 FCA 120

The appellant ("Prescient") made a gift of $500,000 to a US charity ("DATA") that was alleged by the Minister to be a non-qualified donee , and participated in a series of transactions effecting the sale of a farm business of a private B.C. company ("Vision Poultry") in a manner that provided tax advantages to Vison Poultry and its individual shareholders. The Court found that the DATA donation was not grounds for revoking Prescient's registration as a charitable public foundation, but that the Vision Poultry transactions were.

Respecting the DATA donation, Mainville, JA first noted (at para. 12) that the applicable standard under s. 172(3) for "extricable question of law" was one of correctness rather than reasonableness. Although the s. 149.1(1) definition of "charitable purposes" includes the disbursement of funds to a qualified donee, the "charitable purposes recognized under the Act extend beyond disbursements to qualified donees" (para. 25). As it was not disputed "that a gift to a foreign charity is a charitable purpose under the common law" (para. 26), the charitable purpose test was satisfied. There was no authority offered by the Minister for the proposition that "to qualify as charitable, a charitable public foundation must…only disburse funds to a qualified donee" (para. 30). (Mainville JA noted that proposed paragraphs 149.1(2)(c), 149.1(3)(b.1) and 149.2(4)(b.1) would have led to a different conclusion if they were in force.)

The Vision Poultry transactions are briefly summarized in the chart immediately below, but are not described in detail as they were lacking in legal and tax logic:

Mainville, JA accepted (at para. 37-39) the Minister's position "that these transactions amounted to [Prescient] participating in a tax planning arrangement for the private benefit of others and, as such, were not entered into for charitable purposes" (para. 36). Furthermore, the investment in shares of Vision Poultry (which became worthless as part of the transactions) did not qualify as a "related business activity," as "it was known, at the outset of the activity, that its outcome would be a major loss" (para. 40).

Alberta Institute on Mental Retardation v. The Queen, 87 DTC 5306, [1987] 2 CTC 70 (FCA)

The appellant solicited and collected used household items, provided the items to an independent for-profit retail corporation ("Value Village"), received from Value Village 50% of the proceeds from the sale of the items and forwarded (as required by the agreement between the appellant and Value Village) all the funds received by it to the Alberta Association for the Mentally Handicapped.

The appellant was operated exclusively for charitable purposes. "The sole purpose of the appellant, at all times, has been and is to raise money for the benefit of persons (and their families) suffering from mental retardation. The means chosen to raise such monies, i.e., the solicitation for and collection of used goods is, in reality, simply a conversion of goods into money and does not itself change the nature of the appellant's operation."

See Also

Re Levy Estate (1989), 68 OR (2d) 385 (Ont CA)

The deceased left the residue of his Estate "unto the State of Israel for charitable purposes only, said charities to be decided upon by my Trustees herein." The Court held that a trust which falls under the fourth head of charity does not lose its charitable character merely because the charitable activities are to be carried on in a foreign country for the benefit of that country and with no direct benefit to Canada.

Administrative Policy

31 March 2017 External T.I. 2016-0630351E5 - Return of a gift

gift potentially could be returned by charity pursuant to a condition subsequent

In 1981, the taxpayer gifted a whole life insurance policy to a charitable foundation that raises funds for a specific college on condition that the funds be used by the college for scholarships in a specific program, which now no longer exists. The taxpayer has contacted the foundation, requesting a return of the policy, which the foundation is prepared to consider. Would there be any negative impact on its registered status if it did so? CRA responded:

[A] registered charity that returns gifted property could be regarded as making a gift to a non-qualified donee or providing an undue benefit, which are contraventions of the Act and could result in sanctions that include revocation of registered status. …

[T]he determination of whether the gift of the life insurance policy to the foundation was subject to a condition subsequent or whether the foundation can legally return the life insurance policy is a question of law and beyond the scope of this technical interpretation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(26) return of gift made 35 years ago 277
Tax Topics - Income Tax Act - 101-110 - Section 110.1 - Subsection 110.1(15) return of gift made 35 years previously by charity 280

Elena Hoffstein and Robin Roddey, "Private Foundations and Community Foundations", Personal Tax Planning, 2001 Canadian Tax Journal, Vol. 49, No. 5, p. 1258.

Cathy Hawara, Director General, Charities Directorate, "The CRA Charities Directorate's Approach to Compliance", 2014 Conference Report, Canadian Tax Foundation, 37:1-10


Public v. private benefit (p. 37:7)

Any benefit to an individual or group of individuals must either (1) arise directly through pursuit of the charity's purposes (for example, relief of poverty), or (2) be incidental to the pursuit of those purposes (as in the case of programs pursued by community economic development organizations—for example, by providing inducements to attract social and community services to a distressed region).

When assessing private benefit, the Charities Directorate considers the following factors:

  • the extent to which the private benefits are considered incidental;
  • the degree to which the private benefits further the organization's charitable purpose; and
  • whether the amount of private benefit is ancillary and incidental to the charitable purpose, and is reasonable. [fn 2: For specific guidelines, see Canada Revenue Agency, "Guidelines for Registering a Charity: Meeting the Public Benefit Test" (]

The concerns examined by our Compliance section include personal private benefit (for example, the paying of personal expenses from a charity's resources), and engaging a company controlled by the charity's donors or officials rather than a company that offers the charity the best value.



Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Classification of Trusts for Income Tax Purposes", Chapter 2 of Canadian Taxation of Trusts (Canadian Tax Foundation), 2016.

Public benefit requirement (p. 81)

There are two distinct components to the public benefit requirement. First, in general an objectively measurable and socially useful benefit must in fact be conferred Second, the benefit must be available to a sufficiently large section of the public that it is not determined by reference to a personal relationship to a particular individual or corporation (except in the- context of the relief of poverty, discussed below.

Four (Pemsel) heads of charity (p. 822)

[T]he four heads of charity described in Pemsel [[1891] AC 531] [are] relief of poverty, advancement of education, advancement of religion, and other purposes beneficial to the community.

Relief of poverty (p. 82)

[A] trust for a person's poor relations can be a valid charitable trust….

Advancement of education (p. 83)

[R]esearch may also qualify as a charitable activity if it increases and disseminates knowledge. Trusts supporting the arts are also considered to be charitable as being for the advancement of education.

Advancement of religion (p. 84)

[T]he public benefit requirement is generally presumed, and courts do not consider the merits of the beliefs to be promoted, as long as they have a religious tendency and do not undermine morality or religion.

Charitable Organization


Credit Counselling Services of Atlantic Canada Inc. v. Canada (National Revenue), 2016 FCA 193

prevention of poverty not relief of poverty or of general community benefit

The Appellant, whose principal objects were the prevention of poverty, was registered as a qualified charity in 1993, and since that time provided credit counselling services, an education outreach program and a debt management program. In confirming the annulment of the Appellant’s registration, Webb JA found that its activities relating to the prevention of poverty were not being carried out for a charitable purpose, noting (at para. 16) that “the Appellant did not refer to any case that have held that the relief of poverty will include the prevention of poverty,” (at para. 17) that “it is clear that the Appellant is assisting many consumers who are employed and who have assets and therefore would not necessarily, as of the time of receiving the assistance, be considered to be in poverty,” and (at para. 18) that “just as in the United Kingdom, it will require an act Parliament to add the prevention of poverty as a charitable purpose.”

Consistently with Vancouver Society, Webb JA also dismissed the Appellant’s argument that it should succeed under the fourth head of charitable purposes (other benefit to the community). Webb JA stated (at para 22):

[T]hose individuals who have been assisted in paying down their debts and better managing their finances have benefited but it is far from clear why this is not a private advantage enjoyed by these individuals or how this would be beneficial to the community in a way that the law regards as charitable.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(2) annulment for pursuing prevention of poverty 46

Opportunities for the Disabled Foundation v. Canada (National Revenue), 2016 FCA 94

expending 70% of revenues on fund-raising and undue benefits inconsistent with wholly-devoted test

Before dismissing the appellant’s appeal under s. 172(3)(a.1) of the revocation of its registration as a charitable organization, Ryer JA noted that one of the grounds for revocation was that the Appellant had failed to devote all of its resources to charitable activities carried on by it (which were not considered to include amounts paid to disabled fundraisers), stating (at paras. 58, 59 & 61):

…[O]nly one percent of the funds raised by the Appellant was deployed towards charitable activities in the period under review. This led the Minister to determine that fundraising itself was the Appellant’s primary activity during this period.

…[A]pproximately 70% of the Appellant’s revenues for the relevant period were expended on fundraising. …

…[F]undraising itself cannot become a raison d'être for a charity. …[T]he high level of fundraising activities undertaken … can reasonably be regarded as having become an end in itself.

Respecting a further ground that the appellant had provided undue benefits to fundraisers and directors, he stated (at para. 43):

[A] charitable organization is required to devote all of its resources to the charitable activities that it carries on. This requirement is necessarily breached if resources of the organization are instead devoted to the provision of undue benefits.

Additional grounds for revocation, which were accepted, were:

  • making gifts to non-qualified donees;
  • failing to maintain adequate books and records and
  • failing to file an information return as required by the Act.
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 168 - Subsection 168(1) - Paragraph 168(1)(e) registration can be revoked for inadequate records 182
Tax Topics - Income Tax Act - Section 165 - Subsection 165(3) timeliness issues addressed by appeal right 185

Humanics Institute v. Canada (National Revenue), 2015 DTC 5012 [at 5542], 2014 FCA 265

"Oneness of Reality" falls short of a "particular and comprehensive system of faith and worship"

In finding that the Minister was correct that the establishing of a sanctuary and sculpture park did not constitute a charity for religious purposes, Noël CJ stated (at para. 5):

[T]he concept of "Oneness of Reality" advanced by the appellant is so broad and vague as to be practically unascertainable. The appellant has failed to show the existence of a "particular and comprehensive system of faith and worship" or a body of teachings and doctrine that would bring the concept which it promotes within the legal acceptation of the word religion... .

Likewise, merely "expressing aspirations" to initiate and support "multi-religious, educational programs and services and will organize lectures, workshops and seminars" were not a basis for overturning the Minister's findings, as (para. 8):

...the Minister may require the applicant to provide detailed and credible plans for the latter's proposed activities.

Sagkeeng Memorial Arena Inc. v. Canada (National Revenue), 2012 DTC 5112 [at 7119], 2012 FCA 171

The Court declined to overrule the Minister's discretionary decision to deny the appellant charitable registration. One of the Minister's bases for the decision was concern over the appellant's involvement with a business corporation ("Fort Alexander Holdings Ltd."), and the possibility that the appellant's resources might be diverted from charitable activities. The Minister requested more information in respect of this concern, which the appellant did not provide. Stratas JA stated (at para. 8):

On the facts, the Minister was well within the range of acceptability and defensibility in requiring more and better information from the appellant. It is one thing to tender draft documents expressing aspirations; it is quite another to tender final documents expressing plans that are detailed and credible.

News to you Canada v. Canada (National Revenue), 2011 DTC 5105 [at 5916], 2011 FCA 192

The taxpayer was incorporated for the purpose of providing unbiased and well researched news and public affairs programs. The Court of Appeal affirmed the Minister's decision that the taxpayer's purposes did not qualify as charitable purposes, as they fell under none of the recognized heads of charitable purpose. Applying Vancouver Society, The Court of Appeal found that the proposed activities did not fall under the head of education, as they did not meet the threshold of being a "legitimate, targeted attempt at educating others, whether through formal or informal instruction, training, plans of self-study, or otherwise." (Vancouver Society at para. 171.)

Neither did the proposed activities fall under the head of "other purposes beneficial to the community." Mainville J.A. stated (at para. 30) that, "in order to be charitable, the appellant's purposes must be of special benefit to the community, with an eye to the society's current social, moral, and economic context." The taxpayer identified its audience as the general public, which meant its services were not targeted at a group in need of special assistance. Moreover, the taxpayer did not set out to create new information infrastructure for the public, but only to provide information over existing infrastructure - a fact which distinguished the present case from Vancouver FreeNet.

Hostelling International Canada v. Canada (National Revenue), 2009 DTC 5643, 2008 FCA 396

The appellant, which provided accommodation in a youth hostel, was unsuccessful in a submission that, by facilitating travel by providing low-cost accommodation, it was promoting the advancement of education, and was found to be carrying on a commercial business. Its appeal from a revocation under s. 149.1(2)(a) was dismissed.

A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency), 2007 DTC 5527, 2007 SCC 42, [2007] 3 S.C.R. 217

An organization that was devoted to the promotion of amateur youth soccer in Ontario was not precluded from arguing that its activities were devoted to charitable purposes notwithstanding that it did not qualify as a registered Canadian amateur athletic association (an "RCAAA") (given its restriction to Ontario communities): the words used by Parliament respecting RCAAAs did not show any intention that the regime for such associations would occupy the field for sports associations so that an association which could not qualify as an RCAAA could not qualify as being a charity. However, the scheme of the Act (which made a distinction between non-profit organizations operated exclusively for social welfare, and charities) signalled that the Act did not support a wide expansion of the definition of charity, in recognizing sports and recreation organizations as being charitable would be "closer to wholesale reform than incremental change" (para. 44). Accordingly, the appellant did not qualify for registration as a charity.

Travel Just v. Canada Revenue Agency, 2007 DTC 5012, 2006 FCA 343

A company whose objects were to work with governmental authorities and grass roots communities of various tourism destination markets to create and develop model tourism development projects that contributed to the realization of international human rights and environmental norms, and to produce and disseminate materials that provided travellers and tourists with information on socially and environmentally responsible tourism, was not charitable.

Bayit Lepletot v. Canada (Minister of National Revenue), 2006 DTC 6321, 2006 FCA 128

offshore orphanages not operated on behalf of appellant

The appellant, which had no staff in Israel and claimed it was carrying on its charitable works in Israel (the operation of three orphanages) through its agent, Rabbi Stern, was unable to establish that the charitable works at the three orphanages were being carried out on its behalf rather than by the three institutions that were operating the orphanages, which had been established 33 years before the incorporation of the appellant.

Fuaran Foundation v. Canada (Customs and Revenue Agency), 2004 DTC 6399, 2004 FCA 181

A foundation that operated a retreat in the Lake Region of England did not qualify as a charitable organization given that its objects included providing financial assistance for the establishment and continued support of "individual Christians and Christian organizations" (which could include non-qualified donees) and given that it was in the complete discretion of attendees at the retreat whether they would participate at all in religious activities. Sexton J.A. stated (at p. 6401) that "there is no targeted attempt to promote religion or to take positive steps to sustain and increase religious belief".

Canadian Committee for the Tel Aviv Foundation v. Canada, 2002 DTC 6843, 2002 FCA 72

no control of offshore agent

The Appellant maintained the position that it was carrying on charitable activities through its agent in Israel. In dismissing an appeal of the decision of the Minister to revoke the appellant's registration as a charitable organization, Malone J.A. stated (at p. 6852):

"While a charity may carry on its charitable activities through an agent, the charity must be prepared to satisfy the Minister that it is at all times both in control of the agent, and in a position to report on the agent's activities."

Alliance For Life v. Canada (Minister of National Revenue), 99 DTC 5228 (FCA)

After reviewing the authorities suggesting that the persuasion or indoctrination of people is not an activity in support of a charitable object, Stone J.A. indicated (at p. 5250) that "despite the object stated in the appellant's constituting documents its true mission is more likely that of advocating its strongly held convictions on important social and moral issues in a one-sided manner to the virtual exclusion of any equally strong opposing convictions", and dismissed an appeal against revocation of the appellant's status as a registered charity.

The procedures followed by Revenue Canada also had events to procedural fairness.

Vancouver Society of Immigrant and Visible Minority Women v. M.N.R., 99 DTC 5034, [1999] 1 S.C.R. 10

activities broader than educational

The purposes of the appellant were not exclusively charitable because they included not only education of immigrant women but also doing that which was "conducive" to the attainment of such objects (which was a broader term than "incidental").

After noting (at p. 5043) that the educational charitable head should not be restricted to the "formal training of the mind" and that any knowledge or training that "is provided in a structured manner and for a genuinely educational purpose - that is, to advance the knowledge or abilities of the recipient - and not solely to promote a particular point of view or political orientation" would qualify, he went on to note that the intended purposes (and the actual activities that were carried out) were not restricted to such matters as training the beneficiaries how to apply for a job but also extended to establishing a job skills directory, networking, liaising for accreditation of credentials, soliciting job opportunities and offering referral services. These were not educational, and did not fall under the fourth head.

Words and Phrases

Action des Femmes Handicapées (Montreal) v. MNR, 98 DTC 6528 (FCA)

The activities of the appellant, which consisted of participation in colloques and workshops organized by others, and the publication of six pamphlets, five of which were on issues of concern to women, especially handicapped women, were not charitable.

Human Life International in Canada Inc. v. MNR, 98 DTC 6196 (FCA)

The appellant, whose objects included the protection of the unborn, elderly and handicapped, the promotion of true Christian family values, the encouragement of chastity, and the teaching of natural family planning had its registration properly revoked by the Minister. The distribution of literature and the holding of conferences by it did not qualify as the advancement of education (i.e., activities directed towards the formal training of the mind or the improvement of a useful branch of human knowledge). Furthermore, given that "the jurisprudence generally supports the proposition that activities primarily designed to sway public opinion on social issues are not charitable activities" (p. 6200), and given that "any determination by this Court as to whether the propagation of such views is beneficial to the community and thus worthy of temporal support through tax exemption would be essentially a political determination" (p. 6201), the appellant's activity did not qualify as serving purposes beneficial to the community within the fourth category of what is charitable.

Interfaith Development Education Association, Burlington v. MNR, 97 DTC 5424 (FCA)

A non-share corporation whose objects were to "educate the public and encourage an awareness and understanding of social justice conditions" and "to interact with local development justice organizations as well as churches and missions to further such educational programs" did not qualify as a charitable organization on the basis of advancing education, or on other grounds.

Briarpatch Inc. v. The Queen, 96 DTC 6294 (FCA)

The appellant, whose principal activity was the publication and distribution of the magazine "Briarpatch", did not come within the educational advancement branch of what was considered to be charitable given that it was "evident that the magazine is not directed toward the training of the mind through structured analysis or presentation of knowledge" (at p. 6296). In order to dispose of a submission that the organization had purposes beneficial to the community under the general charitable head, it was sufficient to note that the topics canvassed in the magazine were not restricted to matters that were of direct relevance to Canada's poor, so that it was not possible to conclude that the magazine spoke to a specific, identifiable group which deserved or needed special recognition or protection.

Vancouver Regional FreeNet Association v. MNR, 96 DTC 6440 (FCA)

The taxpayer, which was incorporated as a non-profit organization in order to provide free access to all persons in the lower mainland of British Columbia to the information highway, including the Internet, qualified as a charitable organization. Hugessen J.A. noted (at p. 6444) that "the free exchange of information amongst members of society has long been recognized as a public good" and noted that because the appellant provided access to messages but not the messages themselves, it did not detract from its charitable status that its services very well might be used for commercial or other non-public purposes.

Everywoman's Health Centre Society (1988) v. The Queen, 92 DTC 6001 (FCA)

The appeal of a free-standing B.C. abortion clinic from the failure of the Minister to accept its application for registration as a charitable organization was allowed given that abortion, when performed by a physician, constitutes a form of health care, the absence of any illegality to the clinic's activities and the absence of clear statements of public policy on the issue of abortion. Décary J.A. stated (p. 6008):

"With respect to the argument that there can be no charity at law absent public consensus ... to define 'charity' through public consensus would be a most imprudent thing to do. Charity and public opinion do not always go hand in hand; some forms of charity will often precede public opinion, while others will often offend it. Courts are not well-equipped to assess public consensus, which is a fragile and volatile concept."

The Seventh Division, Pacific Northwest Region, National Model Railroad Association v. MNR, 89 DTC 5133 (FCA)

While some incidental measure of personal benefit to an organization's membership may not deprive it of its charitable character, the Minister rightly concluded that in this case the element of benefit to the membership was too high.

N.D.G. Neighbourhood Association v. MNR, 88 DTC 6279, [1988] 2 CTC 14 (FCA)

A neighbourhood association which devoted most of its resources to advancing various causes that were perceived to affect the well-being of the community (e.g., opposing spending cut-backs that would stop poor children from attending summer day camps, opposing adverse changes to public transit, and battling condominium conversions in a low-rent area) did not come under the fourth head, and was tainted by its political character. "It is not a near miss with respect to the advancement of education, which an enlightened public opinion must then recognize through the fourth category."

S.149.1(b.2) did not apply because its political activities were not merely ancillary.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 167 - Subsection 167(5) 37

Toronto Volgograd Committee v. MNR, 88 DTC 6192, [1988] 1 CTC 365 (FCA)

An unincorporated association whose objects and activities entailed establishing links between residents of Toronto and Volgograd in order to reduce international tensions, was political rather than charitable. Activities aimed at establishing a particular climate of opinion and at promoting an attitude of mind, were political.

Positive Action Against Pornography v. MNR, 88 DTC 6186, [1988] 1 CTC 232 (FCA)

The presentation to the public of selected items of information and opinion on the subject of pornography did not entail the advancement of education, and therefore was not charitable. In order for there to have been advancement of education in its legal sense, it would be necessary to find an element of formal training of the mind or improvement of a useful branch of human knowledge.

The primary purpose of the appellant's activities could not be classified as beneficial to the community under the fourth head of charity, but instead was political, e.g., the procuring of changes in the law.

Polish Canadian Television Production Society v. MNR, 87 DTC 5216, [1987] 1 CTC 319 (FCA)

Given the inadequacies of the record, it was unwise to express any concluded opinions on whether the advancement of multiculturalism generally or of the cultural interest of an individual ethnic component of the national mosaic was to be considered a charitable objective.

Native Communications Society of B.C. v. M.N.R., 86 DTC 6353, [1986] 2 CTC 170 (FCA)

A non-profit corporation whose main objects were to produce radio and television programs of relevance to native people in British Columbia, to train such natives as communications workers and to publish a newspaper on subjects of relevance to such people, was held to be charitable under the general head in light inter alia of the character of Indians as "a people set apart for particular assistance and protection in many aspects of their lives."

Scarborough Community Legal Services v. The Queen, 85 DTC 5102, [1985] 1 CTC 98 (FCA)

Although "an organization should not lose its status as a charitable organization because of some quite exceptional and sporadic activity in which it may be momentarily involved," the appellant, here, was not entitled to be registered as a charity because of "sustained efforts to influence the policy-making process", e.g., taking part in rallies at Queen's Park to protest against a proposal by the Ontario Government to bring changes to the Family Benefits program, and being involved with the Committee to Improve the Scarborough Property Standards By-laws (per Marceau,J.).

McBurney v. The Queen, 84 DTC 6494, [1984] CTC 466 (FCTD), rev'd 85 DTC 5433, [1985] 2CTC 214 (FCA)

rev'd on other grounds 85 DTC 5433, [1985] 2 CTC 214 (FCA)

Incorporated private schools which devoted their resources to teaching pupils from a Christian perspective were charities.

Hutterian Brethren Church of Wilson v. The Queen, 79 DTC 5474, [1980] CTC 1 (FCA)

Since the business of farming for a profit was the appellant's main activity, it did not qualify. "The business of farming is neither a religious nor a charitable activity ... and this is so even if that business is carried on by persons believing farming to be the only activity compatible with a truly religious life ... . Moreover, a commercial activity ... does not become a charitable activity within the meaning of section 149 for the sole reason that it is carried on by a charitable person with the intention of using income derived from that business for charitable purposes."

See Also

Latimer v. Commissioner of Inland Revenue, [2004] 1 WLR 1466 (PC)

Before going on to find that a trust was not charitable because of a residual trust in favour of the Crown, Lord Millett stated (at p. 1476):

"Where the trustees are authorised to apply trust money for a range of charitable and non-charitable purposes it cannot be said with certainty of any particular sum that it will be applied to charitable purposes: it may be applied to non-charitable purposes.

... (S)ome trust for charitable purposes cannot help but confer incidental benefits and individuals; they do not thereby lose their charitable status.

... The distinction is between ends, means and consequences. The ends must be exclusively charitable. But if the non-charitable benefits are merely the means or the incidental consequences of carrying out the charitable purposes and are not ends in themselves, charitable status is not lost."

L.I.U.N.A. Local 527 Members' Training Trust Fund v. The Queen, 92 DTC 2365 (TCC)

In the context of considering the applicability of s. 149(1)(l), Bowman J. found that a fund established for the purpose of re-training from time to time members of a union lacked the element of public benefit sufficient to make it qualify as a charitable trust.

Re Public Trustee and Toronto Humane Society (1987), 60 OR (2d) 236 (Ont HC)

An organization dedicated to obtaining legislation which would abolish the statutorily-santioned practice of removing impounded animals for scientific research, had political purposes and therefore could not be charitable.

Re Ronald McDonald Society (1984), 7.DLR (4th) 367 (BCCA)

A society which had been incorporated as a charity to construct and operate a home for sick children was found to be using the home for a charitable purpose during the period of renovation prior to the occupation of the home by patients.

Re Laidlaw Foundation (1984), 48 OR (Zd) 549 (Ont. DC)

An organization, the main object of which is the promotion of an amateur athletic sport which involves the pursuit of physical fitness, is prima facie a charitable organiation.

C.I.R. v. McMullen, [1980] T.R. 85 (HL)

A trust, whose objective was to enable and encourage pupils to play association football and other sports, was charitable.

C.I.R. v. White, [1980] T.R. 155 (HC)

"[T]he promotion or advancement of industry ... is a charitable object provided that the purpose is the advancement of the benefit of the public at large and not merely the promotion of the interests of those engaged in the manufacture and sale of their particular products." An association whose purpose was to preserve and foster craftsmanship, was charitable.

Barralet v. A.G. re South Place Ethical Society, [1980] T.R. 217 (HC)

A learned society devoted to the dissemination and study of ethical principles was charitable.

Administrative Policy

Cathy Hawara, Director General, Charities Directorate, "The CRA Charities Directorate's Approach to Compliance", 2014 Conference Report, Canadian Tax Foundation, 37:1-10


Requirement for direction and control over the charity's activities (pp. 37:5-6)

Registered charities may use their resources in only two ways: (1) by making gifts to qualified donees, or (2) by carrying on their own charitable programs….

…[I]n order to demonstrate that it is carrying on its own activity, a registered charity must maintain direction and control over the use of its resources. Although a charity can generally delegate the authority to make day-to-day operating decisions, it cannot merely be a conduit to funnel money to an organization that is not a qualified donee. A properly structured agency or joint venture agreement can help demonstrate direction and control. Even when an agreement exists, however, the charity must ensure that it is monitored.

16 July 2001 Comfort Letter 20010716

Finance "will recommend the replacement of the current contribution test with a post-donation test. This test will require that, all times after the donation, any person (or group of persons not dealing at arm's length) contributing more than 50% of the capital of the organization must deal at arm's length with more than half of the directors, trustees and officers of the organization, and must not have any direct or indirect influence over the organization such that, if exercised, it would be reasonable to conclude that the person (or group) controls the organization or one or more activities of the organization."

13 March 1992 T.I. (Tax Window, No. 18, p. 23, ¶1806)

While most boards of education are not municipalities (and therefore not qualified under s. 110.1(1)(a)(iv)), they would be considered to be charitable because the purposes and activities are the advancement of education.


Cullity, "The Myth of Charitable Activities", Estates & Trusts Journal, July 1990, p. 7.

Bromley, "Political, Foreign and Business Activities: Problems in the Law of Charities", 1989 Conference Report, c. 36

Disbursement Quota

Administrative Policy

3 August 1995 External T.I. 5-950789 -

The "amount" to be used in A of the formula is the fair market value of the capital property at the time the property was gifted.

9 May 1994 T.I. 940710 (C.T.O. "Liability for Part V Tax")

The amount of a gift represented by shares gifted to a private foundation will be the amount designated under s. 118.1(6), because this is deemed to be the fair market value of the gift and, as such, the amount that the foundation would issue the receipt for.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 189 - Subsection 189(3) 49


Wolfe Goodman, "Income Tax - Charities - Disbursement Quota - Effect on Disbursement Quota of Capital Encroachment on 'Ten Year Gift'", 21 Estates, Trusts & Pensions Journal, p. 374.

Ineligible Individual

Administrative Policy

Cathy Hawara, Director General, Charities Directorate, "The CRA Charities Directorate's Approach to Compliance", 2014 Conference Report, Canadian Tax Foundation, 37:1-10


"Balanced" application intended (p. 37:9)

Previously, when charitable registrations were revoked for serious breaches of the Act (including issuing false receipts and participating in abusive tax shelter schemes), those who were in charge when the breaches occurred could, establish new entities and apply for registration, and the CRA could not refer to their history as part of its decision-making process. Although the new provisions give the CRA the discretion to determine which organizations will be registered and which will have their registration revoked or suspended, the CRA intends to act in a balanced way, recognizing that most organizations comply with the Act's requirements.

Public Foundation


Sheldon Inwentash and Lynn Factor Charitable Foundation v. Canada, 2012 FCA 136

A trust, which was a charitable foundation, did not qualify as a public foundation as it had a single trustee (a registered trust company). Dawson JA stated (at paras. 30-33) that the references to "more than 50%" of the other trustees, the trustees dealing with "each other," and their dealing "at arm's length" (and "[m]oreover, a single trustee is not at arm's length from itself") showed an unequivocal intention that there be multiple trustees. Furthermore, an examination of the legislative context and purpose indicated that "the requirement that there be more than one arm's length trustee provides greater assurance that a public foundation will not be used for tax avoidance purposes" (para. 42).

Administrative Policy

T4063(E) Rev. 12 "Registering a Charity for Income Tax Purposes"

Charitable organizations

  • mainly do their own activities; and
  • more than 50% of their directors, trustees, or like officials deal with each other at arm's length.

Public foundations

  • generally give more than 50% of their income annually to qualified donees, but may also do some of their own charitable activities; and
  • more than 50% of their directors, trustees, or like officials deal with each other at arm's length.

Private foundations

  • may do their own charitable activities or fund other qualified donees;
  • 50% or more of their directors, trustees, or like officials are not at arm's length; and
  • more than 50% of their funding comes from a person or group of persons that controls the charity in some way.

Qualified Donee

Paragraph (a)

Sujbparagraph (a)(iii)

Administrative Policy

5 June 2014 Internal T.I. 2014-0532281I7 F - Chambre des communes-donataire reconnu 149.1(1)

Parliament does not perform a function of government

Does the House of Commons qualify as a qualified done? CRA responded:

Given that the House of Commons exercises legislative rather than executive power, it does not meet the expression "municipal or public body performing a function of government in Canada" for the purposes of section 149.1. Thus, we are of the view that it cannot qualify as a qualified donee.

Words and Phrases

Related Business


Prescient Foundation v. Canada (National Revenue), 2013 DTC 5101 [at 6044], 2013 FCA 120

The appellant ("Prescient") had served as an intermediary in an asset sale, and thereby attempted to confer on private individuals similar tax advantages to those enjoyed by charitable foundations. In the course of the asset sale, the taxpayer and several other charitable foundations acquired 95% of the shares of a farm corporation, and donated the farm assets to another foundation.

In the course of affirming the Minister's decision to revoke Prescient's charitable registration (see above fore details), Mainville JA noted that Prescient's dealings with the farm corporation did not qualify as a "related business activity," as "it was known, at the outset of the activity, that its outcome would be a major loss" because the farm corporation's assets were going to be donated (para. 40).

House of Holy God v. Canada (Attorney General), 2009 DTC 5901, 2009 FCA 148

A business of producing and selling maple syrup through directors who were remunerated for their efforts was not a related business. An argument that the maple syrup business should be regarded as a related business because the profit generated was deposited in an account for use at some future time to construct a community centre, was rejected.

Earth Fund v. MNR, 2003 DTC 5016 (FCA)

The Minister refused to register Earth Fund as a charitable foundation. Earth Fund proposed to carry on lottery operations in conjunction with certain business corporations and to disburse its share of the profits from such operations to entities that would be "qualified donees." Earth Fund would not carry on any charitable activities itself. Before dismissing Earth Fund's appeal, Sharlow JA stated (paras. 30-31):

I do not accept the argument of counsel for the appellant that the Alberta Institute case is authority for the proposition that any business is a "related business" of a charitable foundation if all of the profits of the business are dedicated to the foundation's charitable object. The Minister in that case was arguing that Alberta Institute was a "wholesaler of goods", but in fact, Alberta Institute was simply soliciting donations of goods which it converted to money. This is somewhat different from the traditional fund raising activities of a foundation, but the difference is only a matter of degree.

By contrast, the appellant proposes to do nothing except market and sell lottery tickets in a manifestly commercial arrangement that will, if all goes as planned, result in a profit that will be donated, I assume, to qualified donees. The appellant is in exactly the same position as any commercial enterprise that commits itself to apply its profits to charitable causes.

Administrative Policy

CG-013 "Fundraising by Registered Charities" 20 April 2012

17. As a general rule, fundraising is any activity that includes a solicitation of present or future donations of cash or gifts in kind, or the sale of goods or services to raise funds, whether explicit or implied.

2006 Ruling 2005-0160481R3 - Charitable Organization - Related Business

Ruling that a charitable organization would not be considered to be carrying on an unrelated business as a consequence of it renting excess parking capacity in a parkade built to provide low-cost parking to members.

Policy Statement CPS-019 "What is a Related Business?" 31 March 2003

Although most fundraising activities are business activities, a fundraising event generally will not be considered to "recur with such regularity and frequency that it amounts to carrying on a business" (para. 12).

17. There are two kinds of related businesses:

1.businesses that are run substantially by volunteers; and

2.businesses that are linked to a charity's purpose and subordinate to that purpose.

A business will be considered to be linked to the charity's purposes where

  • the quality of services delivered to charitable programs are improved (e.g., hospital parking lots, and cafeterias, and museum book shops)
  • it is an off-shoot of a charitable program (e.g., the sale by a church of recordings of its Christmas concert)
  • it utilizes excess capacity (e.g., university rentals in the summer months)
  • it sells products which promote the charity (e.g., products with the charity's name or logo)

Subsection 149.1(1.1) - Exclusions

Administrative Policy

Cathy Hawara, Director General, Charities Directorate, "The CRA Charities Directorate's Approach to Compliance", 2014 Conference Report, Canadian Tax Foundation, 37:1-10


Scope of political activities (p. 37:8)

An activity is presumed to be a political activity if it

1) explicitly communicates a public call to action;

2) explicitly communicates to the public that the law, policy, or decision of any level of government in Canada or a foreign country should be retained (if the retention of the law, policy or decision is being reconsidered by a government), opposed, or changed;

3) explicitly indicates in its materials (whether internal or external) that the intention of an activity is to incite, or organize to put pressure on, an elected representative or public official to retain, oppose, or change the law, policy, or decision of any level of government in Canada or a foreign country; and

4) as a result of the measures introduced in the 2012 federal budget, which came into force on June 29, 2012, a political activity also includes the making of a gift to a qualified donee intended for political activities. [fn 3: For specific guidelines, see "What Are Political Activities?" ...]

Subsection 149.1(2) - Revocation of registration of charitable organization


Credit Counselling Services of Atlantic Canada Inc. v. Canada (National Revenue), 2016 FCA 193

annulment for pursuing prevention of poverty

Webb JA found that the purpose for which a credit counselling registered charity had been operating since 1993 should be characterized as the prevention of poverty which (unlike the relief of poverty) was not a recognized charitable purpose, so that the annulment of its registration was confirmed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Charitable Organization prevention of poverty not relief of poverty or of general community benefit 242

Canadian Magen David Adom for Israel v. Canada (Minister of National Revenue), 2002 DTC 7353, 2002 FCA 323

The Minister had properly revoke the appellant's registration based on the absence of evidence demonstrating that the appellant had maintained control over the use of ambulances and related equipment which it provided to a medical relief organization ("MDA") in Israel. However, there was no Canadian public policy expressed in any Act of Parliament, regulation or in any publicly available government document that a Canadian charitable organization could not operate in the territories occupied by Israel and, accordingly, public policy would not have been a proper basis for revoking the appellant's registration had it been able to establish that activities of MDA were carried out by it as agent for the appellant.

Administrative Policy

Cathy Hawara, Director General, Charities Directorate, "The CRA Charities Directorate's Approach to Compliance", 2014 Conference Report, Canadian Tax Foundation, 37:1-10


Education letters and compliance agreements generally are used over revocation (pp. 37:4-5)

The Charities Directorate takes an "education first" approach to compliance, and we have a range of tools at our disposal, such as education letters, compliance agreements, monetary penalties, suspension of receipting privileges, and revocation. In most instances, charities are provided with an opportunity to correct their actions through education or compliance agreements before other measures are considered.

Only in the most serious cases of non-compliance—for example, when an organization has a previous record of non-compliance, when the non-compliance has had a substantial adverse effect on others, or when an organization cannot or will not take steps to bring itself into compliance—does the CRA turn to revocation. …

… Results of the 2013-14 Audit Program
Outcome Files Percentage
Education letter 513 61.0
Compliance agreement 137 16.5
Clean 112 13.5
Notice of intent to revoke issued 34 4.0
Voluntary revocation 20 2.5
Other (part V audits, pre-registration audits, etc.) 13 1.5
Annulment 6 0.5
Sanctions 5 0.5
Total (excluding political activities audits) 840 100.0
Tax shelter audits (p. 37:6)

[T]he CRA…will continually audit tax shelter gifting arrangements, which includes auditing all registered charities that play a role in a tax shelter gifting arrangement.

Paragraph 149.1(2)(a)

Administrative Policy

2014 Ruling 2014-0529291R3 F - Use of a trust by a charitable organization

real estate development properties transferred by charitable organization to LP held by discretionary trust of which it is beneficiary

A charitable organization ("Oeuvre") which is a registered charity holds various vacant lands with development potential. It has confidence in the abilities of personnel associated with Foundation X (a private foundation and registered charity with the same values and goals as Oeuvre) which, in turn, has recourse to the expertise of Parent Co.

Proposed transactions

An inter vivos discretionary trust ("Oeuvre Trust") will be settled by Mr. C having Oeuvre, Foundation Y (a private foundation with Oeuvre members as managers) and certain other persons as beneficiaries, and members of Uvre as trustees along with an independent trustee.

A limited partnership ("Land LP") will be formed with Newco (having Oeuvre and Immobilier Inc., a wholly-owned subsidiary of Parent Co, as shareholders) as the general partner and Oeuvre Trust and Parent Co as limited partners.

Oeuvre will sell most of the lands to Land LP for an agreed price reflecting their fair market value. The unpaid portion of the purchase price will bear interest and be secured by a hypothec on the lands. Annual payments by Land LP to v will be financed by Parent Co.

The development of the lands as serviced lots (to be sold to a builder, e.g., Parent Co, or to be built out by Land LP itself for sale or rental) will be managed by Newco as general partner. The profits will be shared by the partners of Land LP, with the portion allocated to Oeuvre Trust distributed by it to one or more beneficiaries, notably Oeuvre. The portion of profits allocated to Parent Co will be donated by it to Foundation X.



The proposed transactions will not by themselves result in Uvre carrying on a business which is not a related business for purpose of paragraph 149.1(2)(a).

The provisions of subsection 245(2) will not be applied… .

2012 Ruling 2011-0431051R3 - Charity's interest in a taxable corporation

provision of investment oversight and paid services to JV corp
The Charity

The Charity is a charitable organization under s. 149.1 and was continued under the Canada Not-for-Profit Corporations Act. It provides services to persons in need.


. Aco is a share corporation engaged in a services business. Its common shares are owned by a business trust.

Proposed transactions

Each of the Charity and Aco will transfer assets (including goodwill) to Newco (a CBCA corporation) in consideration for Class A or Class B redeemable preferred shares (bearing a dividend on their redemption amount equal to the prevailing interest rate prescribed under Reg. 4301(c)) and cash in consideration for Class C preferred shares. Aco apparently will use those assets and transferred employees to carry on a services business. Each of the Charity and Aco will have specified representation on the Board which oversees Newco. The Charity will enter into an agreement with Newco for the performance of certain services for a fee equal to the greater of their cost and fair market value. Following this transfer, the Charity will "not take an active role in day-to-day management of Newco [but]… will… set… broad policy with respect to standards and process, etc."


"Subject to Comment D below, the Charity's ownership of a XX% interest in the Common Shares in Newco and its representation on the Board of Directors of Newco, in and of themselves, would not be considered activities that would constitute the carrying on of a business that is not a related business of the Charity for the purposes of paragraph 149.1(2)(a)."

Comment D

. Described activities (consisting of or including the services-for-fee agreement]:

appear to extend beyond the mere ownership of Newco Shares by the Charity which suggest that the Charity will be carrying on a business that is not a related business as defined in subsection 149.1(1). …

[T]he Charities Directorate…have advised us that… the performance of XX services by the Charity to Newco would be a business that is not a related business. They have also advised us that with respect to the [other] proposed… transactions between the Charity and Newco…the Charity may or may not meet the requirements of the Act.

2003 Ruling 2003-002420 -

A charitable organization would not be considered to be carrying on a business by virtue only of leasing excess space under a net lease.

2003 Ruling 2002-016551 -

The leasing by a charitable organization of a housing complex to a society (with overlapping directors) who operate and manage the complex as a residence for seniors would not cause the charitable organization to be considered to be carrying on business given that the lease was a net lease and the society would be solely responsible for operating, repairing and maintaining the complex without the benefit of any additional services from the charitable organization.

1 June 1992 T.I. 920737 (December 1992 Access Letter, p. 31, ¶C144-189)

A charitable organization is not precluded from earning rentals where they are income from property rather than income from a business.

It generally would be acceptable for a charity to rent out at a profit the excess capacity of its buildings provided that such rented space constituted only a small portion and the rental activity was not the charity's main activity.

Subsection 149.1(3) - Revocation of registration of public foundation

Paragraph 149.1(3)(a)


Alberta Institute on Mental Retardation v. The Queen, 87 DTC 5306, [1987] 2 CTC 70 (FCA)

The appellant solicited and collected used household items, provided the items to an independent for-profit retail corporation ("Value Village"), received from Value Village 50% of the proceeds from the sale of the items and forwarded (as required by the agreement between the appellant and Value Village) all the funds received by it to the Alberta Association for the Mentally Handicapped.

Although the appellant may have had an "undertaking" under the extended meaning of "business", any such business was a related business. "The commercial operation at bar is exclusively related to charitable purposes since all monies collected are so allocated."

Administrative Policy

24 January 1992 Memorandum (Tax Window, No. 16, p. 3, ¶1715, January - February 1993 Access Letter, p. 33, ¶C144 - 196)

Guarantee fees received by a charitable foundation for guaranteeing a bank loan to a corporation engaged in scientific research would constitute income from a related business if the foundation used the fee income to carry out its stated objectives.

4 October 1991 T.I. (Tax Window, No. 10, p. 14, ¶1495)

The holding of title to real estate (through a nominee company) and the rental and operation of those properties (through a real estate management corporation) pending the later use of such real estate properties in connection with a hospital expansion probably would be considered to give rise only to incidental property income and not business income to the hospital.

Paragraph 149.1(3)(c)

Administrative Policy

4 October 1991 T.I. (Tax Window, No. 10, p. 14, ¶1495)

It is reasonable to disregard the existence of a real estate nominee corporation for purposes of the prohibition against acquiring control of a corporation in s. 149.1(3)(c).

Paragraph 149.1(3)(d)

Administrative Policy

24 January 1992 Memorandum (Tax Window, No. 16, p. 3, ¶1715, January - February 1993 Access Letter, p. 33, ¶C144 - 196)

Where a charitable foundation guarantees a bank loan made to a corporation engaged in scientific research, it will not be considered to have incurred a debt until such time as the corporation defaults on the loan.

4 June 1991 Memorandum (Tax Window, No. 4, p. 30, ¶1278)

Ss.149.1(3)(d) and (4)(d) preclude a foundation from incurring any debt which relates only indirectly to a permitted purpose, and also preclude the foundation from incurring debt to discharge another debt even if the other debt was incurred for a permitted purpose.

Subsection 149.1(6.1) - Charitable purposes


Bromley, "Political, Foreign and Business Activities: Problems in the Law of Charities", 1989 Conference Report, c. 36

Subsection 149.1(6.2) - Charitable activities


Canada Without Poverty v. AG Canada, 2018 ONSC 4147

ss. 149.1(6.2)(a) and (b) are of no force and effect

The Applicant was a registered charity with the stated charitable purpose of relieving poverty and had an “overall goal of ending poverty through advocacy” (para. 23). CRA concluded that virtually all of the Applicant’s activities involved political engagement in the nature of communications to the public advocating policy changes. It brought an application challenging the prohibition on “political” activity of this scale under s. 149.1(6.2) as interpreted by CRA.

After finding (at para. 30) that “there is no doubt that the activity in which the Applicant wishes to engage – public advocacy of policy change – is within the guarantee of freedom of expression,” and noting (at para. 31) the Attorney General’s argument that “the Applicant has a right to free speech, not to subsidized speech” through the ability to issue charitable receipts, Morgan J further stated (at paras 39, 42 and 43):

[V]irtually everything that the Applicant does is “political”, although those political activities are conceptually ancillary to –i.e. a mechanism to achieve – its charitable activities and purpose. …

Simply put, there is no way to pursue the Applicant’s charitable purpose – using methodology that is recognized as necessary by Parliament itself – while restricting its politically expressive activity to 10% of its resources as required by CRA under s. 149.1(6.2). …

Moreover, the evidence is that the Applicant cannot function – or will have difficulty in functioning – in the absence of registered charitable status.

After concluding (at para. 49) that s. 149.1(6.2) “violates s. 2(b) of the Charter in that it burdens the Applicant’s pursuit of public policy advocacy,” he found that the Attorney General had failed to establish under s. 1 of the Charter that such infringement was reasonable and justified in a free and democratic society, as there had been a failure to answer the question as to “why Parliament has limited political speech acts done in furtherance of accepted charitable purposes” (para. 57).

He went on to make a declaration (para. 72) that “that ss. 149.1(6.2)(a) and (b) are of no force and effect pursuant to s. 52(1) of the Constitution Act, 1982” and (at para. 73):

The exclusion from “charitable activities” of partisan political activities contained in subsection 149.1(6.2)(c) of the ITA remains in force.

Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) unjustified restriction in s. 149(6.2) on public policy advocacy in support of charitable object 262

Action by Christians for the abolition of torture v. Canada, 2003 DTC 5394, 2002 FCA 499

The Minister revoked charitable registration of the appellant on the basis that its activities of pressuring governments and government members through the sending of letters and postcards with a view to reducing the incidence of "torture" (as broadly defined by the appellant) around the world, were a major activity of the appellant rather than activities that were merely ancillary and incidental to its charitable purposes. In finding that such revocation was correct, Décary J.A. stated (at p. 5405) that the words "political purposes" or "political activities":

"cover any attempt to sway a government or a member of the government or, where there is a democracy, a member of the Parliament in such areas as these organizations or individuals are politically in a position to take action in response to the pressures to which they are subjected."

and also stated (at p. 5405) that such activity:

"is no less political because the cause that is the object or the initiative is popular, or has unanimous support or is endorsed by the existing authorities."

Words and Phrases
political activities


Statement by the Minister of National Revenue and Minister of Finance on the Government’s Commitment to Clarifying the Rules Governing the Political Activities of Charities 15 August 2018 Press Release

Canada Without Poverty … [contains] significant errors of law and … will be appeal[ed] … to address the uncertainty created by it, and to seek clarification on important issues of constitutional and charity law. …

[O]ur Government intends to amend the Income Tax Act to implement changes consistent with recommendation no. 3 of the Report of the Consultation Panel on the Political Activities of Charities. The intended amendments will allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy. Charities will still be required to have exclusively charitable purposes, and restrictions against partisan political activities will remain.

“Our Government intends to present legislation to this effect in the Fall. The Canada Revenue Agency will develop supporting guidance in collaboration with the charitable sector. The legislation will be drafted to apply retroactively, including to the audits and objections that are currently suspended. This suspension will be lifted when the legislation is passed by Parliament, when we intend to fully respond to the Report of the Consultation Panel on the Political Activities of Charities.

Report of the Consultation Panel on the Political Activities of Charities 31 March 2017

Proposed narrowing of CRA interpretation of “political” (pp. 12-14)

Recommendation 1

…The Panel recommends that the CRA proceed immediately to amend its administrative guidance to expressly permit a charity to engage in public policy dialogue and development, if it furthers a charity’s charitable purposes, is subordinate to those purposes and is non-partisan in nature, and that charities should not have to quantify and report about the quantification of these activities.

...CRA could find support for a more expansive view of what is a charitable activity in the case law. The Vancouver Immigrant Society decision supports looking at the activity in the context of a charitable purpose. If a charity calls for a change in the law in furtherance of its charitable purpose - and such activity is subordinate and non-partisan, the Panel believes the policy could accept it as charitable. Bowman [[1917] A.C. 406], which CRA points to as suggesting a call to action is political and thus has to be counted, was not considering an activity that furthers an otherwise charitable purpose - the Court in Bowman was looking at the trust's purpose which was to advocate for changes to the law. …

Further, the prohibition on both "direct and indirect" partisan political activities is highly subjective (particularly "indirect"), and has been the subject of much confusion in the charitable sector….

[T]he Panel recommends that the quantitative approach [in s. 149.1(6.2)(b)] be replaced with a qualitative approach. In other words, charities would not be required to track and report a percentage of resources expended on their political activities (public policy dialogue and development). However, they would be required to describe these and articulate how they further their charitable purposes. ...

Proposed amendment allowing charities to fully engage in non-partisan public policy dialogue and development that is subordinate to and furthers their charitable purposes (pp. 17-18)

Recommendation 3

…The Panel recommends that amendments:

  1. retain the current legal requirement that charities must be constituted and operated exclusively for charitable purposes, and that political purposes are not charitable purposes;
  2. fully support the engagement of charities in non-partisan public policy dialogue and development in furtherance of charitable purposes, retiring the term "political activities" … and clearly articulating the meaning of "public policy dialogue and development" to include: providing information, research, opinions, advocacy, mobilizing others, representation, providing forums and convening discussions; and
  3. retain the prohibition on charities’ engaging in "partisan political activities", with the inclusion of "elected officials" (i.e. charities may not directly support "a political party, elected official or candidate for public office"), and the removal of the prohibition on "indirect" support, given its subjectivity. …

The rationale for this approach is more fully described under Recommendation 1 in the context of interim changes recommended to the policy guidance.

Subsection 149.1(12) - Rules

Paragraph 149.1(12)(a)

Administrative Policy

2013 Ruling 2012-0443321R3 - Donation of shares to public foundation

A charitable organization developed technology for its own use but then determined that the technology could be commercialized. Accordingly, the charitable organization transferred the intellectual property rights to the technology to a newly incorporated taxable Canadian corporation (the "Corporation") in consideration for shares, with a view to gifting those shares to a public foundation (the "Foundation"), which was governed by an independent board, and is represented to deal at arm's length with the charitable organization.

The Foundation agreed to provide initial financing to the Corporation pursuant to a demand interest-bearing promissory note secured by a general security agreement over the assets of the Corporation. "The Corporation anticipates repaying the promissory note from the profits relating to the successful commercialization of the Technology."

Ruling that for purposes of s. 149.1(3)(c), the Foundation will be deemed not to have acquired control of the Corporation pursuant to paragraph 149.1(12)(a), as a result of the gift of the shares of the Corporation by the charitable organization to the Foundation.

28 January 1994 T.I. 940144 (C.T.O. "Private Foundations")

Where a donor gifts to a private foundation voting preferred shares of a corporation that are convertible into voting common shares, with the voting rights representing more than 50% of all votes both before and after conversion, s. 149.1(12)(a) will deem the foundation not to have acquired control of the corporation on its acquisition of the preferred shares by way of gift. "

However, on the acquisition of the common shares by virtue of the conversion of the preferred shares to common shares, the foundation would be providing the preferred shares as consideration. Since the foundation would be deemed not to have acquired control of the corporation on its acquisition of the preferred shares, and yet it will control the corporation through its ownership of common shares, it is reasonable to conclude that the foundation will acquire control of the corporation on its acquisition of common shares." However, the Minister would not necessarily exercise his discretion to revoke the foundation's registration.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 189 - Subsection 189(3) 62