Advisory committee on charitable sector: Report 1

March 18, 2021 | Sarah Fitzpatrick

On January 29, 2021, the Advisory Committee on the Charitable Sector issued its first report to the Honourable Diane Lebouthillier, Minister of National Revenue and Bob Hamilton, Commissioner of the Canada Revenue Agency. Established in 2019, the Advisory Committee is made up of 14 sector representatives and is a consultative forum for the Government of Canada to engage in meaningful dialogue with the charitable sector. Its mandate is to advance emerging issues related to charities and to ensure that the regulatory environment supports the work of charities.

Due to the issues highlighted and created by the pandemic, the Advisory Committee decided to accelerate its work and released this first report which contains recommendations for immediate consideration. The recommendations contained in the report are:

1. The “own activities” test be removed from the Income Tax Act (Canada), and instead require a focus on resource accountability.

The primary source for regulation of charities in Canada are the rules in the Income Tax Act. The Income Tax Act requires charities to devote their resources to charitable activities carried on by themselves or by making grants to other qualified donees (generally other charities). In order to establish that a charity is devoting resources to its charitable activities, it must meet the “own activity” test. This requires the charity to direct and control the use of its resources. This requirement can become particularly onerous when a charity is working with a third party that is not a qualified donee.

The Advisory Committee recommends that the Income Tax Act be amended to replace the “own activity” test with a regime that permits charities to establish reasonable and practical parameters for ensuring resource accountability when working to achieve a charitable purpose with a third party that is not a qualified donee. The focus under this regime would be on whether a charity uses its resources to further its charitable purposes, rather than on whether the resources are being used in the charity’s own activities.

2. That recommendation 23 from the 2019 Senate Special Committee Report, Catalyst for Change: A Roadmap to a Stronger Charitable Sector be implemented.

This recommendation has two parts:

(i) that all appeals from decisions of the Charities Directorate of the Canada Revenue Agency (“CRA”) proceed to the Tax Court of Canada for a hearing de novo, following consideration by CRA’s Tax and Charities Appeals Branch (the “Appeals Branch”); and

(ii) that an organization should have a right to appeal to the Tax Court of Canada for cases where the Appeals Branch has not rendered a decision within six months of the organization appealing to the Appeals Branch a refusal of its application for registered charity status, or a decision to revoke its charitable registration.

Currently, in both of these situations, the appeal must be made to the Federal Court of Appeal, rather than the Tax Court of Canada. The issue is that this process does not allow for a reconsideration of the facts and is based on CRA’s existing written record. As a result, the system is weighted against the organization bringing the appeal and the case law in this area has not evolved much over time.

3. That a permanent “home in government” for Canada’s charities and non-profits be created, outside of CRA

This proposal would create a federal policy “home” for the charitable and nonprofit sector outside of the Charities Directorate of the CRA. The “home” would provide a place for comprehensive government policy development that will strengthen the relationship between the sector and government to enable a more productive and effective partnership. In addition, the “home” would advocate on behalf of the sector with respect to broader government policies and programs and act as a connector and communicator with other government departments.

In the view of the Advisory Committee, these recommendations can be implemented in the short to medium term. The intention is to improve the regulatory and policy environment for charities. The changes would address issues faced by the sector, particularly issues that have been highlighted during the pandemic. The Advisory Committee is continuing to conduct consultations and is expected to develop further recommendations, with a second report in spring 2021.

The Advisory Committee’s report is available on the CRA’s website.

Miller Thomson’s Social Impact Group will continue to keep you updated on the work of the Advisory Committee.


This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

Miller Thomson LLP uses your contact information to send you information electronically on legal topics, seminars, and firm events that may be of interest to you. If you have any questions about our information practices or obligations under Canada's anti-spam laws, please contact us at

© 2022 Miller Thomson LLP. This publication may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested by contacting