{"id":6555,"date":"2023-12-21T19:23:19","date_gmt":"2023-12-22T00:23:19","guid":{"rendered":"https:\/\/www.millerthomson.com\/cra-final-guidance-qualifying-disbursements-highlights\/"},"modified":"2026-02-18T15:18:43","modified_gmt":"2026-02-18T20:18:43","slug":"cra-final-guidance-qualifying-disbursements-highlights","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/social-impact\/cra-final-guidance-qualifying-disbursements-highlights\/","title":{"rendered":"CRA releases final guidance on qualifying disbursements: Key highlights"},"content":{"rendered":"\n

On December 19 2023, the Canada Revenue Agency released its final administrative guidance<\/a> on qualifying disbursements.<\/p>\n\n\n\n

Guidance Document CG-032 (\u201cRegistered charities making grants to non-qualified donees\u201d) first appeared in draft form a little over a year ago, on November 30 2022.<\/p>\n\n\n\n

The CRA issued the most recent version of the Guidance after a yearlong consultation and drafting process, which included a two-month period in which the CRA received comments from the public (including this submission from Miller Thomson<\/a>).<\/p>\n\n\n\n

Miller Thomson\u2019s Social Impact Group will have more to say about the latest Guidance in the new year. For now, we wish to highlight a few points that will be of interest to charities:<\/p>\n\n\n\n

1. Making a qualifying disbursement to a non-qualified donee? A standalone grantmaking purpose is not enough (ss. 25-34)<\/h2>\n\n\n\n

There was an open question\u2014left unanswered in the draft Guidance\u2014as to whether a charitable foundation with a standalone grantmaking purpose (e.g.<\/em> \u201cmaking qualifying disbursements\u201d or \u201cmaking grants\u201d) could make a qualifying disbursement to a non-qualified donee, without doing more.<\/p>\n\n\n\n

The latest Guidance clarifies that foundations with a standalone grantmaking purpose will not be able to make qualifying disbursements to a non-qualified donee without first amending their governing documents to add a relevant \u201cactive\u201d charitable purpose (e.g.<\/em> relieving poverty, advancing education, advancing religion, or bettering the community in ways the law regards as charitable).<\/p>\n\n\n\n

It is not enough for a charity to make a qualifying disbursement to a non-qualified donee for any<\/em> charitable purpose; the disbursement must further a specific<\/em> purpose in the charity\u2019s governing documents that falls under one of the four categories of charity described above. Here, the CRA states that a standalone purpose of \u201cmaking qualifying disbursements\u201d or \u201cmaking grants\u201d would not fit within one of these categories.<\/p>\n\n\n\n

2. The CRA provides clarifications, but no major changes, to the anti-directed giving rule and its earlier guidance (ss. 75-81)<\/h2>\n\n\n\n

The anti-directed giving rule prohibits a charity from accepting or soliciting a gift on the explicit or implicit condition that the charity will gift it to a specific non-qualified donee. Many sector observers feared that such a rule would have a chilling effect on certain fundraising activities or on donor-advised accounts.<\/p>\n\n\n\n

The draft Guidance indicated that, so long as the charity retains authority over the use of its resources, it will not be considered to be engaged in directed giving. Many in the sector considered this assurance insufficient and inconsistent with the text of the actual rule in the Income Tax Act<\/em>.<\/p>\n\n\n\n

The latest Guidance cleans up earlier language in the draft and provides some clarifications, including two examples of explicitly and implicitly conditional gifts. However, charities that were hoping for a tectonic shift in the CRA\u2019s administrative position on the anti-directed rule (or even in the rule itself) will be left wanting more from the latest Guidance.<\/p>\n\n\n\n

The latest Guidance does suggest that any charity that includes the name of a non-qualified donee in its own name, purposes or other formal documents may be at risk of revocation if it receives gifts, as those gifts could be implicitly conditional on the charity granting it over to the specific non-qualified donee.<\/p>\n\n\n\n

The CRA further clarifies that the anti-directed giving rule does not prohibit a charity from using a donation to carry on its own activities through a non-qualified donee intermediary, so long as the charity exercises direction and control over the intermediary\u2019s use of the charity\u2019s resources.<\/p>\n\n\n\n

3. The CRA tells us how it will interpret and apply specific provisions of the qualifying disbursements rule (ss. 7, 13)<\/h2>\n\n\n\n

Charities would be well-advised to review section 13 of the latest Guidance, which sets out how the CRA will interpret and apply the specific provisions of the qualifying disbursements rule, as set out in the Income Tax Act<\/em>.<\/p>\n\n\n\n

For example:<\/p>\n\n\n\n