Budget 2011 Extends Charity Regulatory Regime to Other Qualified Donees

22 mars 2011 | Andrew Valentine

( Disponible en anglais seulement )

The Budget has proposed significant changes to the regulatory regime that applies to qualified donees other than registered charities.  The Income Tax Act provides that official donation receipts can be issued not only by registered charities, but also by other organizations that meet the definition of “qualified donee.” These include:

  • registered Canadian amateur athletic associations (RCAAAs);
  • municipalities in Canada;
  • municipal and public bodies performing a function of government in Canada (largely First Nations bands);
  • housing corporations in Canada constituted exclusively to provide low-cost housing for the aged;
  • prescribed universities outside Canada, the student body of which ordinarily includes students from Canada; and
  • charitable organizations that have received a gift from the federal Crown in the current or preceding year.

Historically, registered charities have been subject to a stricter regulatory regime than other qualified donees.  Under the proposed changes in Budget 2011, RCAAAs will be made subject to many of the rules that apply to registered charities, as well as the associated penalties.  The requirement to issue tax receipts in accordance with the Act, as well as to comply with the record-keeping rules and with CRA’s audit powers, will also be extended to all qualified donees, which will now face the possibility of having their qualified donee status revoked if they do not comply.

If the Budget changes are passed, these measures will apply on or after the later of January 1, 2012 and Royal Asset to the enacting legislation.

General Changes

The Budget proposes that all qualified donees will be required to be on a publicly-available list maintained by CRA.  Currently, such a centralized list is maintained only for registered charities. The expansion of the list is designed to better enable members of the public to determine which organizations may issue official donation receipts, as well as to allow registered charities to know which organizations are qualified donees for grant-making purposes. This is a very helpful change.

With respect to the issuing of official donation receipts, the Budget proposes that if a qualified donee issues a donation receipt other than in accordance with the Income Tax Act, CRA may suspend the receipting privileges of that organization or revoke its qualified donee status.  Budget 2011 also proposes to extend the monetary penalties associated with the improper issuing of receipts to RCAAAs.  All qualified donees will therefore need to ensure that their receipting practices are compliant with the Act and regulations.  Query whether CRA has constitutional jurisdiction to impose a fine on a municipality.

The Budget proposes to extend the requirements regarding books and records – which currently apply only to registered charities and RCAAAs – to all qualified donees.  All qualified donees will be required to maintain proper books and records and to provide access to those books and records to CRA when requested pursuant to CRA’s audit powers under the Act.  If a qualified donee fails to comply, CRA would be authorized to suspend the receipting privileges of the qualified donee or revoke its qualified donee status. The Budget also proposes to extend the monetary penalties associated with failing to file an information return (which currently apply only to registered charities) to RCAAAs.

Qualified donees such as municipalities, prescribed foreign universities and foreign organizations that have received federal gifts should take careful note of these changes.  If the Budget passes, the qualified donee status of these organizations can be revoked by CRA for failure to comply with the above requirements.  It is noteworthy in particular that CRA will be empowered to revoke qualified donee status when a foreign organization does not comply with CRA’s audit powers under the Act.  Such powers have not been previously recognized under the Income Tax Act, and organizations that would be subject to them will need to take steps to ensure compliance.  It should be noted that the federal and provincial Crown, as well as the United Nations and its agencies, are not proposed to be subject to these new rules.


The Budget proposes several changes that apply specifically to RCAAAs.  The Budget notes that while registered charities are required to operate exclusively for charitable purposes, RCAAAs currently need have only the promotion of amateur athletics in Canada on a nation-wide basis as their primary purpose and primary function.  The Budget proposes that RCAAAs be required to have the promotion of amateur athletics in Canada on a nation-wide basis as their exclusive purpose and exclusive function (rather than merely their primary purpose and primary function). The Budget document states that these changes will not prevent RCAAAs from staging or engaging in international events and competitions, as such activities would normally be consistent with the promotion of amateur athletics in Canada, given the participation of Canadian teams and athletes in such events.

RCAAAs will be made subject to the regulatory rules that apply to registered charities with regard to related business activities and political activities.  RCAAAs will be subject to the same penalties in respect of these activities as registered charities.  RCAAAs will also be subject to the penalties under the Act as registered charities in relation to the provision of undue benefits (e.g., excessive compensation to staff, fundraisers, etc).

The Budget proposes finally to provide public access to the annual information returns, governing documents, applications for registration and the names of directors of RCAAAs.  This information is currently available only for registered charities. The measure is intended to provide greater transparency for the public regarding how charities spend their funds.

The Budget notes that CRA will consult with stakeholders regarding these changes and develop an administrative guidance regarding these measures.  In particular, stakeholders are invited to comment on the proposed “exclusivity of purpose and function test” for RCAAAs by June 30, 2011. Stakeholders with concerns about the application of an exclusivity of purpose and function test are encouraged to comment.


If the Budget passes, these changes will significantly change the regulatory landscape within which qualified donees other than registered charities operate. Such organizations, and RCAAAs in particular, will need to ensure that their operations comply with the regulatory requirements that currently apply to registered charities. For many organizations, this will require a thorough review of current operations, receipting and record-keeping practices.

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