There was an important change made in 2023 in how a charity may contribute funds to ‘non-qualified grantees’. This is an issue many charities run into when funding international work
1. Many organizations in Canada and internationally contribute to charitable activities, but do not have registered charity status with the Canada Revenue Agency (CRA). We refer to these organizations as non-qualified donees in this guidance.Footnote1
2. The Income Tax Act was amended in 2022Footnote2 to create a new way for registered charities to work with non-qualified donees: by making grants to grantees.
3. Charities can also work with non-qualified donees as intermediaries. A charity can do this if it maintains ongoing direction and control of the activity that the non-qualified donee performs on its behalf. In this kind of arrangement, the activity must be the charity’s own.Footnote3
4. With grants, a charity can support the grantee’s own activities, provided the charity shows that it meets the Income Tax Act requirements set out in this guidance.
5. This legislative change recognizes the significant value that non-qualified donees bring to charitable work in Canada and internationally. This new option was introduced to provide charities with a means to build more collaborative and equitable partnerships.Footnote4
6. This guidance is not law. Instead, it recommends ways a charity can meet the Income Tax Act requirements while taking reasonable, flexible, and proportionate measures based on the nature of each grant. To do this, the charity should apply due diligence when making the grant. This allows the charity to account for its use of tax-assisted resources.
