Report on the Charities Program 2021 to 2022

Message from the Commissioner

This past year, we have seen once again how remarkably resilient the Canadian charitable sector is. I am proud of the CRA and incredibly grateful to our partners in the sector for their continued collaboration and engagement. 

The ACCS produced two reports in the past fiscal year. These reports included numerous recommendations that the CRA is actively considering. The CRA held an open call for new ACCS members in the spring of 2021, encouraging applications from members of underrepresented groups. In our engagements with the charitable sector, our continuing goal is to encourage and receive input from diverse perspectives.

The Technical Issues Working Group continues to be highly effective in highlighting issues, exploring solutions, and providing real-time feedback to the CRA. 

The Federal/Provincial/Territorial Network of Charity Regulators had its membership renewed in January 2022. The network aims, in part, to identify emerging issues that affect charities across jurisdictions and to find ways to reduce the administrative burden on charities.

I would like to thank all members of the charitable sector and employees at the CRA for another excellent year of continued hard work. I hope you find the 2021 to 2022 Report on the Charities Program useful and informative.

Bob Hamilton
Commissioner of the Canada Revenue Agency

Message from the Director General

In 2022, I had the honour and great pleasure of taking on the role of Director General of the Charities Directorate. It has been a rewarding experience, and I am moved by the dedication of our employees and their passion for supporting the charitable sector. It was another extraordinary year, and the directorate continued to provide a range of services to the sector in support of our risk-based approach to compliance. 

This past fiscal year, we completed over 100 virtual Charities Education Program visits, which are meant to help new charities understand their obligations as a registered charity. As well, we had over 2,400 participants attend our interactive Charities Information Sessions on gifting and receipting.

Once again, we exceeded our service standard targets for telephone enquiries, written enquiries, and applications for charitable registration. As always, our focus remains on providing the best possible service to the sector and the public, and I am proud that we continued to achieve exceptional standards.

The program could not succeed without support from the sector itself; we continue to rely on important consultations with and feedback from stakeholders. I am continuously impressed by the hard work, dedication, and passion from those on the ground—directors, volunteers, and representatives—who work tirelessly to make our communities, country, and world a better place. I look forward to continuing this collaboration and growing this relationship, especially as we develop new guidance on recent legislative changes regarding charitable partnerships and the disbursement quota. I am excited to see what we will accomplish together next.

Sharmila Khare
Director General
Charities Directorate
Canada Revenue Agency

Introduction

Charities are a vital part of Canadian society, offering a remarkably diverse range of services to people in our country and around the world. Their activities include providing food and shelter to people experiencing poverty, operating schools, offering religious services, and running hospitals. The Income Tax Act and its regulations that apply to registered charities help promote charitable giving while protecting charities and the public from abuse.

The CRA promotes compliance with the Act and its regulations and plays an important role in the economic and social well-being of Canadians. The CRA does this by administering tax programs for the Government of Canada and for most provinces and territories. It also administers various social and economic benefit and incentive programs delivered through the tax system.

The CRA is responsible for all program activities related to the provisions of the Act and its regulations for registered charities, registered journalism organizations (RJOs), registered Canadian amateur athletic associations, registered national arts service organizations, and other qualified donees (OQD).

The Charities Directorate’s main roles and responsibilities are to:

• develop policy guidance products by engaging with the charitable sector, other government departments, and other levels of government
• review applications for registration as a charity
• provide information, guidance, and education programs for the charitable sector
• make sure registered organizations comply with their obligations through a balanced program of education, service, and responsible enforcement
• support the Government’s efforts to combat the financing of terrorism 

This report provides summary information of the directorate’s activities from April 1, 2021, to March 31, 2022. In some cases, data has been rounded to the nearest whole number for publication purposes.

The regulatory process

The Government of Canada recognizes that a strong charitable sector is crucial to a well-functioning democracy and thriving communities and wants to ensure that the sector is best positioned to maximize its contribution to the social fabric of Canada.

To qualify for registration as a charity, an organization must be in Canada, its purposes must be exclusively charitable, and its activities must support its purposes. Also, an organization must be able to show that its purposes and activities will benefit the public and comply with public policy. This means that it could not, for example, operate to provide a benefit to private individuals (such as its members) or operate to make a profit.

Trust is critical to a healthy charitable sector. Given that registered charities have significant privileges, such as issuing donation receipts and having tax-exempt status, the CRA has a responsibility to maintain the integrity of the charitable sector and confidence of Canadian donors by making sure all registered charities follow these rules.

To accomplish this, the Charities Directorate monitors the operations of registered charities to make sure they comply with their obligations under the Income Tax Act.

Privileges:

• able to issue official donation receipts for gifts received
• exempt from paying income tax under Part I of the Act
• eligible to receive gifts from other registered charities
• exempt from paying goods and services tax / harmonized sales tax (GST/HST) on many goods and services the charity provides
• often able to claim a partial rebate for the GST/HST it pays

Obligations:

• devote its resources (funds, personnel, and property) to charitable purposes and activities
• file an annual information return within six months of its fiscal period-end
• meet its annual spending requirement
• keep adequate books and records in Canada, and make them available for review by the CRA on request
• make sure that official donation receipts are complete and accurate
• control and direct the use of its resources
• keep its status as a legal entity (where applicable)

Registration

During the registration process, the CRA provides ongoing support to applicants and representatives. In the 2021 to 2022 fiscal year, 82% of applicants used online services to submit applications, documents, and correspondence. The CRA received 2,375 applications for registration as a charity.

In addition to applications for registration as a charity, the CRA also received 84 applications for registration as an other qualified donee.

A qualified donee can be:

• a registered charity (including a registered national arts service organization)
• a registered Canadian amateur athletic association
• a registered journalism organization
• a registered housing corporation resident in Canada constituted exclusively to provide low-cost housing for the aged
• a registered Canadian municipality
• a registered municipal or public body performing a function of government in Canada
• a registered university outside Canada, the student body of which ordinarily includes students from Canada
• a registered charitable organization outside Canada to which His Majesty in right of Canada has made a gift
• His Majesty in right of Canada, a province, or a territory, the United Nations and its agencies

Budget 2019 introduced new tax measures to support Canadian journalism, including the creation of RJOs as a new type of qualified donee. This measure under the Act came into effect on January 1, 2020. In addition to being exempt from paying income tax, RJOs can also issue donation receipts for gifts they receive, and registered charities can make gifts to them. Since 2020, the CRA has registered eight organizations as RJOs. The CRA continues to work with the sector to better improve the RJO application process.

Feedback from the sector continues to help the CRA identify how it can improve online and paper forms. The Canadian Bar Association as well as many representatives and applicants have provided important information about their experiences.  As a result, the CRA made a number of changes in the fall of 2021. These included changes to questions to allow the applicant to provide more information and adding help text (a feature that provides more instructions) to make technical terms clearer to the applicant.   

Compliance activities

The CRA continued using its multi-streamed approach to promote voluntary compliance across a wide segment of the charitable sector. By applying a risk-based approach to the sector, the CRA is able to use the right type of intervention based on the risk of non-compliance.

To address lower risk, low complexity non-compliance issues, the CRA proactively reaches out and supports as many registered charities as possible with non-audit activities. These include Charities Education Program (CEP) visits, education letters, telephone calls, and requests for information. This benefits the sector and the public by providing a greater presence and more meaningful contact to help a wider range of charities resolve minor non-compliance before it becomes more serious.

The CEP involves one-on-one visits with registered charities to better help them understand their compliance obligations. During the 2021 to 2022 fiscal year, the CRA completed 103 virtual CEP visits. The objective of the program is to promote voluntary compliance by offering charities information and help so they understand their obligations as a registered charity and avoid common errors. During the visit, a charity education officer asks the charity questions about its books and records, as well as its purposes and activities. They do this to make sure the charity follows the rules and avoids any non-compliance that could jeopardize its registration. 

The CRA uses audits to address the smaller proportion of charities that exhibit the highest risk of non-compliance. Audits are an important part of the compliance program as they are used to identify and appropriately address the most serious non-compliance risks in the sector. This in turn helps us maintain public confidence in the fairness and integrity of the charitable registration system. Audits can result in corrective measures to resolve serious non-compliance and protect tax-assisted charitable assets and charitable beneficiaries. In the 2021 to 2022 fiscal year, 182 audits were completed. For more information, go to How we promote compliance and The audit process for charities.

The CRA assesses the amount of tax owed by a revoked charity on the remaining charitable property that has not been applied to a charitable use. The tax is equal to 100% of the value of all remaining assets after the charity has paid its debts. A charity may transfer its remaining assets to an eligible donee (an arm’s length registered charity in good standing) to keep their assets in the charitable sector. The Income Tax Act requires revoked charities to calculate on Form T2046 – Tax Return Where Registration of a Charity is revoked, the amount of the revocation tax that they owe, and to pay the amount when they send the form to the CRA. The revocation tax ensures that charitable property does not leave the charitable sector when a charity is revoked.

Supporting federal assistance programs

The Charities Directorate continued supporting the CRA administered subsidy programs, such as the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS), for the charitable sector.

The directorate continued its partnership with several areas of the CRA to develop and administer the wage and rental subsidy programs. This included providing educational resources, reviewing applications, and responding to applicants’ questions and concerns. The CRA has and will continue to use a combination of automated queries, data checks, and post-payment audits to ensure charity and other qualified donee applicants and recipients meet the eligibility criteria. The compliance program will continue dedicating resources to these reviews into the next fiscal year.

Program policy

The CRA develops guidance products to help charities comply with the requirements of registration under the Act. The common law definition of charity developed by the courts determines whether purposes and activities are charitable. Purposes describe an organization’s main aim or intent. Activities describe how the organization will accomplish its purposes.

According to the common law, charitable purposes and activities must also fall under four “heads” or categories of charity:

Relief of poverty: A charity with activities targeted at providing basic amenities, such as food, shelter, and clothing, to people experiencing poverty. For example, an organization that pays for children who are experiencing poverty to participate in organized sports. 

Advancement of education: A charity with activities targeted at educating others in a way the law recognizes as charitable. For example, an organization providing computer training courses to the public. 

Advancement of religion: A charity with a religious belief system that meets certain criteria, along with activities targeted at advancing that religion. For example, an organization providing chaplaincy services in hospitals, prisons, and universities. 

Other purposes beneficial to the community: A charity with activities providing a tangible benefit to the community that the law has recognized as charitable, such as promoting health, providing public amenities, and protecting the environment. For example, an organization relieving conditions associated with old age by providing facilities for the elderly.

The CRA establishes its policy priorities in response to factors such as charitable sector developments, government initiatives, and changes in the law. Also, the CRA continues to identify and address policy concerns that arise from the operation of the charities program. From 2021 to 2022, the CRA began and continued to work on a range of products, including guidance on receipting, related businesses, fundraising, annulment, housing, management and administration expenses, protection of the environment, and expenses incurred by volunteers.

Consultations/stakeholder engagement

Advisory Committee on the Charitable Sector

The Advisory Committee on the Charitable Sector (ACCS) makes recommendations to the Minister of National Revenue and the Commissioner of the CRA on the regulatory issues of the charitable sector.

Since it published its first report in January 2021, the ACCS continued to meet and publish two more reports:

• Report #2 of the Advisory Committee on the Charitable Sector - April 2021
• Report #3 of the Advisory Committee on the Charitable Sector - July 2021

The CRA is examining the recommendations from the three ACCS reports to gauge what is required to implement them. The CRA reviewed each recommendation to identify the right lead, general extent of resources required, and possible next steps.

Although many recommendations require multi-departmental collaboration or may fall outside of the CRA’s mandate, the CRA is looking at all recommendations within its purview and giving the ACCS regular status updates. There are no significant barriers (in other words, they could be operationalized without a legislative change or coordination with other government departments) to putting some of the recommendations in place. Some recommendations would be complex and comprehensive and would likely require the CRA to invest significant financial and human resources.

As part of the selection process for the new members of the Committee, the CRA held an open call for applications, which closed on May 21, 2021. The CRA encouraged applications from a broad cross-section of experts, practitioners, and leaders from the not-for-profit and private sectors as well as members of various groups, including women, LGBTQ2+ communities, Indigenous peoples, persons with disabilities, and members of visible minorities. Increased representation is important to ensure the work done within the committee reflects the diverse needs of the charitable sector. Over 200 people applied, and the CRA reviewed all applications to ensure the committee is well represented, inclusive, and diverse.

On April 5, 2022, the Minister of National Revenue announced the appointment of nine new members. Visit our website to read the names and biographies of the 15 current members.

Technical Issues Working Group

The Technical Issues Working Group (TIWG) discusses trends and technical issues in the charitable sector to explore workable solutions and expand the CRA’s understanding of this sector. It has been operating since 2004, usually meeting twice a year. During the reporting period, the TIWG met virtually in June 2021 and January 2022.

Its membership is composed of experts from the charitable sector, and the current members represent professional associations, umbrella organizations, and other key players. The membership was renewed in January 2022 for another two-year cycle.

Federal/Provincial/Territorial Network of Charity Regulators

The Federal/Provincial/Territorial Network of Charity Regulators (FPT Network) meets to discuss issues related to regulating charities across Canada, to identify potential areas for communication and collaboration, and to share news on legislative or policy developments.

Over the year, the representatives met to share some updates and to discuss:

• core business line priorities of all jurisdictions
• processes of transitioning from in-person work to a virtual environment
• concerns about accessibility with the transition to digital services and the return to in person services

Serving the sector and Canadians

Enquiries received

In the 2021 to 2022 fiscal year, the most common type of written requests that charities made were account updates. These include changes to directors, addresses, representatives, legal names, and contact information. The shift to a more digital world means that, more and more, charities are using online services to make these requests.

In addition to answering written enquiries, the Charities Directorate’s client service representatives support, provide guidance, and assist charities. The most common phone enquiries were about online services and My Business Account, but the representatives helped organizations make changes to their account and answered questions related to the registered charity information return (Form T3010), applications, and receipting.

The CRA continues to improve its Charities and giving web pages by developing more user friendly products to explain charity rules and obligations. Charities can easily search the Charities and giving – A to Z index and Questions and answers about operating a registered charity pages for information they need to meet their registration obligations.

Public information

The CRA provides public information from the T3010 Registered Charity Information Return, upon request. Requests may be made for specific lines or sections of the return or for charities by geographical location, designation, or category code.

As well, the directorate responds to informal requests for charity and other qualified donee documents available to the public under the Act. From 2021 to 2022, the directorate processed 1,312 document requests from the public and 76 from reporters (through the Media Relations Section in the Public Affairs Branch). The number of processed requests does not represent the number of individual documents the public sent (for example, one request could represent five documents). Of the 1,312 requests for documents received from the public, more than 2,888 individual documents were disclosed, and of the 76 requests from reporters, more than 560 individual documents were disclosed.

The most common types of information requests are for registered charities or other qualified donees’ financial statements, governing documents, and application forms.

For more information, see How to get information about a charity.

Charities information sessions

With the shift to a more digital world, the CRA held information session webinars in March, May, and November 2021 on the topic of gifting and receipting. The CRA hosted the webinars by videoconference in both English and French. Subject matter experts answered any questions that attendees asked during the event.

Many people attended the webinars, and the number of registrants and attendees increased each time they were held. A combined total of 2,404 individuals attended the webinars.

Participants’ feedback shows that the new interactive format was successful and broadened our approach to client services. Specifically, participants appreciated the number of examples about gifting and receipting and that the subject matter experts answered their questions right away.

Protecting the sector from terrorist abuse

The risk of terrorist abuse within the charitable sector is a domestic and international concern. To address this risk, the Government of Canada put several measures in place and created a framework that enables Canada’s national security partners, including the CRA, to protect charities from terrorist abuse. 

As a partner within Canada’s anti-money laundering/anti-terrorist financing (AML/ATF) regime, the CRA has a regulatory responsibility to protect and maintain public confidence in the charitable sector. This regime contributes to a whole-of-government approach to combating terrorism and terrorist financing.

The CRA contributes to the government’s efforts to combat terrorism and terrorist financing by detecting and addressing risks of terrorist abuse to Canada’s charitable sector. The CRA reviews all applications for registration as a charity and conducts compliance-related activities in support of the Act and the Charities Registration (Security Information) Act. Reviewing an organization’s continued eligibility for charitable registration under the Act is an administrative process that does not include criminal investigations or validation that a criminal activity, such as terrorism, has occurred.

The CRA contributes to ongoing efforts to mitigate the risk of terrorist financing abuse in the charitable sector, with the implementation of a dedicated audit program in fiscal year 2008 to 2009, undertaken through the Review and Analysis Division (RAD). The RAD follows an audit planning process to ensure that only those files of greatest risk of non-compliance are audited. Completed audits cover a range of possible outcomes, reflecting the CRA’s risk-based approach to compliance.

External reviews

Office of the Taxpayers' Ombudsperson (OTO) review

In Canada, systemic racism and discrimination is a real and important concern, and one the CRA takes very seriously. The CRA is dedicated to diversity, inclusion and anti-racism, which also aligns with our values of professionalism, integrity, respect, and collaboration. 

In July 2021, the Minister of National Revenue requested that the Office of the Taxpayers’ Ombudsperson (OTO) examine concerns raised by certain Muslim-led charities about their experiences with the CRA.

The OTO works to enhance the CRA’s accountability in the CRA’s service to and treatment of taxpayers. The OTO operates at arm’s length from the CRA and conducts independent and objective reviews of service-related complaints and systemic issues.

In response to the Minister’s request for a systemic study to address the concerns raised, the OTO examined:

• how the CRA selects which files to audit
• the quality of services the CRA offers
• the efforts the CRA has taken to sensitize its employees to unconscious biases 

The CRA supports that important work and provided to the fullest extent possible any information the OTO requested to conduct its examination. Protecting taxpayer information is of the utmost importance to the CRA because the confidence and trust that Canadians have in the CRA is a cornerstone of Canada’s voluntary tax system. 

The CRA welcomes the results of the OTO review. In addition, as part of its continual efforts to improve its service delivery, the CRA is already taking steps by offering internal training activities to educate employees on unconscious bias and empathy in service as well as those offered by the Canada School of Public Service.

International and domestic commitments

As mentioned above, the risk of terrorist abuse within the charitable sector is both an international and domestic concern. The Financial Action Task Force (FATF) is an inter-governmental policy making body charged with setting up international standards and policies to combat money laundering and terrorist financing. 

The FATF specifically addresses the issue of terrorist financing through the non-profit sector in Recommendation 8 of its 40 Recommendations. Recommendation 8 requires countries to review the adequacy of their laws and regulations to ensure that non-profit organizations, which include registered charities in Canada, cannot be abused to finance terrorism. As a FATF member, Canada has committed to complying with these recommendations and is subject to peer reviews of its compliance. 

In Canada’s recent follow-up evaluation, the FATF’s review recognized the importance of the CRA’s efforts in detecting and disrupting the risks of terrorist financing in registered charities. 

The United Nations (UN) adopted UN Security Council Resolution 1373 related to measures to combat terrorist activities, which Canada as a UN member is also assessed against for compliance. The UN’s Security Council Counter-Terrorism Committee Executive Directorate (CTED), which monitors, promotes, and facilitates the compliance of resolutions related to countering terrorism, conducted an initial review in 2021 of Canada’s current measures that aim to protect the charitable and non-profit sectors from terrorist financing abuse. Its findings were generally consistent with the assessment received from the FATF’s review. The CTED has delayed conducting a more thorough in-person review because of the COVID-19 restrictions, but will conduct its review in the future.

As well, as the lead national security and AML/ATF regime partner responsible for protecting and maintaining public confidence in the charitable sector, the CRA provided input on various AML/ATF initiatives. 

To stay informed about program changes and web page updates, to get guidance or advice about maintaining registered status or for general information for the charitable sector, subscribe to the electronic mailing list.