The Charities Glossary is provided for information purposes only as a plain language explanation of some of the technical terms used on our Web pages and in our forms and guides, and does not replace the law, either enacted or proposed.
Generally, this is the amount the registered charity originally paid for the property, plus the costs (such as legal fees or surveys) associated with the purchase, plus the cost of improvements to the property.
An advantage is the total value, at the time the gift is made, of what a donor receives in return for the gift (for example, a meal, tickets to a show). The advantage must be taken into consideration when determining the eligible amount of a gift for receipting purposes.
Determining the fair market value of an advantage is similar to determining the fair market value of a gift in kind. However, while only donations of property can be receipted as gifts in kind, the fair market value of any type of advantage (for example, services, accommodation, meals) must be taken into consideration when determining the eligible amount of a gift for receipting purposes.
An advantage also includes any limited-recourse debt in respect of the gift. However, the calculation of an advantage does not include taxes such as GST, PST, or HST. As well, it does not include gratuities, unless they are included in the cost and are not discretionary.
For more information, see Pamphlet P113, Gifts and Income Tax.
A charitable gift annuity is an arrangement under which a donor transfers capital to a charitable organization in exchange for immediate guaranteed payments for life at a specified rate depending on life expectancy or for a fixed term.
A charitable organization may enter into arrangements to issue annuities without jeopardizing its status as a registered charity. Charitable foundations, however, cannot enter into arrangements to issue annuities since an undertaking to make an annuity payment is considered a debt, which is a ground for revocation.
When a charity's or Canadian amateur athletic association's registration is annulled, it is as though the registration never existed. Therefore, the effective date of an annulment is the date at which the registration was originally granted. Annulments generally occur when registration was granted in error. An organization whose registration has been annulled can no longer issue donation receipts for income tax purposes, and is no longer eligible to receive gifts from registered charities. However, because the registration was granted in error, the CRA considers receipts issued after the effective date of registration and before the date of the notice of annulment as valid.
An appropriation occurs when a charity transfers property to an individual or organization and the recipient of the transfer obtains an unwarranted benefit as a result of the transaction.
Appropriations that are included in the calculation of the revocation tax are those that took place up to 120 days before the charity received a notice of intention to revoke its registration.
The amount of an appropriation is the fair market value of the property transferred less any amount the recipient gave the charity for the property.
Individuals and organizations that receive an appropriation from a charity are jointly liable with the charity for the revocation tax up to the amount of all appropriations. In other words, if a charity cannot pay the revocation tax because it has given away its property to an individual or organization, then the recipient that improperly benefited from the transfer of property will be liable for the revocation tax up to the amount of all appropriations.
The term "at arm's length" describes a relationship where persons act independently of each other or who are not related. The term "not at arm's length" means persons acting in concert without separate interests or who are related.
Related persons are individuals who are related to each other by blood, marriage or common law partnership, or adoption. Examples of blood relatives include grandparents, parents, brothers, sisters, and children. Examples of persons related by spousal relationship include the grandparents of a spouse, the parents of a spouse, the brothers and sisters of a spouse, the spouse of a child, and the spouse of a grandchild. Generally, in determining arm's length relationships, common law partners are treated in the same way as legally married spouses. Adopted children are treated in the same way as blood-related children.
Related persons also include individuals or groups and the corporations in which they have a controlling interest. Persons related to these individuals or groups are also considered related to those corporations.
For more information on arm's length, see Interpretation Bulletin IT-419, Meaning of Arm's Length.
A registered charity's assets include, among others, amounts receivable, bank accounts, capital assets, cash, inventories, long-term investments, and short-term investments.
A registered charity must report the value of its assets on a cost basis (that is, the amount the charity paid to acquire the asset). If an asset is donated to a charity, the value is the fair market value of the asset on the day the charity received the gift.
Associated charities are two or more registered charities that have applied for and received this designation from us. Associated charities can pass funds among themselves without being affected by the usual limitation placed on gift making by charitable organizations.
The Income Tax Act generally requires that charitable organizations spend no more than half their income as gifts to qualified donees, otherwise they will be re-designated as public foundations.
You must obtain written permission from us to have an associated status designation. For more information, see Asking for associated status.
A provision in which the trustees give assurance that all the money received will be spent only for the purposes outlined in the trust document.
The business number (BN) is a 9-digit business identifier to which businesses can register program accounts with the Canada Revenue Agency (CRA). An organization may have more than one program account number assigned by the CRA including corporate income tax, import/export, payroll deductions, goods and services tax/harmonized sales tax (GST/HST), and registered charities. The first nine digits would be the same for all of these accounts.
A bequest is property a registered charity receives from the will of a deceased person.
By-laws, if adopted by an organization, form part of the governing documents. They set out the rules and regulations for the administration and management of the organization. For example, by-laws often identify the duties of officers, the fiscal year end of the organization, and when meetings must be held.
A Canadian amateur athletic association is created and resident in Canada with the exclusive purpose and exclusive function to promote amateur athletics in Canada on a nation-wide basis. It must devote all its resources to that purpose and function.
A Canadian amateur athletic association is eligible for registration by the Canada Revenue Agency. Once registered, it can issue official donation receipts for income tax purposes for gifts from individuals and corporations, and receive gifts from registered charities.
A capital gain is realized when a capital property (for example, a share or land) is sold or considered to have been sold for more than the total of its adjusted cost base and the outlays and expenses incurred to sell the property. Outlays and expenses include fixing-up expenses, finders' fees, commissions, brokers' fees, surveyors' fees, legal fees, transfer taxes, and advertising costs.
(Applies only for fiscal periods ending before March 4, 2010)
The definition "capital gains pool" applies for the purpose of the definition "disbursement quota" and is applicable to fiscal periods that begin after March 22, 2004.
The capital gains pool of a registered charity for a fiscal period is the amount by which the total amount of declared capital gains of the charity from the disposition of enduring property (other than a capital gain from the disposition of a bequest or an inheritance received by the charity in a fiscal period that included any time before 1994) after March 22, 2004, exceeds the amount claimed by the charity as a capital gains reduction.
The annual calculation of the capital gains pool is voluntary, nevertheless the charity should declare its capital gains realized on the disposition of enduring property which will preserve its right to do the calculation and claim a reduction in the disbursement quota in a subsequent fiscal period. See "Calculating the disbursement quota" in Guide T4033B for instructions on how to calculate the capital gains pool.
(Applies only for fiscal periods ending before March 4, 2010)
The capital gains reduction is a calculation that allows a registered charity to use its capital gains from the disposition of enduring property to assist it in meeting the element of its disbursement quota obligation based on the average value of its assets not used directly in charitable activities or administration.
If the amount identified on line 5900 of the T3010 return (i.e., the average value of property owned by the charity at any time in the 24 months immediately preceding the fiscal period that was not used directly in charitable activities or administration) is $25,000 or less, the capital gains reduction is deemed to be nil.
Where the amount at line 5900 is more than $25,000, the capital gains reduction is the lesser of:
See "Calculating the disbursement quota" in Guide T4033B for instructions on how to claim a capital gains reduction.
This includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. Capital property is usually bought for investment purposes or to earn income. It does not include trading the assets of a business, such as inventory. Some common types of capital property include:
Cause-related marketing (sometimes called social marketing) is a venture with a non-charitable partner to promote the sale of items or services on the basis that a portion of the revenues will be directed to a charity or charities.
A document issued by an incorporating authority (federal, provincial, or territorial government) stating that the organization is duly incorporated and that it is in good standing with the authority. The name of the document may vary from jurisdiction to jurisdiction.
Law enacted by Parliament in 2001 as Part 6 of the Anti-terrorism Act. It provides a mechanism for revoking the registration of any charity or denying registration of an applicant when security information is used to establish that the charity or applicant is involved in supporting terrorism. Under the act, two ministers may sign a special certificate when they have reasonable grounds to believe that a charity or applicant is implicated in supporting terrorism. A court then reviews the evidence. If it confirms that it was reasonable to issue the certificate, the charity's registration is revoked or the applicant's registration is denied on the date of the court's determination.
A charity registration number is 15-digit program account number assigned to a charity by the Canada Revenue Agency when it is registered. A complete charity registration number has three parts: the BN (first nine digits), the program identifier (two letters), and the reference number (four digits). The registered charity program identifier is "RR". When you deal with the Charities Directorate always use the 15-digit registration number. If you are unsure of your registered charity's number, contact the Charities Directorate. For more information, go to Registration number.
A community foundation is an organization established to manage a community endowment fund, the income from which is distributed to registered charities within a community. A community foundation can qualify for registration as a charity.
Compensation, for persons (employees) working full-time or part-time for a registered charity, includes salaries, wages, commissions, allowances, bonuses, fees, and honoraria, plus the value of taxable and non-taxable benefits.
The Canada Revenue Agency may enter into a compliance agreement with a registered charity to help correct some infractions. A compliance agreement sets out the steps that a charity must follow in order to comply with the Income Tax Act, and the consequences of continued infractions.
(Applies only for fiscal periods ending on or after March 4, 2010)
A designated gift is a type of gift made between registered charities that are not at arm's length to each other. A gift becomes a designated gift if the donor charity identifies it as a designated gift in its information return for the year the gift is made.
For more information on designated gifts, see New anti-avoidance rules and designated gifts.
Directors and trustees are persons who make up the registered charity's elected or appointed governing body. This generally means persons who hold positions identified in the registered charity's governing documents, such as chair, treasurer, secretary, or past president. The registered charity's governing board includes all its directors and trustees.
The disbursement quota is the minimum calculated amount that a registered charity is required to spend each year on its own charitable programs or on gifts to qualified donees (such as other registered charities). For more information, see Annual spending requirement (disbursement quota).
Under proposed legislation, this is the amount by which the fair market value of the gifted property exceeds the amount of any advantage received or receivable as a result of the gift. This is the amount for which a qualified donee can issue a receipt.
For example, a donation of $1,000 is made to the Anytown Ballet Company, which is a registered charity. In gratitude, the charity gives the donor three tickets to a show that are valued at a total of $150. The donor is considered to have received an advantage of $150. Therefore, the eligible amount of the gift is $850 ($1,000 - $150).
There are exceptions to this concept. For a more detailed explanation, see Pamphlet P113, Gifts and Income Tax and Income Tax Technical News, Issue 26 or go to Deemed fair market value rule, Determining fair market value, or What you need to know to issue an official donation receipt.
An eligible donee is a registered charity:
Employees are individuals who are hired under an employment contract to perform specific duties under the management of the charity. The earnings from employment contracts in Canada are considered employment income and are subject to Canada Pension Plan, Employment Insurance, and income tax deductions.
(Applies only for fiscal periods ending before March 4, 2010)
The definition "enduring property" applies for the purpose of the definition "disbursement quota" and is applicable to fiscal periods that begin after March 22, 2004. The enduring property of a registered charity generally includes:
Gifts of enduring property are generally excluded from the charity's disbursement quota in the year they are received. However, the charity may subsequently have to consider these gifts when calculating the value of property for its 3.5% disbursement requirement.
When the charity spends or transfers some or all of the enduring property, the amount spent or transferred must be included when calculating the disbursement quota requirement.
See definition under "Non-qualifying security".
Fair market value is usually the highest dollar value you can get for your property in an open and unrestricted market and between a willing buyer and a willing seller who are knowledgeable, informed, and acting independently of each other.
For more information, see Determining fair market value.
At a minimum, financial statements consist of a statement of assets and liabilities and a statement of revenue and expenditures for the fiscal period. They should show the different sources of a registered charity's revenue and how it spent its money. For more information, see Financial statements.
A fiscal period is the 12 months (or, for incorporated charities, a period of up to 53 weeks) covered by the charity's financial statements. Many registered charities have a fiscal period that is the same as the calendar year (that is, their fiscal period is from January 1 to December 31); others have a different fiscal period (for example, ending August 31 or March 31).
The fiscal period end is always stated as month and day only (for example, March 31). The year is not included because, unless formally changed, the fiscal period stays the same year after year. The phrase "fiscal period ending" does include the year because it identifies one specific fiscal period that ends in that year.
Under the Income Tax Act, a registered charity must obtain our permission before changing its fiscal period end, since such changes affect the charity's obligations under the Income Tax Act.
A full-time (permanent) position refers to continuous service in an office or position. An employee should be considered full-time (permanent) if the employee works, throughout the year, all or substantially all of the typically scheduled hours of work established for persons in that class of employees.
In most cases, a gift is a voluntary transfer of property without valuable consideration to the donor. However, under proposed legislation, for gifts made after December 20, 2002 a transfer of property for which the donor received an advantage will still be considered a gift for purposes of the Income Tax Act as long as we are satisfied that the transfer of property was made with the intention to make a gift. The existence of an advantage will not necessarily disqualify the transfer from being a gift if the amount of the advantage does not exceed 80% of the fair market value of the transferred property.
For gifts made after December 20, 2002, it is the eligible amount of the gift that is used to calculate the donor's donation tax credit or deduction.
Gifts-in-kind, also known as non-cash gifts, are gifts of property. They cover items such as artwork, equipment, securities, and cultural and ecological property.
A contribution of service, that is, of time, skills or efforts, is not property and, therefore, does not qualify as a gift or gift in kind for purposes of issuing official donation receipts.
These are the documents that formally establish an organization and govern its operations. Some examples of governing documents are letters patent, certificate of incorporation, memorandum or articles of association, a constitution, trust documents, and bylaws. For more information, see Governing documents
An internal division is a branch, section, or other division of a registered charity. An internal division does not have its own governing documents but rather operates under the governing document of a parent or head body.
A registered charity can decide to pool its resources with other entities that may not be qualified donees in order to establish and operate a charitable program. The charity will be considered to be carrying on its own activities providing it is an active partner exercising a degree of control that is at least proportionate to the resources it provides to the venture. In these situations, the CRA strongly recommends that the charity put a formal agreement in place as evidence that it retains direction and control over its resources, and is an active participant in a joint venture that directly furthers its charitable purpose.
This is a document that is provided by a parent body or a head body, which confirms the name of an internal division and its status as a branch, section, parish, or congregation. The document must give the date the internal division was established, the name of the governing document under which it was established, and the name of the governing document it currently follows. The document must be dated and signed by a director or trustee of the parent body or the head body, and must show their position.
A like official is a person who has governing responsibilities for the registered charity similar to those of a member of the governing board or a trustee. This should be interpreted broadly to include anyone having control and management of the administration of the registered charity. These people generally hold positions such as chair, vice-chair, treasurer, secretary, or past president.
A linked charity is a registered charity with its own governing documents that is, at least in some respects, in a subordinate position to a head body.
The head body usually has policies that govern the charitable programs the linked charities deliver and that regulate their administrative and financial affairs. It may also require dues from the linked charities.
A loanback occurs when a donor makes a gift to a qualified donee and within 60 months of making the gift, a specific situation occurs that affects the fair market value of the gift for income tax purposes. For more information, see Loanbacks.
See "arm's length".
A provision stating that the organization shall be carried on without purpose of gain for its members, and any profit or other assets of the organization shall be used solely to promote its objectives.
A non-profit organization is an association, club, or society that is operated exclusively for social welfare, civic improvement, pleasure, recreation, or any other purpose except profit. It is not a charity. No part of the organization's income can be payable to or available for the personal benefit of any proprietor, member, or shareholder, unless the recipient is a club, society, or association whose primary purpose and function is to promote amateur athletics in Canada.
This applies to private foundations only.
A non-qualified investment is:
1. a debt, other than a pledge or an undertaking to make a gift, owing to the foundation by:
a) a person, other than an "excluded corporation", see below, who:
i) is a member, shareholder, trustee, settlor, officer, official, or director of the foundation;
ii) has contributed more than 50% of the foundation's capital or who is a member of a group of persons not dealing with each other at arm's length who have contributed more than 50% of the foundation's capital; or
iii) does not deal at arm's length with any person described in i) or ii);
b) a corporation, other than an "excluded corporation", controlled by:
i) the foundation;
ii) any person or group of persons described in a) above;
iii) the foundation and any other private foundation with which it does not deal at arm's length; or
iv) any combination of i), ii), and iii);
2. a share of a class of the capital stock of a corporation, other than an "excluded corporation", described in 1 above that the foundation holds. However, the law excludes from non-qualified investments any share listed on a designated stock exchange or a prescribed share of the capital stock of a taxable Canadian corporation.
3. a right the foundation holds to acquire a share described in 2 above.
An excluded corporation is:
A non-qualifying security of an individual at a particular time is:
(b.1) A beneficial interest of the individual or the estate in a trust that
A qualified donee can only issue an official donation receipt to the donor of a non-qualifying security if the security is an excepted gift or, if within 60 months of acquiring the non-qualifying security, one of the following two conditions applies:
The 2011 Federal Budget contains a proposed change to the second condition. Specifically, when a qualified donee disposes of a non-qualifying security, an official donation receipt may only be issued when the disposition is for consideration that is not another non-qualifying security of any person. This provision takes effect for dispositions on or after March 22, 2011.
A non-qualifying security is considered to be an excepted gift if it meets all of the following criteria:
What we consider an "official copy" of the governing documents depends on how the registered charity is formed.
If the registered charity is incorporated, the appropriate provincial or federal incorporating authority usually has to approve changes to the registered charity's governing documents. In this case, the official copy we want is a photocopy of the amending documents displaying the stamp or other approval mark from the incorporating authority.
If the registered charity is not incorporated, the official copy we want is a photocopy of the amended documents showing the date the documents came into effect. Two people who are directors, trustees, or like officials of the registered charity must sign the photocopy.
Registered charities can issue official donation receipts (also referred to as "tax receipts") to acknowledge gifts. An official donation receipt is subject to particular requirements under the Income Tax Regulations including identification that it is an official receipt for income tax purposes. See the definition "eligible amount of gift" for further information. To view sample receipts see Samples - Official donation receipts.
Note that registered charities issue other forms of receipts to acknowledge acceptance of services or items that are not gifts. These are not tax receipts and should be clearly distinguished from the tax receipts issued to acknowledge gifts. Contributions of services, that is, of time, skills or efforts, are not property and, therefore, do not qualify as gifts for purposes of issuing official donation receipts. Accordingly, a charity cannot issue an official donation receipt for services rendered free of charge. For more information, see Policy Commentary CPC-017, Gifts of Services.
This refers to any position of an employee of the registered charity that does not meet the requirements of a "full-time (permanent) position".
A financial penalty has been imposed on a charity because it was not complying with specific legislative obligations under the Income Tax Act.
Planned giving is a fundraising program that involves arranging donations to serve the interests of the registered charity and that suits the personal, financial, and tax situation of the individual donor. Through a planned-giving program, a registered charity seeks to attract significant gifts by identifying potential donors and helping them with information and advice.
Examples of planned giving include bequests, annuities, life insurance policies, and residual interests or charitable remainder trusts.
This is usually the amount a person receives or will receive for property sold. When a registered charity sells a property such as land, buildings, securities, and works of art, it may have a gain or loss from the sale.
Property, for the purpose of calculating the disbursement quota, includes any real estate or personal property, or part of such property that was not used directly in charitable activities or administration. This may include, but is not limited to, cash on hand and in bank accounts, stocks, bonds, GICs, mutual funds, land, and buildings.
The disbursement quota calculation is based on the property owned by the charity in the 24 months before the beginning of its fiscal period.
A qualified donee is an organization that can issue official donation receipts for gifts it receives from individuals and corporations. It can also receive gifts from registered charities.
A qualified donee can be:
RCAAA stands for registered Canadian amateur athletic association. To be registered as a Canadian amateur athletic association, the applicant must be created and resident in Canada and have the promotion of amateur athletics in Canada on a nation-wide basis as its exclusive purpose and exclusive function. It must also devote all its resources to that purpose and function.
An organization has applied to the CRA and received approval as meeting the requirements for registration as a charity, and has been issued a charitable registration number.
A registered charity is exempt from paying income tax and can issue official donation receipts for gifts it receives. However, if a registered charity is under suspension, it no longer has receipting privileges during the suspension period.
A registered charity is designated by the CRA as a charitable organization, a public foundation, or private foundation.
Restricted funds are funds tied to a specific use and not available for the general purposes of the organization (for example, a fund consisting of contributions that donors specifically direct the registered charity to use to buy a new building). Endowments are one type of restricted fund. Donors create them when they stipulate that the registered charity must maintain the principal amount and only use the income earned on it.
The summary is a brief description of the Charities Directorate's decision to revoke a charity's registration. In cases of non-compliance following an audit, a Notice of Intention to Revoke is sent to the charity detailing the non-compliance activities. However, only the revocation for cause summary is published on our Web pages.
Revocation tax is a tax that a charity becomes liable for when its registration is revoked. The tax is 100% of the value of the charity's remaining assets after all debts and liabilities have been paid. A charity can reduce the amount of revocation tax it owes by using its remaining assets on its charitable programs or by transferring them to an eligible donee during the winding-up period. For more information see, Revocation tax and the T2046 tax return.
Registration as a charity or Canadian amateur athletic association has been cancelled and the privileges that go with it have been taken away. The organization can no longer issue official donation receipts and is no longer eligible to receive gifts from registered charities.
Registration as a charity or Canadian amateur athletic association is officially revoked when a notice is published in the Canada Gazette.
Registration may be revoked because the charity or Canadian amateur athletic association:
Registration as a charity or Canadian amateur athletic association has been cancelled because the charity ceased to comply with the requirements for registration (other than failure to file). Generally, only the most severe cases of non-compliance, or cases where there is continuous non-compliance result in revocation for cause.
Registration as a charity or Canadian amateur athletic association has been cancelled for failure to file an Information Return (Form T3010 or Form T2052 respectively) within six months of its fiscal period end.
Registration as a charity or Canadian amateur athletic association has been cancelled at the charity's or Canadian amateur athletic association's request. Voluntary revocation may be requested for a number of reasons, such as:
A right to acquire shares is a right under which a charity is entitled, either immediately or in the future, and either absolutely or contingently, to purchase or otherwise receive any class of shares.
A sanction is a measure that can be used to obtain compliance with the requirements of the Income Tax Act from registered charities, registered Canadian amateur athletic associations (RCAAA), and other listed qualified donees. They include:
A share is a share or fraction of a share of the capital stock of a corporation. A share of the capital stock of a corporation includes a share of the capital of a cooperative corporation (within the meaning assigned by subsection 136(2) of the Income Tax Act) and a share of the capital of a credit union.
(Applies only for fiscal periods ending before March 4, 2010)
A specified gift is a type of gift that one registered charity makes to another. A gift becomes a specified gift if the donor charity identifies it as a specified gift in its information return for the year the gift is made.
A specified gift will not increase the recipient charity's disbursement quota for the following year. The donor charity cannot use the specified gift to satisfy its own disbursement quota.
A charity may be in a subordinate position to a parent organization. For example, a registered charity with its own governing documents may be, at least in some respects, in a subordinate position to a head body. The head body usually has policies that govern the charitable programs the charity delivers and that regulate its administrative and financial affairs. It may also require dues from the subordinate charity. The subordinate charity could also be an internal division, which is an internal branch, section, or other division of a registered charity. An internal division does not have its own governing documents.
Certain privileges of a registered charity, registered Canadian amateur athletic association, or other qualified donee have been temporarily taken away because it failed to comply with specific provisions of the Income Tax Act. Although a suspended organization may continue to operate while its privileges are suspended, it is not considered a qualified donee during that time, it cannot issue official donation receipts, and it must inform a donor of its suspension before accepting a gift.
See "Official donation receipt".
A ten-year gift is a donation made to a registered charity that is subject to a donor's written trust or direction that the gift, or any property substituted for it, be held by the recipient charity for ten years or more from the date the gift was made.
Term of office refers to the length of time a person (for example, directors, trustees, and/or like officials) serves in a particular position. A term of office has a particular start and end date, which may or may not coincide with a charity's fiscal period.
A written agreement is a document the helps establish the relationship between a charity and its representative when the representative is carrying out specifically identified tasks on behalf of the charity. For more information, see Guidance, Canadian Registered Charities Carrying Out Activities Outside Canada.