October 25, 2002 (Revised June 14, 2007)
Business - Related business - Sanctions - Revocation
Under the Income Tax Act, charitable organizations and public foundations can carry on related businesses that accomplish or promote their charitable objects. They can carry on any other business activities if substantially all (that is, at least 90%) of the staff involved in these activities are volunteers. Private foundations cannot carry on any business activities.
A charitable organization or public foundation that carries on an unrelated business is liable to a penalty equal to 5% of its gross revenue for a taxation year from any unrelated business that it carries on in the taxation year. This penalty increases to 100% and the suspension of tax-receipting privileges for a repeat infraction within 5 years.
A private foundation that carries on business activities is liable to a penalty equal to 5% of its gross revenue for a taxation year from any business that it carries on in the taxation year. This penalty increases to 100% and the suspension of tax-receipting privileges for a repeat infraction within 5 years.
A registered charity that contravenes or continues to contravene the Act could also have its registration revoked.
- Summary Policy CSP-F17, Penalties
- Summary Policy CSP-R05, Business Activity
- Summary Policy CSP-R12, Revocation
- Summary Policy CSP-S17, Sanctions
- Summary Policy CSP-S18, Suspensions
- Policy Statement CPS-019, What is a Related Business?
- Policy Commentary CPC-002, Related Business and Public Foundations
- Church of Christ Development Company Limited v. Minister of National Revenue,  82 D.T.C. 1461.
- Earth Fund v. Canada (Minister of National Revenue) (2002 FCA 498), 2002-12-16.
- Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, ss. 149.1(1), 188.1(1), (2) and para. 188.2(1)(a).
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