What is Charity Law in Canada?

Canada’s charity law framework governs over 86,000 registered charities that collectively manage more than $300 billion in assets. As a Canadian nonprofit leader or philanthropist, understanding this complex legal landscape is essential for maintaining compliance while maximizing social impact.

This guide examines the key aspects of charity law in Canada, including:

• The federal registration process

• Ongoing compliance requirements

• Permitted charitable activities

• Fundraising regulations across provinces

• Recent legal developments affecting the sector

1. Legal Framework for Canadian Charities

Federal vs. Provincial Jurisdiction

• Federal: Registration and tax status (Canada Revenue Agency)

• Provincial: Incorporation and fundraising rules

• Municipal: Business licensing and property taxes

Key Legislation

2. Becoming a Registered Charity in Canada

Eligibility Requirements

To qualify under the Income Tax Act, organizations must:

1. Have exclusively charitable purposes (relief of poverty, education, religion, other community benefits)

2. Devote resources primarily to charitable activities

3. Meet public benefit test

4. Have appropriate governance structures

The Registration Process

1. Incorporate federally or provincially

2. Develop bylaws and governance policies

3. Submit Form T2050 to CRA

4. Wait 6-18 months for approval

Approval Rates: Only ~60% of applications succeed

3. Maintaining Charity Status

Annual Compliance Requirements

• File T3010 information return within 6 months of fiscal year-end

• Spend minimum 3.5% of property on charitable activities (for endowed charities)

• Maintain direction and control over resources

• Keep adequate books and records

Permitted Activities

4. Fundraising Regulations Across Canada

Provincial Registration Requirements

Key Rules

• Receipting: Official donation receipts must include specific information

• Fundraising Costs: CRA scrutinizes ratios (ideal <35% of revenue)

• Online Fundraising: Must comply with privacy laws (PIPEDA)

5. Governance Best Practices

Board Responsibilities

• Ensure compliance with governing documents

• Exercise due diligence

• Avoid conflicts of interest

• Maintain financial oversight

Required Policies

• Conflict of interest

• Gift acceptance

• Investment

• Whistleblower protection

6. Recent Developments (2023-2024)

CRA Enforcement Trends

• Increased audits of charities engaged in advocacy

• Focus on inappropriate receipting

• Scrutiny of compensation for senior staff

Legislative Changes

• Bill C-19: New anti-avoidance rules for charities

• Modernization of the Canada Not-for-profit Corporations Act

• Quebec’s Bill 56: Enhanced transparency requirements

7. Common Compliance Issues

Top Reasons for CRA Audits

1. Political activities exceeding limits

2. Inadequate books and records

3. Improper receipting

4. Private benefit concerns

5. Failure to meet disbursement quota

Sanctions for Non-Compliance

• Monetary penalties

• Suspension of receipting privileges

• Revocation of charitable status

8. When to Consult a Charity Lawyer

Seek legal advice for:
✅ Starting a new charity
✅ Mergers or collaborations
✅ CRA audits or disputes
✅ Complex gift agreements
✅ International operations

Pro Bono Resources

• Canadian Bar Association’s Charity and Not-for-Profit Law Section

• Community Legal Clinics (province-specific)

Conclusion: Navigating Canada’s Charity Law Landscape

Canada’s charity law framework balances public accountability with operational flexibility. By understanding both federal and provincial requirements, charitable organizations can focus on their missions while maintaining compliance.