In a recent CRA document, we obtained that was released through access to information, it provides a good explanation of why CRA cares about charitable purposes and ALSO charitable activities.  For most people the point is obvious.   If you are going to set up a religious charity for example and have a charitable purpose, but your activities are going to be extremely harmful to the public, people would expect CRA to reject the charity application.


However, some people familiar with other countries (some of which provide far less or no tax incentives for donations) that focus almost exclusively on purposes may be confused or don’t understand or don’t agree with CRA’s position.   Keep in mind the same issue applies not just to charitable registration of an organization but also to changing or adding legal purposes once you are a registered charity.


Here is the text of CRA’s view:


Appendix A. Background information pertaining to the Income Tax Act requirement for providing sufficient information about activities at the time of registration

1. Historically, common law only focused on the charitable nature of purposes with little regard to the activities that furthered those purposes. At common law, and under the system in England and Wales as regulated by the Charity Commission, which is substantially similar to the common law:

• An organization’s status as a charity is determined by its purposes, and is almost entirely unaffected by what it actually does-its activities.

• Therefore, if there is an inconsistency between what it is supposed to do and what it actually does, that normally does not affect its status or registration as a charity. Instead, the problem is considered to lie with the trustees or managers of the charity. The Charity Commission exercises the power of the original courts of equity under the common law to correct the situation by intervening and regulating the trustees and managers, and even by replacing them with others or charging them with breach of trust.

2. This is essentially the situation in Canada at the provincial level, except that the supervisory role played in England and Wales by the Charity Commission is the responsibility of the provincial Attorneys General (the ministers of Justice) or in some cases the public trustee, acting by application to the modern courts. But this is not the situation at the federal level, the level of government in Canada that has primary responsibility for the income tax system, and in particular how that system recognizes and deals with charitable status.

3. In Canada, in order to be exempt from income tax and in order to be able to issue tax-creditable and tax-deductible receipts for donations received from other taxpayers, charities must be registered under the Act. That Act does not supersede the common law exactly, but it adds certain requirements that charities under the common law have to fulfill in order to have these tax privileges. The effect is that if there is an inconsistency between what a charity is supposed to do and what it actually does, that can indeed-unlike the common law and the regime in England and Wales -affect its status or registration as a charity under the Act:

• The common law sets out a purpose test to decide whether an organization is a charity: The purpose must fall within a recognized category of charitable purposes, and deliver both the benefit and the public components of public benefit.

• The Canadian Income Tax Act recognizes the common law in this regard; however, it adds an activities test which must be fulfilled as well.

• Most charities have to be registered as “charitable organizations” under the Act. It allows an organization to be registered as such only if all of its resources “are devoted to charitable activities”.

4. Although the Supreme Court of Canada (in the 1999 Vancouver Society case) declared that a charitable activity is nothing more than an activity that accomplishes or furthers a charitable purpose, the Act’s focus on “activities” is not the same as the common law’s focus on purposes. Activities, unlike purposes, are about what the organization is actually doing or going to do, as opposed to the results it is intended to accomplish or further.

5. While the classification of purposes as charitable or not, and as conferring a benefit to the public or not, are questions of law (or questions of mixed fact and law), the nature and effect of activities are regarded as questions of fact for income tax purposes; and there are no presumed facts. Therefore, an organization still has the onus of showing all the facts needed to satisfy both the common law and the Act.

6. The decision whether to register is thus only partly based on the common law issue of whether the purposes fall into a charitable category and would confer public benefit. It is equally based on whether the activities-what the organization actually does or is going to do- are, as a matter of fact, capable of accomplishing or furthering charitable purposes and conferring public benefit.

7. Even if a charitable organization’s purposes can be “prima facie assumed” to confer public benefit within the meaning of the common law of charity, indeed, even if it is accepted that an organization’s purposes are entirely charitable under the common law or the Income Tax Act, CRA still may not register the organization for tax purposes unless it is provided with evidence to show that the organization’s actual and planned activities fall within a charitable category-meaning that they actually accomplish or further a charitable purpose and really deliver a public benefit.

8. The other types of charities under Canadian income tax law, public and private foundations are subject to a slightly different rule but the effect is the same. The decision to register them under the Act is based on whether they are “constituted and operated exclusively for charitable purposes”. The requirement that they be “operated” for charitable purposes is the same as requiring their activities-what the foundations actually do-to be charitable and confer public benefit, just like charitable organizations.

9. As well, both charitable organizations and foundations still have to list all their planned and actual activities in order for the decision-maker to verify that these are consistent with charitable purposes. Also, when applying for charitable registration, the onus remains on them to provide all the facts relevant to the issue. Again, there are no presumed facts. Nevertheless, CRA reserves the right to make its own investigation into the facts and take account of all relevant information available to it, in addition to that supplied by an applicant or organization.

10. To summarize, then, there is no “presumption of fact” in Canada regarding charitable purposes. When considering whether a purpose is charitable under the common law, there can be a “prima facie assumption” of the legal conclusion that a charitable purpose under the first three Pemsel heads satisfies the benefit requirement. However, under Canadian income tax law, the registered status of Canadian charities depends equally on whether their activities (as opposed to their nominal purposes) are charitable, which is a question of fact unaffected by any presumption or assumption. Therefore, an applicant organization must provide a complete and detailed description of its activities, in order for the CRA to assess whether the applicant organization is eligible for registration.

11. Having said the above, while CRA has the legal authority to require an organization to provide sufficient information about the activities it will conduct to further each of its stated purposes, it is generally our practice to take a reasonable approach and where appropriate, approve registration in low-risk situations and not require an organization to amend the stated purposes in its governing document prior to registration.

Here is the full document:

Purposes Not Being Furthered on a charity application