Registered Charity

A registered charity is an organization established and operated for charitable purposes, and must devote its resources to charitable activities. The charity must be resident in Canada, and cannot use its income to benefit its members.

A charity also has to meet a public benefit test. To qualify under this test, an organization must show that:

• its activities and purposes provide a tangible benefit to the public; 
• those people who are eligible for benefits are either the public as a whole, or a significant section of it, in that they are not a restricted group or one where members share a private connection, such as social clubs or professional associations with specific membership; and 
• the charity's activities are legal and are not contrary to public policy.

If you decide that your organization does fall into the category of registered charity, you must decide if it is right for you. You must look at the advantages and obligations, and ask yourself some questions before making the final decision.

There are many advantages to being a registered charity.

The main ones include:

• registration allows a charity to issue official donation receipts for gifts it receives. These receipts may be used to reduce an individual donor’s income tax payable, or a corporate donor’s taxable income.
  
• once registered, a charity is exempt from paying income tax under Part I of the Income Tax Act;
  
• registered charities are eligible to receive gifts from other registered charities, such as foundations;
  
• registration provides increased credibility in the community, since registered charities must follow certain rules and guidelines in order to maintain their registration; and
• many goods and services provided by registered charities are exempt from goods and services tax/harmonized sales tax (GST/HST). Also, in many situations, registered charities may claim a partial rebate for the GST/HST they pay.

On the other hand there are many obligations that are associated with being a registered charity. They include:

• devoting its resources (funds, personnel, and property) to its charitable purposes and activities;
  
• filing its annual Form T3010, Registered Charity Information Return, within six months of the end of its fiscal period;
  
• meeting its annual spending requirement (disbursement quota);
  
• keeping adequate books and records, and making them available for review on request by the Canada Revenue Agency;
  
• making sure that official donation receipts are complete and accurate when issued;
  
• controlling and directing the use of all its resources (funds, personnel, and property); and 
• maintaining its status as a legal entity.

For more details on making an informed decision about registering as a charity, please visit:

• Charities and Giving - Is Registration right for you?

To register as a charity, the organization has to be either incorporated or governed by a legal document called a trust or a constitution. This document must explain the organization's purposes and structure.

For answers to questions about applying, please visit the CRA website:

• Charities and Giving - Applying for registration

Registered charities must fit into one of four categories of charitable purposes: the relief of poverty, the advancement of education, the advancement of religion, or other purposes that benefit the community in a way that the courts have said are charitable. Non-profit organizations may not fit into one of the four categories of charitable purposes, but may have purposes such as social welfare, civic improvement, pleasure, or recreation. Non-profit organizations cannot issue official donation receipts for gifts that they receive.

For more details on the differences under the Income Tax Act, please view:

• Registered charity vs. non-profit organization

To view a glossary of terms related to registered charities, please visit:

• Charities and Giving - Glossary

For related policies and technical information, please visit:

• Charities and Giving - Policies and technical Information

For more answers on the topic of registered charities, please visit the CRA website:

• Questions and answers

The Canada Revenue Agency has answers to questions pertaining to fundraising by non-profits. Please visit:

• Guidance on Fundraising by Registered Charities

Public Legal Education and Information Service of New Brunswick (PLEIS-NB) has launched a new series of free resources for charities and non-profit organizations. The handbook contains an overview of some of the legal issues and questions to consider when becoming involved with an organization’s board of directors. The handbook provides space to record important information about the specific organization and references to other resources.