The Qualified Donee Regime and its Implications for Charities

Charity law and policy, Income Tax Act

The Qualified Donee Regime and its Implications for Charities

If your charity makes gifts to qualified donees (such as a university outside of Canada, UNICEF agencies, or certain low-cost housing corporations), you should be aware of their requirements under the Income Tax Act, which are discussed below.

Important note: Some charities, particularly those that provide low-cost housing, may be confused by these new requirements, since the term “low-cost housing corporation” may seem to describe them. However, the new registration requirements discussed below do not apply to organizations that already have/qualify for registered charity status. Rather, they apply to organizations described in other sections of the Income Tax Act. Registered charities should still make note of the requirements for qualified donees as they may impact their grant/gift-making activities.


By law, registered charities are required to devote their resources exclusively to charitable activities. Generally, this requires charities to carry out their charitable activities and programs themselves. However, transferring resources to organizations that meet the definition of a “qualified done”, including another registered charity, is also considered a charitable activity under the ITA.

As a result, instead of spending money on its own activities, a charity also has the option of transferring money to another charity to carry out those charitable activities instead. In the vast majority of cases, the only qualified donee a charity will transfer resources to will be another registered charity, with similar objects. However, the definition of qualified donee also extends to other types of organizations, including:

  • Canadian amateur athletic associations
  • National arts service organizations
  • Low-cost housing corporations for the aged;
  • Canadian municipalities;
  • Municipal or public bodies performing a function of government in Canada;
  • Universities outside Canada;
  • Foreign charities that have received a gift from Her Majesty in right of Canada (hereinafter “charitable organizations outside Canada”);
  • Her Majesty in right of Canad, a province or a territory; and
  • The United Nations and its agencies.

In addition to being eligible to receive gifts from registered charities, these qualified donees can also issue official donation receipts for gifts they receive from individuals and corporations in their own right.

The Rules

Previously, these entities were generally not subject to special registration requirements under the ITA (at least not in their capacity as qualified donees). However, amendments to the ITA have changed that. Now most of the entities listed above are required to be registered with the Canada Revenue Agency in order to become or continue to be qualified donees. Once registered, a qualified donee will be included on a publically accessible list on CRA’s website. Charities should not make a gift to any organization that is not included on a public CRA list (other than Her Majesty in right of Canada or a province and the United Nations and its agencies).

What are the registration requirements for Qualified Donees?

The registration requirements differ for each category of qualified donee.

Canadian amateur athletic associations must promote amateur athletics in Canada nation-wide as their exclusive purpose and function.

National arts service organizations must first apply to the Department of Canadian Heritage before applying to the CRA and must, among other things, be formed and operated exclusively to promote the arts on a nation-wide basis.

A low-cost housing corporation for the aged must meet the conditions to be exempt from tax under para 149(1)(i) of the Income Tax Act and be constituted exclusively for providing low-cost housing for the aged, defined to be 55 years of age or older.

Municipalities are automatically registered and publicly listed based on existing information. Similarly, prescribed universities are publicly listed in Schedule VIII of the Canadian Income Tax Regulations, but there is also a process by which universities can ask for prescribed status.

A charitable organization outside of Canada must demonstrate that it not only received a gift from the federal government, but that it would also meet the requirements for charitable registration in Canada.

Public bodies performing a service of government  must submit a letter to the CRA with evidence that they are constituted and operated as such. The criteria for these organizations were set out in two recent technical interpretations, which are linked to below:

CRA is administered “interim measures” which allowed all low-cost-housing corporations and public bodies performing a service of government to be qualified donees until January 1, 2014. Now, only those organizations that are on the list can issue donation receipts and receive gifts from charities.

Ongoing Obligations for Qualified Donees     

Once registered, qualified donees must ensure that they properly issue donation receipts, accurately valuate non-cash gifts, maintain proper books and records, and provide CRA with access upon request. Failure to do so could result in a suspension of their receipting privileges or a suspension of their qualified done status.

Practical Implications

As a result of these changes to the regulation of qualified donees, specific steps now need to be taken by both registered charities and qualified donees.

Qualified donees must comply with their requirements, including the types of books and records they are required to keep, as well as the information that must be contained on an official donation receipt.

Registered charities that make gifts to qualified donees must ensure that they only do so to those publically listed on CRA’s website. Those lists can be found here:

Charities should also ensure that any gift to a qualified donee is consistent with its charitable purposes. Although these gifts are permitted under the Income Tax Act, they could potentially constitute a breach of trust if a charity transfers resources to an organization such as a municipality, public body, or UN agency where  the gift could be used to carry out activities that do not further, or are inconsistent with, its charitable objects.

For general information on qualified donees, see CRA Guidance CG-010, Qualified Donees.

Noteworthy is provided for general information purposes and does not constitute legal or professional advice. Every organization’s circumstances are unique. Before acting on the basis of information contained in this blog, readers should consult with a qualified lawyer for advice specific to their situation.

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