Dollars, Donees, and Disbursements: New Opportunities for Charity Partnerships Await


Canadian registered charities now have greater flexibility when partnering with non-profit organizations. On June 23, 2022, Bill C-19, Budget Implementation Act 2022, No. 1 (“BIA”) received royal assent. The BIA, among other things, amends certain rules in the Income Tax Act (Canada) (the “ITA”) to give charities more options for how they use their resources and how they collaborate with other non-profit organizations. These changes were first announced in the 2022 federal budget and the draft legislation has since evolved based on concerns and feedback from the charitable sector.



Prior to these amendments, a charity was only permitted to carry out its own charitable activities, or make gifts to other “qualified donees” (which includes other charities but does not include non-profit organizations that are not registered charities). If a charity wanted to transfer resources to a non-profit organization, the charity had to ensure it maintained direction and control over the use of the resources such that the activities were still considered to be the activities of the charity. This meant the charity had to make all major decisions around how the activity would be carried out, who it would benefit, and its overall goals. In some cases, this requirement to maintain direction and control was at odds with the charity’s actual intentions in partnering with the non-profit and often led to inefficiencies.

New Rules


Under the new rules, charities are now permitted to make “qualifying disbursements”, which includes a disbursement or gift by a charity to a non-profit organization that is not a qualified donee, provided that: (i) the disbursement or gift is in furtherance of the charity’s charitable purposes; (ii) the charity ensures that the disbursement is exclusively applied to charitable activities in furtherance of the charitable purpose; and (iii) the charity maintains documentation sufficient to demonstrate the foregoing. At this stage, it is unclear how these new rules will be administered by the Canada Revenue Agency and the level of detail they will expect to see in supporting documentation for qualifying disbursements.

Notably, the first draft of the BIA would have required the charity and non-qualified donee to comply with seven mandatory accountability requirements, as well as obligations around due diligence, ongoing monitoring, and remedial action. While the second draft removed some of these onerous requirements, it did not provide all of the flexibility that organizations in the charitable sector were hoping for.

Under the new rules, charities are also prohibited from accepting gifts that are expressly or implicitly conditional on making a gift to a person other than a qualified donee. This may limit charities from fundraising in cases where donations ultimately benefit a non-profit partner. The new rules also require charities to disclose the following information on their T3010 information return:

  1. The name of any grantee organization that received more than $5,000 of qualifying disbursements in the year;
  2. The purpose of each such disbursement; and
  3. The total amount disbursed to each grantee organization in the year.
Considerations Moving Forward


The new rules allow charities and non-qualified donees to work together without the burden of what some organizations felt was artificial and unnecessary oversight by the charity. The changes allow charities to make their own decisions around the level of control and direction required based on the experience of the partner, the significance of the work they are involved in, and any other factors that may be relevant.

Charities wishing to take advantage of this additional flexibility should review their charitable purposes to ensure their existing purposes allow the charity to make gifts to non-qualified donees. Many charities have charitable purposes that only permit the charity to carry out charitable activities directly and/or make gifts to qualified donees. These charities may need to amend their constitutional documents if they wish to take advantage of the flexibility granted by the new rules.

For the most part, the amendments appear to be a welcome change that will more easily facilitate partnerships between charities and non-qualified donees. Some in the charitable sector, however, have also expressed the concern that the changes could create a lack of oversight over money entering and leaving the charitable sector.

If you want to know how these changes will affect your organization, please reach out to a member of our Tax Group.