Income Tax Act S. 149.1(2) — Revocation of a Charitable Organization

The Minister may, in the manner described in section 168, revoke the registration of a charitable organization for any reason described in subsection 168(1) or where the organization

• (a) carries on a business that is not a related business of that charity;
• (b) fails to expend in any taxation year, on charitable activities carried on by it and by way of gifts made by it to qualified donees, amounts the total of which is at least equal to the organization's disbursement quota for that year; or
• (c) makes a disbursement by way of a gift, other than a gift made in the course of charitable activities carried on by it, or to a donee that is a qualified donee at the time of the gift.

What This Means for Your Charitable Organization

A charitable organization (as distinct from a private or public foundation) must devote substantially all of its resources to its own charitable activities. Revocation can occur if the organization carries on an unrelated business, fails to meet its annual disbursement quota, or makes improper gifts to non-qualified donees.

The disbursement quota requires charities to spend a minimum amount annually on charitable activities — currently set at 3.5% of the average value of assets not used directly in charitable activities or administration. Failure to meet this threshold is one of the most common compliance failures leading to revocation. B.I.G. Charity Law Group provides ongoing compliance advisory services to help charitable organizations meet their obligations. Book a governance review today.

Frequently Asked Questions

What is the disbursement quota for charities?

As of 2022, registered charities must disburse at least 3.5% of the average value of their investment assets annually on charitable activities or gifts to qualified donees. Charitable organizations that fail to meet this threshold risk CRA scrutiny and potential revocation.

What counts as a related business for a charitable organization?

A related business must be linked to the charity's purposes or operated substantially by volunteers. Revenue-generating activities that are unrelated to the charitable mission are not permitted for charitable organizations.