Income Tax Act S. 149.1(3) — Revocation of a Public Foundation

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

• (a) carries on a business that is not a related business of that charity;
• (b) fails to expend in any taxation year amounts at least equal to the foundation's disbursement quota;
• (b.1) makes a disbursement by way of a gift other than in the course of charitable activities or to a qualified donee;
• (c) since June 1, 1950, acquired control of any corporation;
• (d) since June 1, 1950, incurred non-permitted debts; or
• (e) within 24 months preceding the notice, while a private foundation, took action or failed to expend amounts that would have entitled the Minister to revoke its registration as a private foundation.

What This Means for Your Public Foundation

Public foundations occupy a middle ground between charitable organizations and private foundations. They can carry on related businesses (unlike private foundations), but face strict rules around corporate control, debt, and disbursements. A particularly notable restriction is that public foundations cannot acquire control of any corporation — this prevents foundations from becoming de facto holding companies for business interests.

The 24-month lookback rule in clause (e) is also important: if a foundation was recently re-designated from private to public foundation status, the CRA can still revoke it for violations that occurred during the private foundation period. B.I.G. Charity Law Group advises public foundations on governance and compliance. Book a compliance consultation.

Frequently Asked Questions

What makes a foundation a public foundation vs. a private foundation?

A public foundation has more than 50% of its directors dealing at arm's length with each other and with major donors. This broader governance structure distinguishes it from a private foundation, which is typically controlled by a single family or small group.

Can a public foundation carry on business activities?

Yes, but only related businesses — those linked to the foundation's charitable purposes or operated substantially by volunteers. Unrelated business activities can trigger revocation.