The Minister may, by notice sent by registered mail to a registered charity, on the Minister's own initiative or on application made to the Minister in prescribed form, designate the charity to be a charitable organization, private foundation or public foundation and the charity shall be deemed to be registered as a charitable organization, private foundation or public foundation, as the case may be, for taxation years commencing after the day of mailing of the notice unless and until it is otherwise designated under this subsection or its registration is revoked.
The CRA has the authority to designate — or re-designate — a registered charity as a charitable organization, private foundation, or public foundation. This designation determines which set of rules applies to the charity and can be initiated either by the CRA itself or by the charity making an application.
A public foundation is a charity that primarily makes grants to other qualified donees (rather than running its own programs), and whose board is majority arm's-length — meaning most directors are independent of each other and of major donors. Public foundations face less restrictive business rules than private foundations but more restrictive rules than charitable organizations.
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The key factor is whether more than 50% of the directors deal at arm's length with each other and with major donors. If yes, it is a public foundation. If the board is controlled by a single family or small group of related donors, it is a private foundation.
Yes. A charity can apply to the CRA to change its designation — for example, from a private foundation to a public foundation if it broadens its board. The change takes effect for taxation years after the notice is mailed.
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