Form T2095: How to Change Your Charity's CRA Designation

Every registered charity in Canada carries one of three designations: charitable organization, public foundation or private foundation. The CRA assigns it at registration, based on how the charity is governed, where its money comes from and what it does with it. Charities change, and a designation that fit at registration can stop fitting. Form T2095, Registered Charities: Application for Re-Designation, is how a charity asks the CRA to move it from one category to another, and this page covers when to use it and what changes once the CRA agrees.

The Three Designations and What Decides Them

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A charity fails into private foundation status. Private status arises where 50 per cent or more of the officials do not deal with each other at arm's length, or where more than half the funding comes from a person or group that controls the charity or makes up more than half its officials, and it applies regardless of what the charity does. A donor who simply gives more than half the money, with no control and no seat at the table, does not on his own make the charity a private foundation. If neither private-foundation condition applies, the split between charitable organization and public foundation turns on whether the charity primarily carries on its own activities or funds other qualified donees. Most requests we see are a family foundation that has added independent directors and wants public status, or a charitable organization that now grants most of its income and needs to become a foundation before the CRA notices.

Why a Charity Would Change Designation

The reasons track the table. Board composition changes when a founding family brings in outside directors, or when independent directors leave and the family holds the majority again. Funding changes when a controlling donor, or a group that also makes up most of the board, provides more than half the money. The CRA can also re-designate a charity on its own initiative, and a charity that disagrees has 90 days from the notice to object.

A charitable organization that wants to fund another charity heavily without becoming a foundation has a different tool: associated status under Form T3011. The two forms are alternatives, and choosing the right one is the first thing we work through.

What the Application Needs

Form T2095 is a single page: the charity's name and registration number, the designation it wants, the reasons it is appropriate, and a signature from someone authorized to sign for the charity. The CRA also asks for two things that are not on the form. The first is an updated list of directors and trustees with a note of any non-arm's-length relationships among them. The second is a statement of whether the charity has received more than half its capital from one person or a group of related persons, and of any non-arm's-length relationships between those donors and the directors.

We write the reasons against the table above: which test changed, when, and what supports it. Everything filed with the request is available to the public on request.

Filing Through MyBA and the Effective Date

The request is filed through the charity's CRA account. In My Business Account, open the RR account, select "Update registered charity or RCAAA information," then "Change organization's designation," describe the request and upload the completed T2095. Paper requests go to the Charities Directorate in Ottawa. Our post on keeping the CRA informed of changes covers the other updates that often accompany a re-designation, such as a change of directors.

If the CRA approves, it notifies the charity through MyBA or by registered mail, and in most cases the new designation takes effect at the start of the charity's next fiscal period. A charity that becomes a public foundation partway through a year is still a private foundation for that year's T3010.

What Changes After Re-Designation

Moving from private to public foundation lifts the two rules that apply only to private foundations: the excess corporate holdings regime reported on Form T2081, and the non-qualified investment tax reported on Form T2140. Moving the other way brings both into force, with the prohibition on business activity. Moving from charitable organization to foundation lowers the disbursement quota threshold from $100,000 to $25,000 of property. Our guide to CRA compliance for private foundations and our post on changes to your charity cover what the new designation will require.

If your board, funding or activities have changed since registration, we can determine which designation fits, prepare the application and manage the transition. Call us at 416-488-5888, email us at ask@charitylawgroup.ca, or schedule a free meeting with our legal team. Form T2095 is on our forms and statutes page.

Frequently Asked Questions

Here are answers to the questions we hear most often about re-designation.

How long does a re-designation take?

Several months is common. A complete application with clear reasons and the supporting director and donor information moves faster than one that draws a request for more information.

Can the CRA change our designation without being asked?

Yes. The CRA can re-designate a charity at its discretion, typically after reviewing a T3010 or an audit. The charity can object within 90 days of the notice.

We give more than half our income to one other charity. Do we have to become a foundation?

Not necessarily. If the two charities have substantially the same purpose, associated status under Form T3011 allows a charitable organization to keep its designation while making those gifts.

This article provides general information about CRA designation rules and is not legal advice. Speak with a charity lawyer about your organization's specific circumstances.

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