Form T3011: Associated Charities Designation Explained

A hospital foundation raises money and hands most of it to the hospital. A national body collects dues and passes the bulk of them to its regional chapters. A church runs a school through a separately registered charity and funds it from the collection plate. Each is a charitable organization giving more than half its income to another registered charity, and under the Income Tax Act that pattern is what defines a foundation. Form T3011, Registered Charities: Application for Designation as Associated Charities, is the mechanism that lets those organizations keep their designation.

The 50 Per Cent Rule That Makes Association Necessary

A charitable organization is expected to carry on its own charitable activities. The Act allows it to give money to other qualified donees, but only up to a point: a charitable organization is treated as devoting its resources to its own activities where it disburses no more than half its income in a year to qualified donees. Cross that line and the CRA's position is that the charity is operating as a foundation and should be designated as one, which is the process covered by Form T2095, Application for Re-Designation.

The Act contains a second branch for exactly the situations in the first paragraph. Income disbursed to a registered charity the Minister has designated as associated with the donor does not count against the 50 per cent line. Association is how a fundraising arm stays a charitable organization while doing what it was created to do.

What Associated Status Does, and What It Does Not

Associated status is a designation, not a merger. Each charity keeps its own registration number, its own T3010, its own board and its own liabilities. What changes is the treatment of gifts between them for the purpose of the 50 per cent test. It does not change the receiving charity's obligations: it must still apply the funds to its charitable purposes and report the gifts on its own return.

Public and private foundations never need the designation, because a foundation is already permitted to give away as much of its income as it likes. Our post on how the CRA interprets accountability requirements covers the separate rules for gifts to organizations that are not qualified donees, which association does not touch.

Who Qualifies: Substantially the Same Aim, or a Joint Project

The CRA approves association where the charitable aim or activity of each charity is substantially the same. A hospital and its foundation, a denomination and its congregations, a national organization and its provincial branches all clear that test easily. Where the aims differ, association is still available for a joint project, and the application has to explain how the project will operate, what each charity contributes and when it starts and ends. The CRA's guidance is Information Circular IC77-6R.

The second route is used less than it should be; two charities with different purposes can associate for a shared program rather than restructuring.

Part I or Part II: Choosing the Right Section

Form T3011 has two parts, and an applicant completes one or the other.

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Both signatures are required on Part II; an application signed by only the donor charity is returned.

Filing Form T3011 and What Comes After

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 "Request associated status," describe the request in the text box and upload the completed form. A paper application goes to the Charities Directorate in Ottawa. Our post on keeping the CRA informed of changes covers the account and the other updates that commonly go with it.

Once designated, the charities report gifts between them on their T3010 returns in the ordinary way. The designation continues until the CRA changes it. Joint-project associations are approved for a specified period: if the project runs beyond it, the charities can request an extension, and if it finishes early, they should ask the CRA to revoke the associated status. A charity whose relationship with the associated charity changes, for example a chapter that leaves the national body, should tell the CRA, because the designation is based on the relationship that existed when it was granted.

Association addresses the designation question and nothing else. Where the two charities do not deal at arm's length, the disbursement quota rules for gifts between related charities still apply, and where the recipient will carry on activities on the donor's behalf rather than as gifts, the relationship needs an agreement of the kind described in our post on agency contracts and joint venture agreements.

If your charitable organization gives, or plans to give, more than half its income to another registered charity, we can determine whether association or re-designation is the right route and prepare the application. Call us at 416-488-5888, email us at ask@charitylawgroup.ca, or schedule a free meeting with our legal team. Form T3011 is on our forms and statutes page.

Frequently Asked Questions

Here are answers to the questions we hear most often about associated charities.

Does associated status merge the two charities?

No. Each remains a separate registered charity with its own registration, return and board. The designation only affects how gifts between them are treated for the 50 per cent test.

Does a foundation ever need Form T3011?

No. Foundations are permitted to give away more than half their income. The form exists for charitable organizations.

Does association expire?

A joint-project association is approved for a specified period. If the project runs longer, the charities can request an extension; if it finishes early, they should ask the CRA to revoke the status. Otherwise the designation continues until the CRA changes it, and the CRA should be told if the relationship between the charities changes.

What happens if we gave more than half our income to another charity without being associated?

The CRA may re-designate the charity as a foundation. File the T3011 promptly, but do not assume it fixes the year that has already passed: associated status takes effect on the date specified in the CRA's approval letter, not retroactively. The earlier disbursement needs to be addressed separately with counsel and, where appropriate, with the CRA.

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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