CRA's Guidance on Grants to Non-Qualified Donees Explained

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In June 2022, amendments to the Income Tax Act (ITA) introduced a significant new option for registered Canadian charities: the ability to make qualifying disbursements directly to non-qualified donees. These changes gave charities a new route for supporting organizations that contribute to charitable work but do not hold registered charity status with the Canada Revenue Agency (CRA).

Following a year-long public consultation, the CRA published the final version of Guidance CG-032 — Registered Charities Making Grants to Non-Qualified Donees — on December 19, 2023. This guidance sets out exactly how the CRA interprets and applies the ITA requirements for qualifying disbursements. On January 28, 2025, the CRA also hosted a public webinar to walk the charitable sector through the rules in detail.

This article provides a complete 2026 guide to what CG-032 requires, what changed from the earlier draft guidance, and what practical steps your charity should take now.

Key Takeaways

1. CG-032 is now final. The CRA published the final version on December 19, 2023. Charities no longer need to wait — the rules are in effect.
2. Two ways to operate. Charities can now support the activities of non-qualified donees directly, without maintaining direction and control, provided they meet the ITA requirements set out in CG-032.
3. A standalone grantmaking purpose is not enough. Foundations whose governing documents contain only a purpose of "making grants" or "making qualifying disbursements" cannot make qualifying disbursements to non-qualified donees without first amending those purposes with CRA approval.
4. The anti-directed giving rule applies. A charity cannot accept or solicit a gift on the explicit or implicit condition that it will grant those funds to a specific non-qualified donee.
5. Written agreements and risk assessments are expected. For grants over $5,000 or on a recurring basis, a written agreement with the grantee is strongly advisable.

Timeline: From Draft to Final Guidance

Understanding the history of CG-032 helps clarify where things stand today and why the final guidance differs significantly from the draft.

Understanding the Landscape: The Old Regime vs. The New Regime

The Old Regime

Before the 2022 amendments, registered charities had limited options when working with non-qualified donees. To channel resources through a non-qualified donee, a charity had to treat that organization as an intermediary and maintain strict direction and control over every aspect of the activity.

This included detailed written agreements, ongoing monitoring and supervision, periodic fund transfers tied to demonstrated performance, separately tracked funds, and retention of all receipts and invoices. The administrative burden was significant.

The New Regime

The 2022 amendments introduced a second route for Canadian charities: making a qualifying disbursement directly to a grantee organization (non-qualified donee). Under this route, the charity can support the grantee's own activities — without maintaining direction and control — as long as it meets the ITA requirements and CRA accountability standards set out in CG-032.

The intermediary route still exists and may still be the right choice in certain circumstances. Which approach a charity uses is its decision. Importantly, the CRA recognizes that relationships can evolve — a charity can transition from an intermediary arrangement to a grantee relationship over time.

What the Final CG-032 Requires: The Step-by-Step Process

The CRA provides a recommended step-by-step process in CG-032. Where a charity's grant-making process aligns with these steps, the CRA will consider the charity to be in compliance with the ITA. The CRA has stated it will aim to take a reasonable, flexible, and proportionate approach to grants and documentation.

Step 1: Confirm Your Charitable Purposes Permit the Grant

The grant activity must further a charitable purpose that is stated in the charity's governing documents. A charity whose purposes do not cover the intended grant activity will need to amend those purposes and obtain CRA approval before proceeding.

Importantly, a standalone purpose of "making qualifying disbursements" or "making grants" is not sufficient. The purpose must fall within one of the four recognized categories of charity: relieving poverty, advancing education, advancing religion, or other purposes beneficial to the community.

Step 2: Conduct a Risk Level Assessment

Before making each grant, the charity must assess the level of risk associated with the proposed disbursement. The CRA provides a non-exhaustive list of factors to consider, including the size of the grant, the grantee's track record, and the operating environment — particularly for international grants where the CRA has limited monitoring ability.

Step 3: Research the Grantee

Charities are expected to learn about the grantee's purposes, programs, history, reputation, and leadership. This can be done through desk research, site visits, meetings, and letters of reference. The depth of research should be proportionate to the size and risk level of the proposed grant.

Step 4: Enter Into a Written Agreement

For grants over $5,000 or on a recurring basis, a written agreement documenting the grant's purpose, terms, and expected use of funds is strongly advisable. The agreement should include a description of the grant activity and confirm the grantee's understanding of how funds must be used.

Step 5: Monitor the Use of Funds and Obtain Reports

The charity remains responsible for showing that grant resources were used for the stated charitable activity. This means requesting progress or final reports from the grantee. If the grant has no set end date, the charity should arrange interim reporting instead.

Choosing Between the Grantee Route and the Intermediary Route

When starting a relationship with a non-qualified donee, a charity should decide at the outset whether to proceed under the qualifying disbursement (grantee) rules or the intermediary model. Both options remain available under the ITA, and the right choice depends on the nature of the relationship and the level of oversight the charity wishes to maintain.

Charities are not locked into either model permanently. The CRA recognizes that a relationship with a non-qualified donee can evolve, and a charity may convert from an intermediary to a grantee relationship as trust and familiarity develop.

CG-032 Accountability Standards

The final CG-032 sets out clear accountability standards that registered charities must meet when making qualifying disbursements. The core requirement is that the charity must be able to demonstrate that grant resources were used by the grantee solely for charitable activities that align with the charity's stated purposes.

The CRA has stated it will aim to take a reasonable, flexible, and proportionate approach to grants and documentation. This is a welcome signal for the charitable sector — but it does not remove the obligation to conduct proper due diligence before and after each grant is made.

Accountability is not a one-time event. It runs through the full grant cycle: from purpose alignment and grantee research, through the written agreement, to ongoing monitoring and final reporting.

The Anti-Directed Giving Rule: What It Means for Your Charity

One of the more significant practical implications of the final CG-032 is the anti-directed giving rule. This rule prohibits a charity from accepting or soliciting a gift on the explicit or implicit condition that it will grant those funds to a specific non-qualified donee.

The CRA takes a broad view of what counts as an implicit condition. A charity that includes the name of a non-qualified donee in its own name, stated purposes, or other formal documents may be at risk of having its charitable registration revoked if it receives donations — because those donations could be considered implicitly conditional on being passed to that specific organization.

The anti-directed giving rule does not prevent a charity from using a donation to carry out its own activities through a non-qualified donee acting as an intermediary — as long as the charity exercises direction and control over how those resources are used.

Charities should review their fundraising materials, campaign language, and governing documents in light of this rule. If your charity has named a specific non-qualified donee in its formal structure, legal advice is strongly recommended.

Updated Compliance Steps for 2026

If your charity is making or planning to make grants to non-qualified donees, here is a practical checklist for your board and legal counsel.

• Review your charitable purposes to confirm they permit granting to non-qualified donees.
• If your purposes consist only of "making grants" or are too narrow to cover the intended grant activity, consult a charity lawyer about amending them and obtaining CRA approval before proceeding.
• Implement a risk assessment process for each grant before it is approved.
• Establish a written grant agreement template for all grants over $5,000 or on a recurring basis.
• Review your organization's name, stated purposes, and fundraising materials for potential anti-directed giving exposure — especially if a specific non-qualified donee is named anywhere in your formal documents.
• Ensure your T3010 annual return properly reports disbursements to grantees that exceed $5,000 in a taxation year.
• If you currently operate through an intermediary model with a non-qualified donee, consider whether converting to the qualifying disbursement model is more appropriate for your organization.
• If you are unsure whether your existing grant-making practices comply with CG-032, seek legal advice from a charity lawyer before making further disbursements.

Frequently Asked Questions

What is CG-032?

CG-032 — Registered Charities Making Grants to Non-Qualified Donees — is the CRA's final administrative guidance on how registered charities can make qualifying disbursements to non-qualified donees. It was published in final form on December 19, 2023, following a public consultation process that began with the release of the draft guidance in November 2022.

Who is a non-qualified donee under the Income Tax Act?

A non-qualified donee is any organization that contributes to charitable activities but does not hold registered charity status with the CRA. This includes Canadian non-profit organizations and foreign organizations that do not appear on the CRA's list of qualified donees.

Can a Canadian charity make a qualifying disbursement to a foreign organization?

Yes. The qualifying disbursement rules apply to both Canadian and international grantees. However, the CRA has limited ability to monitor events and transactions outside Canada, so the granting charity carries a heavier responsibility to document and verify how international grant funds are used.

Does a charity need a written agreement to make a qualifying disbursement?

A written agreement is not a formal legal requirement in every case, but it is strongly recommended — particularly for grants over $5,000 or on a recurring basis. The CRA considers a written agreement to be one of the key accountability tools for demonstrating compliance with the ITA requirements.

What is the anti-directed giving rule?

The anti-directed giving rule prohibits a charity from accepting or soliciting a gift on the explicit or implicit understanding that those funds will be passed to a specific non-qualified donee. Charities that name a specific non-qualified donee in their formal documents — including in their name, purposes, or governing documents — may be at risk of triggering this rule.

Can a foundation with only a grantmaking purpose make qualifying disbursements to non-qualified donees?

No. The final CG-032 clarifies that a standalone purpose of "making grants" or "making qualifying disbursements" does not fall within one of the four recognized categories of charity. A foundation with only such a purpose would need to amend its governing documents to add an active charitable purpose — and obtain CRA approval for that amendment — before it can make qualifying disbursements to non-qualified donees.

What is the difference between a grantee relationship and an intermediary relationship with a non-qualified donee?

In a grantee relationship, the charity makes a qualifying disbursement to support the non-qualified donee's own activities, without maintaining direction and control over how funds are used. In an intermediary relationship, the non-qualified donee carries out the charity's own activities under close supervision by the charity. Both routes remain available under the ITA, and a charity can transition from one model to the other as the relationship evolves.

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