Charitable Status and Grant Funding

Registration opens some funding and closes other funding. It also brings obligations that, left unmet, can cost an organisation both its status and the grants that depended on it.

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RegistrationQualified DoneesAnnual FilingRevocation Risk

Charitable registration is a separate application to the Charities Directorate of the Canada Revenue Agency. Incorporating a non-profit in Ontario does not make it a charity, and a great many boards believe otherwise.

Who does this work. Lexaltico LLP’s government funding and grants service is led by Mitch Parmasar, who is not a lawyer and does not provide legal advice. Where a matter calls for legal advice — a funding agreement, a governance question, a repayment demand — it is handled by a lawyer at Lexaltico LLP. The firm is responsible for all of the work described on this page.

Quick Answer

Do we need charitable status to get grants?

It depends on the programme, and registration is not simply an advantage. Some funders restrict themselves to registered charities, which are qualified donees under the Income Tax Act. Others fund incorporated non-profits regardless of charitable status, and a few deliberately fund organisations that are not charities. Registration also brings continuing obligations — an annual information return, a disbursement quota, record-keeping in Canada, and rules about granting to organisations that are not qualified donees — and failing them puts the status itself at risk.

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TWO DIFFERENT THINGS

Incorporating Is Not Registering

Incorporating a non-profit in Ontario creates a corporation under the Not-for-Profit Corporations Act, 2010. Registering as a charity is a separate application to the Charities Directorate of the Canada Revenue Agency under the Income Tax Act, and it is registration, not incorporation, that permits an organisation to issue official donation receipts.

The confusion is extremely common, and it usually surfaces at a funding deadline: a board that has always described itself as a charity discovers, filling in an application, that it has never been registered as one. There is no quick route from that position to a registration number.

WHAT REGISTRATION OPENS

Qualified Donee Status and Who Requires It

Registered charities are qualified donees, which is the category a number of funders and most private foundations work within. For those programmes registration is not an advantage but a precondition, and an unregistered organisation cannot be considered at all.

Registration also matters for money that comes from other charities. A foundation making a grant has its own obligations about who it can grant to, so an organisation seeking foundation funding is frequently asked for its registration number before anything else.

WHAT IT CLOSES

Some Funding Is for Organisations That Are Not Charities

Registration constrains what an organisation may do. A charity’s resources must be devoted to its charitable purposes, and activities that a non-charitable non-profit could undertake freely may be restricted or out of bounds.

So an organisation whose work is genuinely broader than charity — advocacy-heavy work, membership benefit, trade or sector activity — may be better served by remaining a non-charitable non-profit, and there are funders who prefer exactly that. Registration is a decision with two sides, not an upgrade.

THE ANNUAL FILING

The Return, and the Commonest Way Status Is Lost

A registered charity must file an annual information return within six months of its fiscal year end. Failure to file is among the most common reasons registration is revoked, and it happens to organisations that are otherwise doing everything properly, usually because the person who used to do it left.

Revocation has consequences well beyond the receipting power. Funding conditional on charitable status can become repayable, applications in progress fail, and regaining registration is a fresh application rather than a reinstatement.

CONTINUING OBLIGATIONS

The Quota, the Records and Granting Onward

Registration brings a set of continuing requirements: devoting resources to the charitable purposes, meeting the disbursement quota on property not used directly in charitable activities or administration, keeping adequate books and records in Canada, and issuing receipts that contain all the prescribed information.

There are also rules governing grants to organisations that are not qualified donees. A charity that passes grant money onward — to a community group, a partner, a project without its own registration — has accountability requirements of its own to meet, and this is exactly the arrangement that arises when a charity acts as trustee for an unincorporated group.

IN ONTARIO

Charitable Property Is Supervised Here Too

Federal registration is not the whole picture. In Ontario, charitable property is supervised under the Charities Accounting Act, and the Office of the Public Guardian and Trustee has a role in relation to charitable property and its proper application.

That matters most where a charity holds restricted funds and wants to apply them differently from the way the donor or funder specified. That is not an internal decision, and the route to changing it is not a board resolution.

HOW WE WORK

What Lexaltico Does on a Charitable Status Question

The practical question is usually not “should we be a charity” in the abstract but whether registration would open the funding this organisation actually wants, at a cost in obligations it can actually meet. That is answerable, and it is better answered before an application than during one.

Programme fit and the funding side of the question are led by Mitch Parmasar, who is not a lawyer. The registration application, the purposes in the articles, obligations that follow registration and anything touching restricted charitable property are handled by a lawyer at Lexaltico LLP. Fees are quoted and agreed in writing before work begins.

Common Questions

Frequently Asked Questions

Do we need charitable status to get grants?

For some programmes yes, for others no, and a few deliberately fund non-charities. Registration also brings continuing obligations, so it is a decision with two sides.

Is our non-profit automatically a charity?

No. Incorporating in Ontario creates a corporation; charitable registration is a separate application to the Canada Revenue Agency. Many boards are surprised by this at a funding deadline.

What is a qualified donee?

A category under the Income Tax Act that includes registered charities. A number of funders and most private foundations can only give to qualified donees.

When is the annual return due?

Within six months of the charity’s fiscal year end. Failure to file is one of the most common reasons registration is revoked.

What happens if our registration is revoked?

Beyond losing the power to issue receipts, funding conditional on charitable status can become repayable and applications in progress fail. Regaining it is a fresh application.

Can a charity pass grant money to another group?

Subject to rules about granting to organisations that are not qualified donees, and accountability requirements the charity itself must meet. This is the situation when a charity acts as trustee for an unincorporated group.

Can we spend a restricted grant on something else?

Not by deciding to. Restricted charitable property is supervised in Ontario under the Charities Accounting Act, and changing the application of a restricted fund is not a board resolution.

Would registration restrict what we do?

It can. A charity’s resources must go to its charitable purposes, so work that is broader than charity may be easier in a non-charitable non-profit — and some funders prefer that form.

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