Charitable Purpose & Activities

The charitable purpose of an organization must be stated in its governing documents. Organizations must also limit their activities to those that further their charitable purpose. This must also be set out in the governing documents. For example, a non-profit would set the purpose and activities out in their articles.

When applying for charitable status, an organization needs to include their governing documents. Other documents that relate to their purpose and activities should also be included. These could be things like brochures, newspaper articles, a website address or minutes of meetings.

To be registered as a charity, an organization must have a purpose that is charitable. It cannot have other purposes or be only partly charitable. There are four types of charitable purposes…

Relief of poverty means helping people who lack the basic necessities. Examples of this include:

• food banks
• non-profit accommodation for low-income people
• disaster relief

Advancement of education means doing things that provide people with knowledge or skills. Examples of this include:

• establishing and operating schools
• providing scholarships
• doing research in a recognized field of knowledge and making the results available to the public

Advancement of religion means to preach and follow a religious faith. For something to be considered religious, there must be worship of a deity or deities. Examples of this include:

• establishing and maintaining a building for religious worship
• providing religious instruction
• missionary work

Other purposes beneficial to the community is for purposes that do not fit elsewhere. These purposes have been recognized as charitable by the courts. Examples include:

• operating an animal shelter
• a volunteer fire department
• a facility for care of the elderly
• a hospital

There are some purposes that are not considered charitable. These include:

• supporting or opposing a political party or candidate
• promotion of sports
• prevention of poverty

The organization must list the activities it will undertake to achieve its charitable purpose. This is a crucial part of the application to become a registered charity. Many application delays are because the activities as listed are too broad or vague. For example, if an organization is going to establish and run a school, it should detail things like:

• the location of the school
• the size of the school
• the students who will attend
• who the instructors will be and their qualifications
• what instruction students will be given

At a minimum, these questions about your activities need to be answered...

• What exactly does the organization do or plan to do?
• How do the activities help achieve the charitable purpose?
• Where will the organization carry out its activities?
• Will the organization carry out its activities itself through employees or volunteers? Will it carry out its activities through a third party?
• How many employees and volunteers does the organization have or hope to have? Does the organization have the capacity to carry out its activities?
• Who benefits from the organization's activities? How are the beneficiaries selected?
• What fees, if any, will the organization charge its clients?
• How does the organization intend to raise funds?

Some organizations may plan to do charitable work that will take place outside of Canada. If so, information about these activities must be provided. The information required includes:

• the countries and the locations within each country where activities will take place
• whether the organization will rely on another organization to perform the activities outside Canada

Any fundraising activities an organization intends to do must be listed on an application for charitable status, including:

• how often these activities will be undertaken
• the proportion of the organization’s volunteers that will be used
• if they will use a professional fundraiser
• if they intend to receive non-cash gifts on a regular basis
• if the organization will be involved with or associated with a tax shelter arrangement

Fundraising is any activity that involves asking for donations of cash or gifts in kind. It is also any sale of goods or services to raise money. Examples include:

• soliciting donations directly, such as a direct mail campaign or a loose change box with the charity’s name on it
• holding events to raise money, such as auctions, galas, or charity runs

Fundraising can include activities that support the fundraising. This could be things like creating fundraising strategies or hiring a fundraiser.

Fundraising in itself is not considered a charitable activity. As such, there are strict limits on the fundraising activities a charity can engage in. Fundraising cannot be used as a charitable purpose when registering as a charity.

A charity cannot run a business that is not related to its charitable purpose. For example, a charity whose purpose is to protect the environment could not open a coffee shop. This is the case even if the proceeds all go to their charitable purpose. Fundraising must also not:

• provide a private benefit to anyone unless it is only incidental to the fundraising activity
• be illegal, against public policy or deceptive

The Charities Directorate uses certain indicators to determine if a fundraising activity is unacceptable, such as when:

• more of the organization’s resources, including money and volunteers, are devoted to fundraising than to the charitable purpose
• there is no specific use for the money raised that furthers the organization’s charitable purpose
• merchandise or services are purchased that do not increase fundraising revenue
• most of the gross revenue generated by the fundraising goes to an organization that is not a charity
• misrepresentations to the public about things like fundraising revenue or practices are made
• the fundraising activity is not well documented
• the cost of the fundraising is a large percentage of the total funds raised

See the CRA’s guidelines for more information.

Charities cannot run a business that is not related to their charitable purpose. Private foundations that are charities cannot carry on any kind of business. However, the law allows charities to carry on a related business. A related business is a revenue-generating activity that is either:

• related to a charity’s purposes
• run mainly by volunteers

For more information, see the CRA publication What is a related business?

If an organization earns income from selling goods or services on an ongoing basis, they must:

• describe these activities in detail
• list the goods or services offered
• list the percentage of the organization’s total resources that will be devoted to the sale of goods or services
• set out the percentage of the people who are involved in selling goods or services who are volunteers
• explain how these activities are related to the organization’s charitable purpose

The same rules apply if an organization uses an asset to generate revenue. For example, if a church rents out parking spaces in the church parking lot.

A charity is free to advocate for any change to a law, policy, or decision of government. However, this can only be done as long as doing so would further its charitable purpose. For example, a charity whose purpose is wildlife conservation cannot advocate for prison reform. A charity must keep records that prove it was carrying on these activities is to further its charitable purpose and provide a public benefit.

Charities cannot, however:

• engage in activities that support or oppose a particular political party or candidate
• refer to or identify a candidate or party when discussing the policy

For more information, see the CRA publication Public Policy Dialogue and Development Activities.

A charity must state on its application if it has or plans to engage in business with someone related to the organization. This could be an official, founder, member, employee or anyone related to one of these people. Examples include the organization lending a director money or renting space from a company owned by a director. These types of transactions will be reviewed to ensure that they are a permitted charitable activity.