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A statement made by the Director General of the Canada Revenue Agency ("CRA") Charities Directorate, Sharmila Khare, at The Canadian Association of Gift Planners Advanced Summit held in Ottawa on April 2, 2024, may be indicating that the CRA will show flexibility with regard to interpreting the relatively new rules (in force since June 2022) under the Income Tax Act (Canada) ("ITA") that allow for Canadian registered charities to provide gifts or otherwise make resources available to “non-qualified donees” (often times these would be non-profit organizations and other non-charities) without the charity that provides the grant having to exercise strict direction and control over the use of the funds or resources as part of the charity’s own activities.

These new rules essentially come from the definition of “qualifying disbursement” at Subsection 149.1 (1) ITA.  These rules require, briefly stated, that the grant in question has to be used for a charitable purpose of the charity making the grant, but that the grantee non-charity is the entity carrying on the charitable activity being funded, and with there being a need for the grantee to account to the charity for the use of funds. (The CRA indicates that possible accountability requirements are set out in the CRA guidance of December 19, 2023, CG-032, titled “Registered Charities Making Grants to Non-Qualified Donees”.)

One of the issues regarding the above that was seen by some as problematic is that the non-charity grantee would be funded as regards charitable “activities”.  In some contexts in the ITA, charitable activities do not include administrative expenses (essentially such expenses are not part of the charitable activity in question).  So as to try to resolve this question, I asked Ms. Khare of the CRA, during the above-mentioned question and answer period at the conference, whether such grants to non-qualified donees could also include administrative expenses, and Ms. Khare stated that it would be possible to include administrative expenses in the grant because it would not be possible to carry out charitable activity without having some related administrative expense.  Ms. Khare implied that the amount of the administrative expenses would have to be reasonable.

I found this answer from the CRA to be very welcome, and perhaps it is showing flexibility from the CRA in applying the new rules relating to such grants by charities to non-charities.

We will continue to monitor this matter.  Please do not hesitate to contact Mtre Daniel Frajman should you have questions on this or other issues.