RC14. Is there only one kind of “registered charity”?

Short answer

No. There are three types of registered charities under the Income Tax Act: charitable organizations, public foundations, and private foundations. This designation is issued by the CRA at the time of registration. Different rules apply to each type.

Long answer

A registered charity is designated as a charitable organization if:

• it devotes its resources mainly to charitable activities carried on by itself
• more than 50 per cent of its directors, trustees, officers, or similar officials deal with each other and with each of the other directors and/or trustees at arm’s length
  and
• in general (there are some exceptions), not more than 50 per cent of the funds that the charity has received have come from one person or organization or from a group of people or organizations that do not deal with each other at arm’s length.

A registered charity is a public foundation if:

• it is constituted and operated exclusively for charitable purposes
• it is a corporation or a trust
  and
• it gives more than 50 per cent of its income annually to qualified donees.

A registered charity is a private foundation if:

• it is constituted and operated exclusively for charitable purposes
• it is a corporation or trust
  and
• it is not a charitable organization or a public foundation.

Generally, charitable organizations focus on carrying out charitable activities, while public foundations focus on raising funds to support operating charities. An entity is designated as a private foundation rather than a charitable organization or a public foundation because those who fund or control it are not necessarily operating at arm’s length.