Who can a charity support?
A charity can provide money, goods, or services to others as a means of fulfilling its charitable objects. For example:
- A health charity funds medical research through a contractual arrangement with a for-profit organization.
- A food bank gives food to people living in poverty.
- A mental health organization provides counselling services to people with mental illness.
Each of the above transactions directly supports the charity's objects.
In addition to directly supporting its objects, a charity can also provide a gift of money or goods to another organization so that the other organization can fulfill its objects, but only if the other organization is allowed to issue a tax receipt for the gift (and is therefore a qualified donee). A charity cannot give gifts to non-profit organizations, businesses or individuals.
A charitable organization (as opposed to a charitable foundation) is limited to gifting up to 50% of its income to other qualified donees. There are also rules that allow for the transfer of capital (for example, endowments) to other qualified donees under certain conditions.
What is a qualified donee?
Generally, a qualified donee is an organization that can issue charitable tax receipts.
The most common example of a qualified donee is another registered charity, but there are other types of organizations that charities can make gifts to. In addition to Canadian registered charities, the following are qualified donees:
1. Organizations in Canada:
- the Federal or any provincial/territorial government, or their agencies, or any municipality;
- registered Canadian amateur athletic associations and registered national arts service organizations; and
- Canadian tax-exempt housing corporations whose sole purpose is to provide low-cost housing for seniors.
2. International organizations:
- the United Nations and its agencies;
- prescribed universities (universities that ordinarily include students from Canada); and
- charitable organizations to which the Canadian Federal government has made a gift during the fiscal period or in the 12 months immediately preceding the period (see a list of these organizations).
See also Guidance CG-002, Canadian Registered Charities Carrying Out Activities Outside Canada.
Reporting gifts given to others
As part of filing its annual T3010 return, a charity must provide a list of the gifts made to qualified donees during the year. This is done using Form T1236.
The following information is required for each gift:
- name and address of donee,
- its registration number,
- amount of the gift(s), and
- whether or not the donee is an associated charity.
To make this easier, the Canada Revenue Agency (CRA) recommends that charities record all gifts to qualified donees in a separate account in its books and records.