Here is a quite a helpful recent CRA letter confirming that orgs that are unregistered charities do not qualify for the tax exemption provided by paragraph 149(1)(l) as NPOs. There are big differences between non-profits and registered charities. People are sometimes confused about how the Income Tax Act deals with organizations that are “charities” but they are not registered charities under the Income Tax Act.
CRA’s position is clearly set forth in this letter:
“An organization will not qualify for the exemption provided by paragraph 149(1)(l) of the Act if the organization is a charity, even if it is not a registered charity. Thus, we confirm your understanding that organizations with exclusively charitable purposes do not qualify for the tax exemption provided by paragraph 149(1)(l).”
Keep in mind that this letter is not talking about organizations that have some attributes of being a charity - it is talking about an organization that meets all the requirements of being a charity. Therefore, if your non-profit group has even one object that is not charitable then it is not going to be considered to be an unregistered charity as all the objects need to be charitable to be a charity.
The letter also discusses some examples of instances where a non-profit that is not a registered charity can undertake certain business activities. The rules for when a business activity can be undertaken by a registered charity are different and contained in CPS-019 Policy Statement What is a Related Business? http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cps/cps-019-eng.html
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.