In Budget 2011, the Federal Government announced a new system of registration which came into force on January 1, 2012 for organizations other than registered charities that are included in the list of entities that are “qualified donees” for the purposes of the Income Tax Act (Canada).  More specifically, these new rules apply to low cost housing corporations for the aged, municipal or public bodies performing a function of government in Canada, municipalities and prescribed universities outside Canada.

Application Process

As qualified donees such entities are tax exempt, can issue donation tax receipts and can receive funds from registered charities.  Notwithstanding that the new rules came into force on January 1, 2012, the Charities Directorate and CRA confirmed the existing rules and acceptance of organizations as qualified donees would continue until the Charities Directorate and CRA were able to work together to implement a new registration system for these organizations. 

The registration system for municipalities and prescribed universities was announced previously.  In June of this year, the announcement of the registration system for the remaining categories was released. 

Now that the application process is in place it is critical that organizations comply. As of January 1, 2014, the CRA will end the interim measures put in place while the application process was being developed which allowed CRA to continue to recognize low cost housing corporations and all municipal and public bodies as qualified donees. As of January 1, 2014 only registered municipal and public bodies included on the CRA’s list will have qualified donee status. Similar rules apply to low cost housing corporations for the aged.

In the May issue of this newsletter, my partner Kate Lazier outlined CRA’s views on when a housing corporation for the aged could be considered to be a qualified donee under the Act.  Kate noted in her article that CRA was currently developing the application process.  That process for such entities has now been announced and can be found here.

Municipal or Public Bodies Performing a Function of Government

As indicated above the Charities Directorate also released documents outlining the application process for entities that are considered to be municipal or public bodies performing a function of government in Canada.  The registration process for these entities can be found here.

This article generally discusses the criteria that must be met by organizations applying for registration for this category of qualified donee.  To be accepted the organization must meet two key requirements.  The first requirement is that it is a “municipal” or “public” body.  Neither term is defined.  Generally, CRA accepts a municipal body to be one that has the characteristics of a municipality.  A public body is typically a body that acquires both its existence and its authority from a statute enacted by a legislature and whose functions are for the benefit of the community of persons to which its authority extends.

The second requirement is that the entity is “performing a function of government in Canada”.  Again this phrase is not defined.  In CRA’s view, a function of government generally means an activity or group of activities undertaken to meet a governance role or purpose within a geographic area.  Historically, CRA has also accepted that providing a range of municipal type services or key social services constitutes performing a function of government as does negotiating a treaty with a federal or provincial government.

To be accepted as a qualified donee the applicant must send a letter to the Charities Directorate and include in that letter an explanation of how the organization meets the requirements set out above.  The evidence that the Charities Directorate will look for when reviewing these applications is outlined in a letter received from the Income Tax Rulings Directorate Legislative Policy and Regulatory Affairs Branch dated March 7, 2013.

The application should outline the factors which are in favour of the organization qualifying as a municipal or public body performing a function of government in Canada within the meaning of paragraph 149(1)(c) of the Act.  More particularly the application should include:

  • identifying information about the Applicant including its CRA business number, tax services office and tax center servicing the entity;
  • a statement of whether there has been a prior determination about the status of the entity as a municipal or public body performing a function of government and the application should  contain copies of any prior correspondence received from CRA on this issue;
  • a complete description of the applicant including how it was created and organized, its purpose, the geographical area over which the applicant as responsibility and authority, an explanation of the persons that the applicant is governing and accountable to, an explanation of the responsibilities and powers of the applicant and of the programs and services offered by the applicant;
  • a statement outlining how the applicant meets the criteria as a municipal or public body performing a function of government in Canada; and
  • an explanation of the sources of revenues of the applicant, including any government funding and a description of any business activities carried on. 

Documents and agreements that evidence the assertions set out in the letter should also be provided.

Once the application is submitted, CRA will be in touch to discuss the information and/or to confirm whether the organization is accepted as a qualified donee.   An applicant that receives a notice refusing its registration for qualified donee status can object to the decision by filing a notice of objection with CRA within 90 days of receipt of the notice of decision.



If your organization is a low cost housing corporation or a municipal or public body performing a function of government and needs qualified donee status, our recommendation is for you to review the materials referenced above and to submit your application as soon as possible.