Funding Road Map

Canadian and American Tax Criteria

Many funding sources stipulate that your group must meet specific charitable or tax-related criteria. This page describes common Canadian and American definitions and regulations relating to these areas.

CANADA

For more detailed information than is provided below, go to the Canada Revenue Agency’s document “Registered Charities and the Income Tax Act”: www.cra-arc.gc.ca/E/pub/tg/rc4108/rc4108-02e.pdf

A charitable organization has the following characteristics:
- Designates its resources primarily to charitable activities conducted by itself
- Greater than half of the organization’s trustees and directors operate with each other and with each of the other trustees and directors “at arm’s length” (i.e. with separate interests, and not related by blood, marriage or adoption)
- A maximum of half of funding received by the charity has come from one person or other organization, or from a group of people or other organizations who do not operate with each other at arm’s length

Non-profit organization (NPO):
- a group that functions exclusively for purposes other than personal gain.
- a profit may be made, but any revenue produced must be used to serve the purposes of the organization
- a charitable organization is an NPO, but an NPO is not necessarily a charitable organization.

UNITED STATES

Internal Revenue Service website:
www.irs.gov/charities/charitable/article/0,,id=96099,00.html

The organizations that meet the following 501(c)(3) criteria are tax-exempt and are generally referred to as ‘charitable organizations’. They must:

ensure that none of the proceeds of their activities go to a private investor or individual;
operate for religious, educational, literary, or charitable purposes;
not operate in the interest of private purposes.

Non-American organizations may apply for recognition of tax-exempt status under IRS 501(c)(3). This page will tell you what you need to do to apply: www.irs.gov/charities/article/0,,id=96109,00.html