Category: Legal News

Running a nonprofit in Canada requires understanding the various financial forms that need to be filed with the Canada Revenue Agency (CRA). One such form is Form T1044, which can sometimes cause confusion.

In this guide, we’ll cover when nonprofits need to file Form T1044, key differences from other tax forms, filing deadlines, common mistakes to avoid, and what happens if you miss the deadline. We’ll also answer frequently asked questions to help your organization stay compliant with CRA requirements.

This article will explain what Form T1044 is, who needs to file it, why it’s important, and how to file it, making sure it’s all easy to understand and applicable to nonprofits and organizations in Canada.

What is Form T1044?

Form T1044 is a specific return called the “Non-Profit Organization (NPO) Information Return,” which is required by the CRA for certain tax-exempt organizations in Canada. It gathers important financial information about the organization to ensure it complies with Canadian tax rules. Form T1044 is different from the T3010 form that registered charities must file.

Key Differences Between Form T1044 and T3010

Understanding which form your organization needs to file is crucial for CRA compliance. Here’s how T1044 and T3010 differ:

Feature	Form T1044 (NPO)	Form T3010 (Registered Charity)
Who Files	Tax-exempt nonprofit organizations	Registered charities (Qualified Donees)
Asset Threshold	Over $200,000 in assets	All registered charities must file
Income Threshold	Over $10,000 in certain income types	All registered charities must file
Filing Deadline	6 months after fiscal year-end	6 months after fiscal year-end
Purpose	Maintain tax-exempt status	Maintain charitable registration
Public Information	Not publicly available	Publicly searchable on CRA website
Tax Receipts	Cannot issue donation receipts	Can issue official donation receipts

Key Takeaway: Registered charities file T3010, not T1044. However, some nonprofit organizations that are not registered charities must file T1044 if they meet the asset or income thresholds. An organization cannot be both a registered charity and required to file T1044 for the same activities.

Who Needs to File Form T1044?

The T1044 form is not required for all non-profit organizations. Generally, an organization must file this form if it meets these criteria:

1. It is a non-profit organization: This includes social clubs, recreational groups, or any other entity that doesn’t aim to generate profits for its members.
2. It has had assets of over $200,000 at any time during the fiscal year: If the organization’s total assets exceed this threshold, it must submit Form T1044.
3. It received more than $10,000 in income: This includes interest, dividends, or rentals. If the organization earned more than this amount during the fiscal year, filing the form is mandatory.

Organizations that meet these conditions are expected to submit the T1044 return. It’s important to note that not all nonprofits fall under these criteria, so it’s essential to review the organization’s financial situation carefully.

Organizations Exempt from Filing T1044

Not every nonprofit in Canada needs to file Form T1044. Your organization is exempt from filing if:

Organizations Below the Thresholds:

• Total assets remained under $200,000 throughout the entire fiscal year, AND
• Investment income (interest, dividends, rentals) was $10,000 or less for the fiscal year

Registered Charities:

• Organizations registered with the CRA as charities file Form T3010 instead and do not file T1044

Qualified Donees:

• Registered Canadian amateur athletic associations (RCAAAs)
• Registered journalism organizations (RJOs)
• These organizations have their own filing requirements

Organizations Filing Other Returns:

• NPOs that file a T2 Corporation Income Tax Return for a taxation year don’t need to file T1044 for that same year

Important Note: Even if your organization was previously exempt, you must reassess your filing requirements annually. If your assets grow or your investment income increases beyond the thresholds, you’ll need to file T1044 for that fiscal year.

If you’re unsure whether your organization qualifies for an exemption, contact a charity and nonprofit lawyer or tax professional familiar with CRA regulations.

Why Is Filing Form T1044 Important?

Filing the T1044 is critical for staying in compliance with CRA regulations. If an organization fails to submit this form when required, there could be significant consequences:

• Penalties: Organizations that do not file this form on time may face financial penalties. These penalties can accumulate quickly, putting a financial strain on the organization.
• Loss of tax-exempt status: In extreme cases, failing to file the required forms may cause the organization to lose its tax-exempt status. This would mean the organization could be taxed on its income, undermining its financial health.
• Increased CRA scrutiny: If an organization regularly fails to meet its filing requirements, it may attract additional scrutiny from the CRA, leading to audits or other compliance checks.

How to File Form T1044?

Filing the T1044 form can seem complex, but the CRA provides guidelines to simplify the process. Here are the steps to follow:

1. Download the form: You can access Form T1044 on the CRA’s website here.
2. Gather required information: To fill out the form, you’ll need accurate records of the organization’s financial activities for the fiscal year. This includes:
   • The total value of the organization’s assets
   • Details on any income received, such as interest or rental income
   • The organization’s financial statements
3. Complete the form: Carefully fill in the required information, ensuring all financial data is correct.
4. Submit the form: Once completed, submit the form by mail to the address provided on the CRA website. It is important to send the form by the deadline, which is six months after the end of the organization’s fiscal year.
5. Keep a copy: Always keep a copy of the completed form and the financial documents used to complete it for your records.

Need clarity on annual federal filing requirements? Compare key obligations in our guide to T1044 and T3010 so your charity stays compliant year-round.

Important Filing Deadlines for T1044

The Standard Deadline:

Form T1044 must be filed within six months after the end of your organization’s fiscal year-end. This is a firm deadline that applies regardless of your organization’s size or structure.

Deadline Examples:

• Fiscal year ends December 31, 2024 → T1044 due by June 30, 2025
• Fiscal year ends March 31, 2025 → T1044 due by September 30, 2025
• Fiscal year ends September 30, 2024 → T1044 due by March 31, 2025

Weekend and Holiday Rules:

If your filing deadline falls on a Saturday, Sunday, or public holiday recognized by the CRA, your return is considered on time if the CRA receives it or it is postmarked on the next business day.

First-Time Filers:

If your organization is filing Form T1044 for the first time because it has crossed the asset or income thresholds, the same six-month deadline applies from your fiscal year-end.

Pro Tip: Don’t wait until the last minute. Mail delays can cause your return to arrive late even if you send it before the deadline. Consider mailing your T1044 at least two weeks before the due date to account for postal delays.

Common Mistakes to Avoid When Filing Form T1044

Many nonprofits make avoidable errors when filing T1044. Here are the most common mistakes and how to prevent them:

1. Incorrect Asset Valuation

Organizations often miscalculate their total assets by forgetting to include all property, investments, and receivables. Remember to include the fair market value of all assets, not just cash and bank accounts.

2. Missing Income Sources

Some organizations fail to report all sources of investment income. Include all interest from bank accounts and investments, dividend income, rental income from property, and capital gains from asset sales.

3. Late Filing

Missing the six-month deadline is one of the most common mistakes. Set calendar reminders well in advance of your deadline and build in time for preparation and review.

4. Incomplete Financial Statements

The CRA requires complete and accurate financial statements. Ensure your statements are prepared according to Canadian accounting standards and include all required schedules and supporting documentation.

5. Not Updating Contact Information

If your organization has moved or changed its contact person, failing to update this information on the form can lead to missed CRA correspondence. Always verify that your current mailing address and contact details are correct on the form.

6. Assuming Exemption Without Verification

Some organizations assume they don’t need to file without carefully checking the thresholds. Review your financial position every year to confirm whether filing is required.

7. Using Outdated Forms

The CRA occasionally updates Form T1044. Always download the most current version from the CRA website rather than using a saved copy from previous years.

How to Avoid These Mistakes:

Maintain detailed and accurate financial records throughout the year, conduct internal reviews before filing, and consider having a charity and nonprofit lawyer or accountant review your completed form before submission.

What Happens After Filing?

Once Form T1044 is submitted, the CRA will review it to ensure the organization meets the necessary requirements for tax-exempt status. If any issues arise, the CRA may request additional information or clarification. It’s important to be responsive to these requests to avoid further complications.

What to Do If You Miss the T1044 Filing Deadline

If your organization has missed the T1044 filing deadline, don’t panic. Taking prompt action can help minimize penalties and compliance issues.

Step 1: File Immediately

Even if you’ve missed the deadline, file your T1044 as soon as possible. Late filing is better than not filing at all. The $25 per day penalty is capped at $2,500, so filing late will stop the penalty from continuing to accumulate.

Step 2: Include an Explanation Letter

When you submit your late return, include a cover letter explaining:

• Why the return was filed late
• What steps you’ve taken to prevent future late filings
• Any extenuating circumstances (illness, organizational changes, etc.)

Step 3: Consider Voluntary Disclosure

If your organization has multiple years of unfiled returns, you may be eligible for the CRA’s Voluntary Disclosures Program. This program can reduce or eliminate penalties if you come forward before the CRA contacts you.

Step 4: Pay Any Assessed Penalties Promptly

If the CRA assesses penalties or interest charges, pay them as quickly as possible to avoid additional interest accumulation.

Step 5: Set Up Systems to Prevent Future Late Filings

• Create a compliance calendar with filing deadlines
• Assign responsibility for tax filings to a specific board member or staff person
• Set up reminders at 8 months, 5 months, and 1 month before your deadline
• Consider hiring a bookkeeper or accountant to manage filing requirements

Repeated Late Filing:

If your organization repeatedly files late, the CRA may increase scrutiny of your nonprofit, potentially leading to audits or challenges to your tax-exempt status. Establishing reliable filing systems is crucial for long-term compliance.

When to Seek Legal Help:

If you’ve missed multiple years of filings or have received correspondence from the CRA about unfiled returns, consult with a charity and nonprofit lawyer immediately to protect your organization’s tax-exempt status.

Do Charities Need to File T1044?

Registered charities in Canada file a different form called the T3010, which is the annual Registered Charity Information Return. However, organizations that are classified as non-profits but not registered charities (or “Qualified Donees” as it is called in legal and CRA parlance) as may still need to file the T1044. It is important to distinguish between different types of organizations to determine the correct forms required by the CRA.

Best Practices for Filing Form T1044

• Stay organized: Maintaining detailed and accurate financial records throughout the year will make it easier to file the T1044 and avoid mistakes.
• Consult a professional: If your organization is unsure about whether it needs to file the T1044 or how to complete it, consider consulting with a tax professional or an experienced charity and not-for-profit lawyer who is familiar with CRA regulations for charities and non-profits.
• Monitor asset and income thresholds: Regularly review the organization’s financial status to ensure it does not surpass the $200,000 asset or $10,000 income thresholds unexpectedly, which would trigger the need to file the form.

Conclusion

Filing Form T1044 is an important responsibility for many nonprofits in Canada. While not all organizations need to file this form, those that do must ensure they meet the filing requirements to avoid penalties, maintain their tax-exempt status, and stay compliant with CRA regulations.

By understanding the filing process, knowing the deadlines, avoiding common mistakes, and staying proactive, organizations can ensure a smooth filing experience. If you’re ever uncertain about your filing obligations or need assistance with CRA compliance, don’t hesitate to consult with a charity and nonprofit lawyer who can provide expert guidance tailored to your organization’s needs.

Need Help With Form T1044 or Nonprofit Compliance?

Filing Form T1044 and maintaining CRA compliance can be complex. If your organization needs guidance on filing requirements, has missed deadlines, or is facing CRA scrutiny, our experienced charity and nonprofit lawyers can help.

Contact Northfield & Associates today:

• Phone: (416-317-6806)
• Email: info@northfield.biz
• Book a Consultation: schedule-a-free-consultation

We provide comprehensive legal support for nonprofits and charities across Canada, including assistance with CRA forms, compliance issues, tax-exempt status protection, and nonprofit governance.

Frequently Asked Questions About Form T1044

What is Form T1044 used for?

Form T1044, the Non-Profit Organization (NPO) Information Return, is used by the Canada Revenue Agency to gather financial information from tax-exempt nonprofit organizations. It helps the CRA verify that qualifying nonprofits continue to meet the requirements for tax-exempt status under the Income Tax Act.

Do all nonprofits in Canada need to file T1044?

No. Only nonprofits that have assets exceeding $200,000 at any point during the fiscal year OR investment income (interest, dividends, rentals) exceeding $10,000 for the fiscal year must file T1044. Nonprofits below both thresholds are exempt from filing.

What is the penalty for not filing T1044?

The penalty for late filing is $25 per day, up to a maximum of $2,500. Additional penalties may apply for repeated failures to file. The CRA may also charge interest on unpaid penalties and could potentially revoke an organization’s tax-exempt status for continued non-compliance.

Can I file T1044 online?

Currently, Form T1044 must be filed by mail. Unlike Form T3010 for registered charities, there is no electronic filing option available for T1044 at this time. Check the CRA website for any updates to filing methods.

How long does it take the CRA to process T1044?

Processing times vary depending on the CRA’s workload and the complexity of your return. Generally, you can expect processing to take 4 to 8 weeks after the CRA receives your return. If the CRA requires additional information, processing may take longer.

What documents do I need to file T1044?

You’ll need your organization’s complete financial statements for the fiscal year, including balance sheet and income statement, detailed asset listings and valuations, records of all investment income (interest, dividends, rentals), your organization’s governing documents (if requested), and proof of nonprofit status.

Can a charity file both T3010 and T1044?

No. Registered charities file Form T3010 only. Organizations that are nonprofits but not registered charities may need to file T1044 if they meet the asset or income thresholds. An organization is either a registered charity or a nonprofit organization for CRA filing purposes, not both.

Running a nonprofit in Canada requires understanding the various financial forms that need to be filed with the Canada Revenue Agency (CRA). One such form is Form T1044, which can sometimes cause confusion.

In this guide, we’ll cover when nonprofits need to file Form T1044, key differences from other tax forms, filing deadlines, common mistakes to avoid, and what happens if you miss the deadline. We’ll also answer frequently asked questions to help your organization stay compliant with CRA requirements.

This article will explain what Form T1044 is, who needs to file it, why it’s important, and how to file it, making sure it’s all easy to understand and applicable to nonprofits and organizations in Canada.

What is Form T1044?

Form T1044 is a specific return called the “Non-Profit Organization (NPO) Information Return,” which is required by the CRA for certain tax-exempt organizations in Canada. It gathers important financial information about the organization to ensure it complies with Canadian tax rules. Form T1044 is different from the T3010 form that registered charities must file.

Key Differences Between Form T1044 and T3010

Understanding which form your organization needs to file is crucial for CRA compliance. Here’s how T1044 and T3010 differ:

Feature	Form T1044 (NPO)	Form T3010 (Registered Charity)
Who Files	Tax-exempt nonprofit organizations	Registered charities (Qualified Donees)
Asset Threshold	Over $200,000 in assets	All registered charities must file
Income Threshold	Over $10,000 in certain income types	All registered charities must file
Filing Deadline	6 months after fiscal year-end	6 months after fiscal year-end
Purpose	Maintain tax-exempt status	Maintain charitable registration
Public Information	Not publicly available	Publicly searchable on CRA website
Tax Receipts	Cannot issue donation receipts	Can issue official donation receipts

Key Takeaway: Registered charities file T3010, not T1044. However, some nonprofit organizations that are not registered charities must file T1044 if they meet the asset or income thresholds. An organization cannot be both a registered charity and required to file T1044 for the same activities.

Who Needs to File Form T1044?

The T1044 form is not required for all non-profit organizations. Generally, an organization must file this form if it meets these criteria:

1. It is a non-profit organization: This includes social clubs, recreational groups, or any other entity that doesn’t aim to generate profits for its members.
2. It has had assets of over $200,000 at any time during the fiscal year: If the organization’s total assets exceed this threshold, it must submit Form T1044.
3. It received more than $10,000 in income: This includes interest, dividends, or rentals. If the organization earned more than this amount during the fiscal year, filing the form is mandatory.

Organizations that meet these conditions are expected to submit the T1044 return. It’s important to note that not all nonprofits fall under these criteria, so it’s essential to review the organization’s financial situation carefully.

Organizations Exempt from Filing T1044

Not every nonprofit in Canada needs to file Form T1044. Your organization is exempt from filing if:

Organizations Below the Thresholds:

• Total assets remained under $200,000 throughout the entire fiscal year, AND
• Investment income (interest, dividends, rentals) was $10,000 or less for the fiscal year

Registered Charities:

• Organizations registered with the CRA as charities file Form T3010 instead and do not file T1044

Qualified Donees:

• Registered Canadian amateur athletic associations (RCAAAs)
• Registered journalism organizations (RJOs)
• These organizations have their own filing requirements

Organizations Filing Other Returns:

• NPOs that file a T2 Corporation Income Tax Return for a taxation year don’t need to file T1044 for that same year

Important Note: Even if your organization was previously exempt, you must reassess your filing requirements annually. If your assets grow or your investment income increases beyond the thresholds, you’ll need to file T1044 for that fiscal year.

If you’re unsure whether your organization qualifies for an exemption, contact a charity and nonprofit lawyer or tax professional familiar with CRA regulations.

Why Is Filing Form T1044 Important?

Filing the T1044 is critical for staying in compliance with CRA regulations. If an organization fails to submit this form when required, there could be significant consequences:

• Penalties: Organizations that do not file this form on time may face financial penalties. These penalties can accumulate quickly, putting a financial strain on the organization.
• Loss of tax-exempt status: In extreme cases, failing to file the required forms may cause the organization to lose its tax-exempt status. This would mean the organization could be taxed on its income, undermining its financial health.
• Increased CRA scrutiny: If an organization regularly fails to meet its filing requirements, it may attract additional scrutiny from the CRA, leading to audits or other compliance checks.

How to File Form T1044?

Filing the T1044 form can seem complex, but the CRA provides guidelines to simplify the process. Here are the steps to follow:

1. Download the form: You can access Form T1044 on the CRA’s website here.
2. Gather required information: To fill out the form, you’ll need accurate records of the organization’s financial activities for the fiscal year. This includes:
   • The total value of the organization’s assets
   • Details on any income received, such as interest or rental income
   • The organization’s financial statements
3. Complete the form: Carefully fill in the required information, ensuring all financial data is correct.
4. Submit the form: Once completed, submit the form by mail to the address provided on the CRA website. It is important to send the form by the deadline, which is six months after the end of the organization’s fiscal year.
5. Keep a copy: Always keep a copy of the completed form and the financial documents used to complete it for your records.

Need clarity on annual federal filing requirements? Compare key obligations in our guide to T1044 and T3010 so your charity stays compliant year-round.

Important Filing Deadlines for T1044

The Standard Deadline:

Form T1044 must be filed within six months after the end of your organization’s fiscal year-end. This is a firm deadline that applies regardless of your organization’s size or structure.

Deadline Examples:

• Fiscal year ends December 31, 2024 → T1044 due by June 30, 2025
• Fiscal year ends March 31, 2025 → T1044 due by September 30, 2025
• Fiscal year ends September 30, 2024 → T1044 due by March 31, 2025

Weekend and Holiday Rules:

If your filing deadline falls on a Saturday, Sunday, or public holiday recognized by the CRA, your return is considered on time if the CRA receives it or it is postmarked on the next business day.

First-Time Filers:

If your organization is filing Form T1044 for the first time because it has crossed the asset or income thresholds, the same six-month deadline applies from your fiscal year-end.

Pro Tip: Don’t wait until the last minute. Mail delays can cause your return to arrive late even if you send it before the deadline. Consider mailing your T1044 at least two weeks before the due date to account for postal delays.

Common Mistakes to Avoid When Filing Form T1044

Many nonprofits make avoidable errors when filing T1044. Here are the most common mistakes and how to prevent them:

1. Incorrect Asset Valuation

Organizations often miscalculate their total assets by forgetting to include all property, investments, and receivables. Remember to include the fair market value of all assets, not just cash and bank accounts.

2. Missing Income Sources

Some organizations fail to report all sources of investment income. Include all interest from bank accounts and investments, dividend income, rental income from property, and capital gains from asset sales.

3. Late Filing

Missing the six-month deadline is one of the most common mistakes. Set calendar reminders well in advance of your deadline and build in time for preparation and review.

4. Incomplete Financial Statements

The CRA requires complete and accurate financial statements. Ensure your statements are prepared according to Canadian accounting standards and include all required schedules and supporting documentation.

5. Not Updating Contact Information

If your organization has moved or changed its contact person, failing to update this information on the form can lead to missed CRA correspondence. Always verify that your current mailing address and contact details are correct on the form.

6. Assuming Exemption Without Verification

Some organizations assume they don’t need to file without carefully checking the thresholds. Review your financial position every year to confirm whether filing is required.

7. Using Outdated Forms

The CRA occasionally updates Form T1044. Always download the most current version from the CRA website rather than using a saved copy from previous years.

How to Avoid These Mistakes:

Maintain detailed and accurate financial records throughout the year, conduct internal reviews before filing, and consider having a charity and nonprofit lawyer or accountant review your completed form before submission.

What Happens After Filing?

Once Form T1044 is submitted, the CRA will review it to ensure the organization meets the necessary requirements for tax-exempt status. If any issues arise, the CRA may request additional information or clarification. It’s important to be responsive to these requests to avoid further complications.

What to Do If You Miss the T1044 Filing Deadline

If your organization has missed the T1044 filing deadline, don’t panic. Taking prompt action can help minimize penalties and compliance issues.

Step 1: File Immediately

Even if you’ve missed the deadline, file your T1044 as soon as possible. Late filing is better than not filing at all. The $25 per day penalty is capped at $2,500, so filing late will stop the penalty from continuing to accumulate.

Step 2: Include an Explanation Letter

When you submit your late return, include a cover letter explaining:

• Why the return was filed late
• What steps you’ve taken to prevent future late filings
• Any extenuating circumstances (illness, organizational changes, etc.)

Step 3: Consider Voluntary Disclosure

If your organization has multiple years of unfiled returns, you may be eligible for the CRA’s Voluntary Disclosures Program. This program can reduce or eliminate penalties if you come forward before the CRA contacts you.

Step 4: Pay Any Assessed Penalties Promptly

If the CRA assesses penalties or interest charges, pay them as quickly as possible to avoid additional interest accumulation.

Step 5: Set Up Systems to Prevent Future Late Filings

• Create a compliance calendar with filing deadlines
• Assign responsibility for tax filings to a specific board member or staff person
• Set up reminders at 8 months, 5 months, and 1 month before your deadline
• Consider hiring a bookkeeper or accountant to manage filing requirements

Repeated Late Filing:

If your organization repeatedly files late, the CRA may increase scrutiny of your nonprofit, potentially leading to audits or challenges to your tax-exempt status. Establishing reliable filing systems is crucial for long-term compliance.

When to Seek Legal Help:

If you’ve missed multiple years of filings or have received correspondence from the CRA about unfiled returns, consult with a charity and nonprofit lawyer immediately to protect your organization’s tax-exempt status.

Do Charities Need to File T1044?

Registered charities in Canada file a different form called the T3010, which is the annual Registered Charity Information Return. However, organizations that are classified as non-profits but not registered charities (or “Qualified Donees” as it is called in legal and CRA parlance) as may still need to file the T1044. It is important to distinguish between different types of organizations to determine the correct forms required by the CRA.

Best Practices for Filing Form T1044

• Stay organized: Maintaining detailed and accurate financial records throughout the year will make it easier to file the T1044 and avoid mistakes.
• Consult a professional: If your organization is unsure about whether it needs to file the T1044 or how to complete it, consider consulting with a tax professional or an experienced charity and not-for-profit lawyer who is familiar with CRA regulations for charities and non-profits.
• Monitor asset and income thresholds: Regularly review the organization’s financial status to ensure it does not surpass the $200,000 asset or $10,000 income thresholds unexpectedly, which would trigger the need to file the form.

Conclusion

Filing Form T1044 is an important responsibility for many nonprofits in Canada. While not all organizations need to file this form, those that do must ensure they meet the filing requirements to avoid penalties, maintain their tax-exempt status, and stay compliant with CRA regulations.

By understanding the filing process, knowing the deadlines, avoiding common mistakes, and staying proactive, organizations can ensure a smooth filing experience. If you’re ever uncertain about your filing obligations or need assistance with CRA compliance, don’t hesitate to consult with a charity and nonprofit lawyer who can provide expert guidance tailored to your organization’s needs.

Need Help With Form T1044 or Nonprofit Compliance?

Filing Form T1044 and maintaining CRA compliance can be complex. If your organization needs guidance on filing requirements, has missed deadlines, or is facing CRA scrutiny, our experienced charity and nonprofit lawyers can help.

Contact Charity Law Group today:

• Phone: (416-488-5888)
• Email: dov.goldberg@charitylawgroup.ca
• Book a Consultation: https://calendly.com/dov-goldberg/schedule-a-free-consultation

We provide comprehensive legal support for nonprofits and charities across Canada, including assistance with CRA forms, compliance issues, tax-exempt status protection, and nonprofit governance.

Frequently Asked Questions About Form T1044

What is Form T1044 used for?

Form T1044, the Non-Profit Organization (NPO) Information Return, is used by the Canada Revenue Agency to gather financial information from tax-exempt nonprofit organizations. It helps the CRA verify that qualifying nonprofits continue to meet the requirements for tax-exempt status under the Income Tax Act.

Do all nonprofits in Canada need to file T1044?

No. Only nonprofits that have assets exceeding $200,000 at any point during the fiscal year OR investment income (interest, dividends, rentals) exceeding $10,000 for the fiscal year must file T1044. Nonprofits below both thresholds are exempt from filing.

What is the penalty for not filing T1044?

The penalty for late filing is $25 per day, up to a maximum of $2,500. Additional penalties may apply for repeated failures to file. The CRA may also charge interest on unpaid penalties and could potentially revoke an organization’s tax-exempt status for continued non-compliance.

Can I file T1044 online?

Currently, Form T1044 must be filed by mail. Unlike Form T3010 for registered charities, there is no electronic filing option available for T1044 at this time. Check the CRA website for any updates to filing methods.

How long does it take the CRA to process T1044?

Processing times vary depending on the CRA’s workload and the complexity of your return. Generally, you can expect processing to take 4 to 8 weeks after the CRA receives your return. If the CRA requires additional information, processing may take longer.

What documents do I need to file T1044?

You’ll need your organization’s complete financial statements for the fiscal year, including balance sheet and income statement, detailed asset listings and valuations, records of all investment income (interest, dividends, rentals), your organization’s governing documents (if requested), and proof of nonprofit status.

Can a charity file both T3010 and T1044?

No. Registered charities file Form T3010 only. Organizations that are nonprofits but not registered charities may need to file T1044 if they meet the asset or income thresholds. An organization is either a registered charity or a nonprofit organization for CRA filing purposes, not both.

Contact us today to schedule your consultation.

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Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

Forward-Looking Information

This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information.

This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company.

Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: the failure to finalize negotiations concerning the increase of the Loan or to close such transaction and the failure of the Company to complete the acquisition of the Company Facility; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company’s activities; and the other risks disclosed under the heading “Risk Factors” and elsewhere in the Company’s amended annual information.

Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

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NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Northfield & Associates professionals will be pleased to discuss resolutions to specific legal concerns you may have.

Many Canadian organizations struggle to determine which tax form they need to file with the Canada Revenue Agency.

The confusion often centres around two key documents: Form T1044 for non-profit organizations and Form T3010 for registered charities.

The main difference is that registered charities must file Form T3010 annually, while non-profit organizations file Form T1044 only when they meet criteria such as having assets over $200,000 or passive income exceeding $10,000.

This distinction reflects the fundamental differences in how these organizations operate and their tax obligations under Canadian law.

Understanding which form applies to your organization is crucial for maintaining compliance with the CRA and avoiding penalties.

The choice between registered charity status and non-profit organization designation affects tax receipt eligibility, reporting requirements, and spending obligations.

Overview of T1044 and T3010

The T1044 and T3010 are distinct information returns required by the Canada Revenue Agency for different types of organizations.

The T1044 serves non-profit organizations that meet specific asset or income thresholds, while the T3010 is mandatory for all registered charities regardless of their financial position.

Purpose of T1044

Form T1044 acts as the Non-Profit Organization Information Return under the Income Tax Act.

The Canada Revenue Agency uses this form to monitor tax-exempt organizations and ensure compliance with federal tax regulations.

The primary purpose is to collect financial data from non-profit organizations that exceed certain thresholds.

This includes organizations with assets over $200,000 or investment income exceeding $10,000 annually.

The CRA reviews this information to verify that organizations continue to qualify for tax-exempt status.

Organizations that fail to file risk losing their tax exemption and facing financial penalties.

Key functions of T1044 include:

• Maintaining tax-exempt status
• Reporting asset valuations
• Disclosing investment income sources
• Ensuring regulatory compliance

Purpose of T3010

The T3010 Registered Charity Information Return serves two main purposes under Canadian tax law.

First, it provides the Canada Revenue Agency with information to verify that registered charities remain compliant with charitable regulations.

Second, the T3010 promotes public accountability and transparency.

All T3010 returns become publicly searchable on the CRA website, allowing donors and the public to access current information about registered charities.

The form captures detailed financial data, program activities, and governance information.

This comprehensive reporting helps the CRA monitor charitable activities and ensures organizations meet their charitable obligations.

Primary purposes include:

• Maintaining charitable registration
• Public transparency requirements
• Regulatory oversight
• Donor accountability

Who Must File Each Form

T1044 Filing Requirements:

Non-profit organizations must file T1044 when they meet specific criteria during their fiscal year.

Organizations with total assets exceeding $200,000 at any point must file this return.

Additionally, organizations receiving more than $10,000 in passive income (interest, dividends, rentals) must submit the form.

This applies to social clubs, recreational groups, and other non-profit entities that are not registered charities.

T3010 Filing Requirements:

All registered charities must file the T3010 annually, regardless of their asset levels or income amounts.

This requirement applies even when charities have no income or expenses during the fiscal year.

Registered Canadian amateur athletic associations and registered journalism organizations also fall under T3010 requirements.

These organizations cannot file T1044 for the same activities covered by their T3010 return.

Important distinction: An organization cannot file both forms for the same fiscal period and activities.

Registered Charities vs Non-Profit Organizations

Registered charities must operate exclusively for charitable purposes and can issue official donation receipts.

Non-profit organizations serve broader social purposes like civic improvement and recreation but cannot provide tax receipts to donors.

Charitable Purposes and Activities

Registered charities operate under strict guidelines that limit their work to four specific charitable purposes.

These include relief of poverty, advancement of education, advancement of religion, and other purposes that benefit the community.

All charitable activities must directly advance these purposes.

A registered charity cannot use its resources for activities outside these categories.

The organization must dedicate all of its resources to charitable activities.

Every dollar raised must go toward furthering the charity’s charitable purposes.

Registration with the Canada Revenue Agency is mandatory for all organizations wanting charitable status.

The CRA issues a charitable registration number once approved.

Registered charities face spending requirements called disbursement quotas.

They must spend a minimum amount each year on their own charitable activities or qualifying disbursements to other charities.

NPO Purposes: Social Welfare, Civic Improvement, and Recreation

Non-profit organizations serve a much wider range of purposes than registered charities.

NPOs can focus on social welfare, civic improvement, pleasure, sport, or recreation.

These organizations cannot operate exclusively for charitable purposes.

If they do, they must register as charities instead of remaining as NPOs.

NPOs do not register with the CRA like charities do.

They receive no registration number and face fewer reporting requirements.

The organization cannot use its income to personally benefit its members.

One exception exists for clubs promoting amateur athletics in Canada.

NPOs have no mandatory spending requirements.

They can build reserves and spend money when needed without meeting annual quotas.

Most NPOs qualify for income tax exemption.

However, they may pay tax on property income or capital gains in some situations.

Official Donation Receipts and Tax Benefits

Only registered charities can issue official donation receipts for tax purposes.

These receipts allow donors to claim charitable tax deductions on their personal tax returns.

Non-profit organizations cannot issue tax receipts unless they also hold charitable registration.

Donations to NPOs provide no tax benefits to donors.

This difference significantly affects funding opportunities.

Many donors prefer giving to organizations that provide tax receipts.

Registered charities often attract larger donations because of the tax benefits they offer.

Corporate donors especially value the tax deduction opportunities.

Both organization types generally avoid paying income tax on their regular operations.

However, registered charities receive complete tax exemption while NPOs may face some tax obligations.

The ability to issue tax receipts makes registered charities “qualified donees” under Canadian tax law.

This status opens doors to certain grants and funding programs not available to regular NPOs.

Filing Requirements and Eligibility

Non-profit organizations in Canada face specific filing obligations based on their registration status and financial thresholds.

Registered charities must file T3010 returns annually, while non-profit organizations meeting certain criteria must file T1044 returns.

New short-form requirements are coming for smaller organizations.

Criteria for T1044 Filing

Non-profit organizations described in paragraph 149(1)(l) of the Income Tax Act must file Form T1044 when they meet specific financial thresholds.

The organization must file if it received taxable dividends, interest, rentals, or royalties totalling more than $10,000 during the fiscal period.

Organizations with total assets exceeding $200,000 at the end of the previous fiscal period must also file.

The asset calculation uses book value based on generally accepted accounting principles.

Once an organization files a T1044 for any fiscal period, it must continue filing for all subsequent periods regardless of future revenue or asset levels.

This creates a permanent filing obligation.

Key filing details:

• Deadline: Six months after fiscal year-end
• Penalty: $25 per day late (minimum $100, maximum $2,500)
• Mailing address: Jonquière Tax Centre, T1044 Program

Agricultural organizations, boards of trade, and chambers of commerce under paragraph 149(1)(e) follow the same T1044 requirements.

Criteria for T3010 Filing

Registered charities must file Form T3010 annually regardless of their size or revenue.

This applies to all organizations registered under paragraph 149(1)(f) of the Income Tax Act.

The T3010 filing requirement is mandatory for maintaining charitable registration status.

There are no financial thresholds that trigger this obligation.

Filing specifications:

• Due date: Six months after fiscal year-end
• Scope: All registered charities
• Purpose: Accountability and transparency reporting

Registered Canadian amateur athletic associations and registered national arts service organizations also file T3010 returns.

These organizations cannot file T1044 returns as they fall under different Income Tax Act provisions.

Charities that also qualify as non-profit organizations may need to file both T3010 and T1044 returns if they meet the T1044 thresholds.

New Reporting Obligations for NPOs

Starting with fiscal years beginning on or after January 1, 2026, new filing requirements will affect smaller non-profit organizations.

Organizations not meeting current T1044 thresholds must file a new short-form return.

The short-form return will require basic organizational information including the business number or trust number.

This expands reporting obligations to virtually all non-profit organizations.

Current vs. future requirements:

• Pre-2026: Only NPOs meeting income or asset thresholds file T1044
• 2026 onwards: All NPOs file either T1044 or short-form return

These changes aim to improve transparency and compliance across the non-profit sector.

Organizations should prepare by ensuring proper record-keeping systems and understanding their new obligations.

The Canada Revenue Agency will provide additional guidance as the implementation date approaches.

Information Required on Each Return

The T1044 and T3010 information returns require different sets of financial and organizational data.

The T1044 focuses on basic organizational details and income sources for non-profit organizations, while the T3010 demands comprehensive financial reporting and detailed program information from registered charities.

Essential Details for T1044

The T1044 Non-Profit Organization Information Return collects fundamental information about tax-exempt organizations.

Organizations must provide their business number or trust number along with basic identification details.

Key requirements include the organization’s legal name and complete mailing address.

The form requires financial data about income sources and expenditures during the fiscal period.

Income reporting covers various revenue streams including:

• Membership fees and dues
• Property income from investments
• Donations and grants received
• Revenue from programs and services

Organizations must also report their total assets and liabilities.

This includes cash holdings, investments, and physical property owned by the organization.

The T1044 requires details about how funds were spent during the year.

This includes program expenses, administrative costs, and any payments made to directors or officers.

Filing thresholds determine which organizations must complete this return.

Organizations meeting specific income or asset requirements must submit the T1044 alongside their T2 Corporation Income Tax Return.

Key Details for T3010

The T3010 Registered Charity Information Return demands comprehensive reporting from all registered charities.

This form requires detailed financial statements and extensive program information.

Financial reporting includes complete revenue and expenditure breakdowns.

Charities must report all funding sources including donations, government grants, and property income from investments.

Asset reporting covers:

• Cash and short-term investments
• Long-term investments and endowments
• Land, buildings, and equipment
• Other assets owned by the charity

The form requires detailed information about charitable programs and activities.

Charities must describe their work and show how they advance their charitable purposes.

Governance information includes details about directors, trustees, and key staff members.

Charities must report compensation paid to directors and the highest-paid employees.

All registered charities must complete the T3010 annually, regardless of their size or income level.

The return must be filed within six months of the charity’s fiscal year-end to maintain good standing with the Canada Revenue Agency.

Penalties and Implications for Non-Compliance

Organizations face different penalty structures and consequences depending on whether they file T1044 or T3010 returns.

The Canada Revenue Agency imposes specific financial penalties for late filing, and continued non-compliance can threaten an organization’s tax-exempt status.

Financial Penalties for Late or Missing Returns

The CRA applies different penalty structures for each return type.

Non-profit organizations that do not file their T1044 return pay a penalty of $25 per day, up to a maximum of $2,500 per return.

The CRA does not impose penalties for first-time late filers of the T1044.

Registered charities face other consequences for T3010 non-compliance.

The CRA charges a late-filing penalty of $500 if a charity misses the six-month deadline after its fiscal year-end.

The agency does not apply this penalty if charities file before their registration is revoked.

Penalties for tax receipt violations are more severe:

• 5% penalty for first-time inaccurate receipts
• 10% penalty for repeat violations
• 125% penalty for false information on receipts

If false receipt penalties exceed $25,000, the charity loses its tax-receipting privileges for one year.

Impact on Tax-Exempt Status

Non-compliance puts the tax benefits both organization types receive at risk.

The CRA can revoke an NPO’s tax-exempt status if it repeatedly fails to file T1044 returns or keep proper records.

For registered charities, consequences escalate faster.

The agency sends a Notice of Intention to Revoke (Form T2051A) if it does not receive the T3010 return within seven months of the fiscal year-end.

Revocation happens by the tenth month if the charity still has not filed.

Once revoked, charities may owe a revocation tax on remaining assets if they do not transfer them to eligible donees in time.

Loss of charitable status means donors cannot claim income tax deductions for their gifts.

Organizations cannot reapply right away and re-registration is not guaranteed.

Choosing Between Registered Charity and NPO Status

Organizations should weigh their operational needs against compliance requirements when choosing their structure.

This decision affects fundraising, tax obligations, and how flexible the organization can be long-term.

Strategic Considerations for Organizations

Purpose alignment is the main factor in choosing a status.

Groups focused on poverty relief, education, religion, or community benefit should become registered charities.

Organizations centered on social welfare, recreation, or civic improvement fit better as NPOs.

Fundraising needs also play a big role.

Registered charities can issue official donation receipts, which attract donors who want tax benefits.

This ability often leads to more and larger donations.

NPOs have stricter limits on charitable activities.

They cannot operate solely for charitable purposes or they lose their NPO classification.

This rule affects organizations that may shift toward more charitable work in the future.

Operational flexibility also differs between the two types.

NPOs have fewer spending requirements and less regulatory oversight.

Registered charities must meet annual disbursement quotas and spend minimum amounts on charitable activities each year.

The registration process is different for each.

Registered charities go through a detailed application review with the Canada Revenue Agency.

NPOs only need to meet basic criteria and do not have a formal registration process.

Long-Term Impacts on Fundraising and Compliance

Funding sources are broader for registered charities.

Many foundations, government grants, and large donors require organizations to be registered charities.

This requirement can limit NPOs’ access to major funding opportunities.

Registered charities face higher compliance costs.

They must file detailed T3010 returns each year and keep thorough records of their activities.

NPOs usually file simpler T1044 forms with less strict reporting rules.

Public trust often favors registered charities because of government oversight and transparency rules.

Donors see charity registration as proof of legitimate operations and proper fund management.

Registered charities face more limits on commercial activities and must keep all revenue sources aligned with charitable purposes.

NPOs have more freedom in how they generate revenue.

Future changes in organizational status require careful planning.

Switching from NPO to registered charity status takes time and a lengthy application process.

Changing from charity to NPO status means permanently losing the ability to issue donation receipts.

Conclusion

The difference between T1044 and T3010 forms is clear.

Registered charities file T3010 returns each year, while non-profit organizations that are not registered charities use T1044 if they meet certain income or asset thresholds.

An organization cannot be both a registered charity and a non-profit for CRA filing purposes.

Which form to file depends on the organization’s registration status with the CRA.

T3010 forms promote transparency and help registered charities stay compliant.

T1044 forms collect information from non-profits with higher financial activity, allowing the CRA to monitor these organizations.

Filing the correct form is necessary to stay in good standing with the CRA.

Northfield & Associates helps organizations meet these requirements and stay compliant.

For help with T1044 or T3010 filing, contact us.

Visit us for more information or schedule a FREE consultation to discuss your organization’s filing needs.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian charity law and can help ensure your organisation follows proper procedures.

Get professional support today by email at info@northfield.biz, by phone at (416) 317-6806, or visit us or Schedule your free consultation to discuss your specific circumstances and receive expert assistance throughout the reinstatement process with our experienced legal team.

Frequently Asked Questions

Organizations often ask which form applies to them and what the filing requirements are.

The T1044 is for non-profit organizations that meet certain criteria, while the T3010 is required for all registered charities in Canada.

What is the difference between T1044 and T3010?

The T1044 is the Non-Profit Organization Information Return.

The Canada Revenue Agency uses it to collect financial information from tax-exempt non-profit organizations that operate under paragraph 149(1)(l) of the Income Tax Act.

The T3010 is the Registered Charity Information Return.

It ensures registered charities stay compliant and provides transparency for the public.

Organizations file the T1044 with a Corporate Income Tax Return, but this usually does not lead to a tax bill.

The T3010 is a separate report designed specifically for registered charities.

Who needs to file a T1044 vs a T3010?

Non-profit organizations file a T1044 if they meet certain criteria under the Income Tax Act.

They must file when their total passive income from dividends, interest, rentals, or royalties exceeds $10,000 in a fiscal period.

All registered charities in Canada must file a T3010 every year.

This rule applies no matter the charity’s size or income.

The main difference is the organization’s legal status.

Non-profits that are not registered charities use the T1044, while registered charities use the T3010.

When are T1044 and T3010 returns due?

Both forms have similar deadlines based on the organization’s fiscal year-end.

Organizations generally have six months after their fiscal year-end to file.

The exact due date depends on when the fiscal year ends.

Organizations should check their year-end date and count six months forward to find their deadline.

Late filing can lead to penalties and possible loss of tax-exempt status.

Organizations should mark their filing dates on the calendar well in advance.

Can an organization ever file both T1044 and T3010?

Organizations cannot file both forms for the same fiscal period.

The choice depends entirely on their legal status with the CRA.

If an organization is a registered charity, it files the T3010.

If it is a non-profit that is not a registered charity, it may need to file the T1044 based on the criteria above.

An organization can switch from one form to the other if its status changes.

For example, a non-profit that becomes a registered charity stops filing T1044 and starts filing T3010.

What are the penalties for non-compliance in filing the T1044 or T3010 forms?

The CRA can charge financial penalties for late filing or non-compliance.

Penalties depend on the organization’s revenue and how late the filing is.

Registered charities that do not file the T3010 can lose their charitable status.

This means they lose the ability to issue tax receipts and may have to pay tax on their income.

Non-profit organizations that do not file required T1044 forms may lose their tax-exempt status.

This would make them liable for corporate income tax on their earnings.

Why does it matter whether my organization files T1044 or T3010?

Filing the correct form helps your organization keep its tax-exempt or charitable status with the CRA. If you use the wrong form or don’t file at all, you risk losing these legal protections.

The T3010 lets registered charities issue tax receipts to donors. If a charity can’t provide receipts, attracting donations becomes much harder because supporters can’t claim tax deductions.

Proper filing builds transparency and public trust. The CRA makes this information public, so donors can make informed decisions about which organizations to support.

Ready for better nonprofit reporting?

At Northfield & Associates, we have a team of professional bookkeepers and accountants to help your organization manage the books so that you can breeze through tax season.

GET IN TOUCH

What We Do!

We’re often asked by prospective clients what our Bookkeeping Service covers?  People want to know what specific tasks we do, and what their responsibility is.  This brief explainer page will answer that question.  This is by no means an exhaustive list, but covers the most frequently asked questions.

Getting Started

• Review your existing books for needed corrections or back-work
• Chart of accounts setup or amendment
• Assistance with setting up bank feeds
• Limited assistance* with setting up payroll (QBO or Gusto only)
• Your books brought current and reconciled if needed

Ongoing Monthly Bookkeeping

• After-the-fact transaction recording
• Post to general ledger
• Post to other ledgers (as needed)
• Bank account reconciliation
• Monthly financial statements
• Other bookkeeping services, as required
• Best-practice bookkeeping advice and counsel

Year End

• Assistance with 1099-NEC preparation*
• Assistance with 1099-MISC preparation*
• Year-end financial statements and period-end closing

What We Don’t Do

Pay bills

We do not offer bill-pay services at this time, nor do we manage Accounts Payable (AP) or Accounts Receivable (AR).

Payroll tax responsibility

Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

*Payroll deductions and benefits

We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data.  We do not assist in state registrations, benefits, or advise on deductions.  Those service areas are provided directly by either QBO or Gusto.

Preparation of W2s

Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

Donation recording

We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

Administrative tasks

We cannot provide administrative services unrelated to our bookkeeping function.

Attend board meetings

Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

Let’s Collaborate & Make a Difference!

Partner with us to amplify your mission. Whether it’s Charity accounting, financial transparency, or strategic growth—we’re here to help you create meaningful impact. Let’s work together to build a better future!

Book a Call

Ready for better nonprofit reporting?

At Northfield & Associates, we have a team of professional bookkeepers and accountants to help your organization manage the books so that you can breeze through tax season.

GET IN TOUCH

What We Do!

We’re often asked by prospective clients what our Bookkeeping Service covers?  People want to know what specific tasks we do, and what their responsibility is.  This brief explainer page will answer that question.  This is by no means an exhaustive list, but covers the most frequently asked questions.

Getting Started

• Review your existing books for needed corrections or back-work
• Chart of accounts setup or amendment
• Assistance with setting up bank feeds
• Limited assistance* with setting up payroll (QBO or Gusto only)
• Your books brought current and reconciled if needed

Ongoing Monthly Bookkeeping

• After-the-fact transaction recording
• Post to general ledger
• Post to other ledgers (as needed)
• Bank account reconciliation
• Monthly financial statements
• Other bookkeeping services, as required
• Best-practice bookkeeping advice and counsel

Year End

• Assistance with 1099-NEC preparation*
• Assistance with 1099-MISC preparation*
• Year-end financial statements and period-end closing

What We Don’t Do

Pay bills

We do not offer bill-pay services at this time, nor do we manage Accounts Payable (AP) or Accounts Receivable (AR).

Payroll tax responsibility

Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

*Payroll deductions and benefits

We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data.  We do not assist in state registrations, benefits, or advise on deductions.  Those service areas are provided directly by either QBO or Gusto.

Preparation of W2s

Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

Donation recording

We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

Administrative tasks

We cannot provide administrative services unrelated to our bookkeeping function.

Attend board meetings

Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

Let’s Collaborate & Make a Difference!

Partner with us to amplify your mission. Whether it’s Charity accounting, financial transparency, or strategic growth—we’re here to help you create meaningful impact. Let’s work together to build a better future!

Book a Call

Can a Canadian Charity Provide Benefits to its Directors?

In Canada, registered charities generally cannot pay directors just for holding board positions. However, they may compensate directors for specific goods, services, or facilities provided beyond governance duties.

This distinction between directorial roles and additional services creates opportunities for legitimate compensation. Charities must still comply with strict regulations.

Understanding these rules is crucial as charities seek qualified directors and manage complex operations. The legal framework varies by province and carries significant consequences for non-compliance.

Charity leaders must understand both the possibilities and the strict safeguards that govern director benefits.

Legal Framework Governing Director Benefits

The legal framework for director benefits in Canadian charities includes federal and provincial legislation. The Income Tax Act sets the foundation for registered charities, while provincial acts govern corporate structure and compensation rules.

Key Federal and Provincial Acts

The Canada Not-for-profit Corporations Act governs federally incorporated charities and sets basic rules for director compensation. This act allows reasonable compensation for services provided to the charity.

Each province has its own not-for-profit corporations act for provincially incorporated charities. In Ontario, the Charities Accounting Act provides specific rules for director payments.

This act requires strict procedures, including:

• Written board agreements before payment
• Board meetings with at least four uninvolved directors present
• Maximum 20% of voting directors can receive compensation
• Full financial disclosure in annual statements

Other provinces have similar but different requirements. Always check the specific provincial laws where the charity operates.

Corporate bylaws and governing documents must explicitly allow director compensation for any payments to be valid.

Income Tax Act Provisions

The Income Tax Act sets the federal tax framework for registered charities in Canada. Section 149.1 defines what qualifies as a registered charity and establishes basic operating rules.

Charities cannot provide undue benefits to any person, including directors, trustees, and connected persons. All transactions must serve the charity’s purposes.

Private benefit rules are strict. Any benefit to directors must be:

• Reasonable compensation for actual services
• In the charity’s best interest
• Properly documented and approved

The Act also requires charities to spend a minimum amount on charitable activities each year. Excessive director compensation could reduce these required expenditures.

Violations can result in penalties, suspension, or loss of charitable status. The CRA regularly audits charities for improper director benefits.

CRA Requirements for Registered Charities

The Canada Revenue Agency (CRA) enforces charity law through detailed policies and regular audits. Charities must show that all director benefits serve legitimate charitable purposes.

Key CRA requirements include:

• Proper documentation of all director payments
• Market-rate compensation for services provided
• Board independence in approval decisions
• Annual reporting of director benefits

The CRA publishes guidance documents explaining acceptable practices. These documents help charities understand rules and avoid violations.

Audit procedures focus on director compensation. The CRA examines board meeting minutes, payment records, and supporting documentation.

Keep detailed records of all decisions and approvals. Non-compliance can trigger sanctions, penalties, compliance agreements, or loss of charitable status.

The CRA takes director benefit violations seriously because they undermine public trust in the charitable sector.

General Rule: Prohibition on Director Benefits

Canadian charity law restricts directors from receiving personal benefits from the organizations they govern. These rules protect charitable assets and ensure directors act in the charity’s best interests.

Duty to Act Without Personal Benefit

Directors of Canadian charities cannot receive compensation simply for holding their director positions. This rule applies across all provinces and territories.

The Canada Revenue Agency enforces this prohibition through federal tax policy. Provincial laws also support this restriction.

Directors must serve without expecting payment for governance duties. This includes attending board meetings, voting, and providing oversight.

Key prohibited benefits include:

• Director fees or stipends
• Payment for board meeting attendance
• Compensation for general governance activities
• Benefits tied to board positions

Charitable resources must go toward charitable purposes. Directors who seek personal gain create conflicts that harm the charity’s mission.

Fiduciary Duty Overview

Directors owe fiduciary duties to their charities under Canadian law. They must put the charity’s interests above their own personal interests.

Fiduciary duties require directors to act with loyalty, care, and good faith in all charity matters.

Core fiduciary principles include:

• Acting in the charity’s best interests
• Avoiding conflicts of interest
• Using charity resources properly
• Making informed decisions

When directors receive personal benefits, they violate these fiduciary duties. This creates legal risks for both the director and the charity.

Courts can hold directors personally liable for breaching fiduciary duties. The CRA can also revoke charitable registration for improper director benefits.

Restricted Use of Charity Property

Charity property must serve charitable purposes, not personal ones. Directors cannot use charity assets, funds, or resources for their own benefit.

The Income Tax Act prohibits organizations from making income available to directors. This rule also prevents indirect benefits through creative arrangements.

Restricted uses include:

• Personal loans from charity funds
• Free use of charity property
• Below-market transactions with directors
• Gifts or personal benefits from charity resources

Provincial charity laws reinforce these restrictions. Ontario’s Charities Accounting Act and similar laws create additional barriers to director benefits.

Violations can result in serious consequences. The CRA may revoke charitable registration, and directors may face personal liability for misused funds.

Permitted Benefits and Exceptions

While Canadian charities face restrictions on director compensation, specific exceptions allow for reasonable expenses, service compensation under strict conditions, and liability insurance coverage. These exceptions help charities operate effectively while maintaining transparency and accountability.

Reimbursement of Reasonable Expenses

Charities can reimburse directors for legitimate expenses incurred while carrying out their duties. This includes travel, accommodation, and meal expenses for charity business.

All reimbursements must be reasonable and directly related to charity activities. Proper documentation is essential for each expense claim.

Common reimbursable expenses include:

• Travel costs for board meetings or charity events
• Accommodation during overnight charity business
• Meal expenses while on charity duties
• Communication costs for charity-related calls or internet

The charity should establish a clear expense policy. This policy must outline what expenses qualify for reimbursement and require proper receipts.

Compensation for Services Rendered

Ontario charities can pay directors for specific services beyond their director role, under the Charities Accounting Act. This compensation must meet strict legal requirements.

Can a Canadian Charity Located in Ontario Pay its Directors?

In Canada, the compensation of directors in charitable organizations can be a complex matter governed by specific provincial regulations. Understanding these regulations is crucial for charities to ensure compliance while fairly remunerating directors for their services. This post highlights the conditions for charities located in Ontario specifically, and which are therefore subject to the Charities Accounting Act, with guidelines for compensating directors or persons connected to directors of registered charities.

‍Payment for Goods, Services, or Facilities: The payment must be for goods, services, or facilities provided by the director to the registered charity.

‍Reasonable Amount: The amount of the payment must be reasonable for the goods, services, or facilities provided.

‍Best Interest of the Charity: The payment for goods, services, or facilities must be in the best interest of the registered charity.

‍Financial Responsibility: Payments cannot result in the registered charity’s debts and liabilities exceeding the value of its charitable property.

‍Written Agreement: Before a payment is made, the board of directors must permit the payment via a written agreement that includes the maximum amount that can be paid.

‍Board Resolution: The board of directors must arrive at the written agreement through a resolution at a duly constituted board meeting, with at least four directors (not including those connected to the person providing the goods/services) present.

‍Exclusion of Involved Directors: Directors receiving payment and those connected to them may not attend or vote at the meeting where the resolution is made.

‍Limit on Payments: The total number of directors receiving payment under s. 2.1 of O Reg 4/01 of the Charities Accounting Act cannot exceed 20% of the number of voting directors.

‍Financial Disclosure: Details about the arrangement must be noted in the registered charity’s annual financial statements and presented to the members at the annual meeting.

‍Director’s Satisfaction: Each director must be satisfied that the payment is being made in accordance with s. 2.1 of O Reg 4/01 of the CAA. If a charity can fulfill these requirements, it can reasonably compensate its directors for services rendered to the organization. This framework ensures transparency, accountability, and adherence to legal standards in the management of charitable funds.

Director and Officer Liability Insurance

Charities can purchase liability insurance to protect directors from personal lawsuits. This insurance covers legal defence costs and potential damages from director decisions.

Liability insurance helps charities attract qualified directors. Many potential board members worry about personal financial risk.

The insurance typically covers:

• Legal defence costs for lawsuits
• Damages awarded against directors
• Employment practices claims
• Regulatory investigations

The insurance policy should include appropriate coverage limits. The policy must cover all directors and officers of the charity.

This benefit protects both the charity and its leadership. It allows directors to make decisions without fear of personal financial ruin.

Conflict of Interest and Compliance Safeguards

Canadian charities must have strong systems to identify and manage conflicts of interest when providing benefits to directors. These safeguards ensure compliance with the Charities Accounting Act and maintain public trust.

Identifying Conflicts of Interest

Directors face conflicts when their personal interests compete with their charity’s best interests. Conflicts arise when directors or their connected parties receive payments, goods, or services from the charity.

Common conflict situations include:

• Directors providing services to the charity for payment
• Family members of directors receiving employment or contracts
• Directors having financial interests in suppliers or vendors
• Board members voting on matters that benefit them personally

The appearance of conflict matters as much as actual conflicts. Directors must avoid situations that could appear improper to donors, regulators, or the public.

Clear policies should define what constitutes a conflict. These policies should cover direct and indirect benefits, including payments to spouses, children, or business partners of directors.

Managing Conflicts and Disclosure

Proper disclosure forms the foundation of conflict management. Directors must declare potential conflicts before board discussions begin.

Written disclosure of all relationships and interests that could create conflicts is required. Key disclosure requirements include:

• Written declaration of all potential conflicts
• Annual conflict of interest statements from all directors
• Immediate disclosure when new conflicts arise
• Documentation of all conflict management decisions

Conflicted directors cannot participate in related discussions or votes. They must leave the room during deliberations about matters affecting their interests.

Keep detailed records of all conflict situations and how they were managed. These records show commitment to proper governance and regulatory compliance.

Regulation and Court Approval Processes

The Charities Accounting Act requires specific procedures when paying directors. Written board resolutions must involve at least four non-conflicted directors, and no more than 20% of voting directors can receive payments.

Court approval may be necessary for some benefit arrangements. Seek legal advice for complex situations or when payments exceed routine service agreements.

Regulatory compliance steps:

• Document all decisions in board minutes
• Include benefit details in annual financial statements
• Report arrangements to members at annual meetings
• Ensure payments remain reasonable for services provided

File required reports with provincial and federal authorities. Trustees and directors share responsibility for meeting all disclosure requirements completely and on time.

Compensation Policies and Best Practices

Canadian charities must establish clear policies to ensure director compensation meets CRA requirements and serves the organization’s best interests. Proper assessment methods and transparent disclosure practices protect both the charity and its directors from regulatory violations.

Assessing Fair and Reasonable Compensation

We need to benchmark compensation against similar roles in comparable organizations.

The CRA requires that payments be reasonable for the services provided.

Key assessment factors include:

• Market rates for similar positions
• Director’s qualifications and experience
• Time commitment required
• Geographic location of the charity

We should document our decision-making process thoroughly.

This includes comparing salaries from other charities of similar size and mission.

The Income Tax Act requires compensation to be in the charity’s best interest.

We must show that paying the director benefits our organization more than hiring an outside contractor.

Board evaluation should consider:

• Whether the director has specialized skills
• If the role requires significant time beyond normal governance duties
• Whether the compensation helps retain valuable expertise

Public Disclosure and Accountability

We must include director compensation details in our annual financial statements.

This transparency helps maintain public trust and meets regulatory requirements.

The CRA expects charities to be open about how donation funds are used.

High director salaries can damage our reputation if not properly justified.

Disclosure requirements include:

• Total compensation amounts
• Number of directors receiving payment
• Description of services provided

We should prepare clear explanations for donors and the public about why compensation is necessary.

Our fiduciary duty requires us to use charitable funds responsibly while ensuring effective leadership.

Board minutes must document the approval process and reasoning behind compensation decisions.

This protects directors and demonstrates compliance with provincial regulations.

Risks, Penalties, and Consequences of Non-Compliance

If charities improperly provide benefits to directors, the Canada Revenue Agency (CRA) can impose significant financial penalties.

The CRA can ultimately revoke charitable status, and directors may also face personal liability under the Income Tax Act.

Tax Penalties and Revocation of Status

The CRA treats improper benefits to directors as “undue benefits” under the Income Tax Act.

This triggers serious financial consequences for charities.

Financial penalties apply immediately.

The penalty equals 105% of the benefit amount.

For example, if we pay a director $10,000 inappropriately, we face a $10,500 penalty.

Repeat violations lead to harsher sanctions.

The CRA imposes more severe penalties for subsequent violations within five years.

This includes potential suspension of our ability to issue donation receipts.

Registration revocation is the ultimate penalty.

For serious non-compliance, the CRA can revoke our charitable status entirely. This means:

• Loss of tax-exempt status
• Inability to issue donation receipts
• Required dispersal of all assets
• Payment of revocation tax on remaining assets

The process escalates quickly.

The CRA may proceed directly to revocation for serious violations rather than imposing intermediate sanctions first.

Personal Liability for Directors

Directors face personal consequences beyond organizational penalties when charities provide improper benefits.

Directors can be personally liable for penalties.

Under the Income Tax Act, directors may be held responsible for the charity’s tax obligations and penalties when they knew or should have known about violations.

Culpable conduct increases exposure.

If directors show “wilful, reckless or wanton disregard of the law,” they face additional penalties.

This includes making false statements to maintain registration.

Joint liability applies in some cases.

When multiple parties participate in benefit schemes, directors can be jointly liable for the full penalty amount.

Due diligence provides some protection.

Directors who can prove they exercised reasonable care and took steps to prevent violations may avoid personal liability.

Special Considerations for Trustees and Restricted Funds

Trustees carry specific legal duties when managing charity assets, especially when handling restricted funds designated for particular purposes.

These responsibilities create additional compliance requirements beyond standard director compensation rules.

Duties of Charity Trustees

Trustees must maintain direct control over all charity funds and assets.

We cannot delegate this core responsibility to employees or outside consultants, though they may provide guidance.

Key trustee obligations include:

• Managing restricted and unrestricted funds according to donor intentions
• Ensuring all expenditures align with the charity’s stated purposes
• Maintaining proper oversight of financial decisions

When trustees receive compensation, we must be extra careful with restricted funds.

Money designated for specific purposes cannot pay trustee benefits unless the donor explicitly permits such use.

The trustee role carries fiduciary duties under provincial law.

We must act in the charity’s best interests at all times. This means avoiding conflicts between personal compensation and proper fund management.

Administration of Restricted Funds

Restricted funds create binding legal obligations for charities.

When we accept donations with specific conditions, the charity becomes a trustee subject to charitable trust law.

Common restricted fund types:

• Endowment funds
• Scholarship programs
• Building funds
• Equipment purchases

We cannot use restricted money for general operations or trustee compensation unless donors specifically allow it.

Breaking these restrictions risks penalties, lawsuits, or loss of charitable status.

Proper documentation is essential.

We must track restricted funds separately and report their use in annual statements.

Any trustee benefits paid from these funds requires clear donor authorization in writing.

The Canada Revenue Agency expects charities to honour all donor restrictions while furthering charitable purposes outlined in governing documents.

Conclusion

Canadian charities can provide benefits to directors, but strict legal requirements must be followed. The rules vary by province, with Ontario having specific conditions under the Charities Accounting Act. 

Payment must be for actual goods or services, the amount must be reasonable, a written board agreement is required, and a maximum of 20% of directors can receive payment. Financial disclosure in annual statements is also mandatory. 

Directors cannot simply be paid for holding their position, they must provide value beyond basic governance duties, and the charity’s best interests must always come first.

Navigating director compensation rules can be complex.

Contact Northfield & Associates for expert guidance on compliance requirements. Our team understands Canadian charity law and can help ensure your organisation follows proper procedures.

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Frequently Asked Questions

Canadian charity directors face specific rules about compensation and benefits.

These rules vary between provinces and depend on whether the organization is a registered charity or regular nonprofit.

Can charity board members be paid in Canada?

Registered charities generally cannot pay directors simply for holding board positions.

However, directors can receive compensation for specific services they provide beyond governance duties.

Provincial laws set the exact rules for when payment is allowed.

In Ontario, charities must follow strict requirements under the Charities Accounting Act.

Directors can be paid for goods, services, or facilities they provide to the charity.

The payment must be reasonable and in the charity’s best interest.

The charity needs a written agreement approved by the board.

At least four uninvolved directors must be present when voting on the compensation.

Can a charity have a director?

Yes, Canadian charities must have directors to govern the organization.

Directors are required by law to oversee the charity’s operations and ensure it meets its charitable purposes.

Directors have fiduciary duties to act in the charity’s best interest.

They must avoid conflicts between their personal interests and the charity’s needs.

The board of directors makes major decisions about the charity’s direction and policies.

They are responsible for financial oversight and legal compliance.

Can directors of a nonprofit be paid?

Nonprofit organizations that are not registered charities have more flexibility with director compensation.

These organizations can usually pay directors for their services without the same restrictions.

The key difference is between registered charities and regular nonprofits.

Registered charities face stricter rules about paying directors and trustees.

Regular nonprofit directors can often receive remuneration and benefits from their organization.

They do not face the same prohibition that applies to charity directors.

How many directors does a nonprofit need in Canada?

The number of required directors varies by province and the organization’s governing documents.

Most provinces require at least three directors for incorporation.

Some provinces allow as few as one director for certain types of nonprofits.

Others require a minimum of three directors at all times.

The organization’s bylaws often set specific requirements above the provincial minimum.

Many nonprofits choose to have five to nine directors for effective governance.

How much does a CEO of a non-profit make in Canada?

Nonprofit CEO salaries vary widely based on organization size, location, and sector.

Small nonprofits may pay $50,000 to $80,000 annually.

Medium-sized organizations often pay CEOs between $80,000 and $150,000 per year.

Large national charities may offer $150,000 to $300,000 or more.

Geographic location affects compensation levels significantly.

CEOs in Toronto and Vancouver typically earn more than those in smaller cities.

The organization’s revenue and complexity influence salary ranges.

Healthcare and education nonprofits often pay higher salaries than community organizations.

What policies should a Canadian charity implement to ensure transparency in director remuneration?

Charities should create clear written policies about director compensation before making any payments. These policies should explain when and how directors can receive benefits.

The board should disclose all compensation arrangements in annual financial statements. Members should review this information at the annual meeting.

Conflict of interest policies prevent directors from benefiting inappropriately from their positions. Directors need to declare potential conflicts and abstain from related votes.

Charities should review compensation regularly to ensure it remains reasonable. Independent evaluations help keep payment levels appropriate.

Charities should keep records such as board resolutions, written agreements, and maximum payment amounts. These documents show compliance with provincial regulations and support accountability.

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian law and can help ensure your organization follows proper procedures.

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We’re often asked by prospective clients what our Bookkeeping service. People want to know what specific tasks we do, and what their responsibility is. This brief explainer page will answer that question. This is by no means an exhaustive list, but covers the most frequently asked questions.

Getting Started

• Review your existing books for needed corrections or back-work
• Chart of accounts setup or amendment
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• Limited assistance* with setting up payroll (QBO or Gusto only)
• Your books brought current and reconciled if needed

Ongoing Monthly Bookkeeping

• After-the-fact transaction recording
• Post to general ledger
• Post to other ledgers (as needed)
• Bank account reconciliation
• Monthly financial statements
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• Assistance with 1099-NEC preparation*
• Assistance with 1099-MISC preparation*
• Year-end financial statements and period-end closing

What We Don’t Do

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We do not offer bill-pay services at this time, nor do we manage Accounts Payable (AP) or Accounts Receivable (AR).

Payroll tax responsibility

Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

*Payroll deductions and benefits

We provide assistance with setting up a payroll account in either Quickbooks Online or Gusto, including entry of employee data.  We do not assist in state registrations, benefits, or advise on deductions.  Those service areas are provided directly by either QBO or Gusto.

Preparation of W2s

Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

Donation recording

We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

Administrative tasks

We cannot provide administrative services unrelated to our bookkeeping function.

Attend board meetings

Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

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Whether you choose to meet in person at one of our offices or connect virtually, we provide flexible and accessible consultation options. During your session, we’ll assess your goals, review key documentation, and guide you through every stage of your FDI or trade mission engagement.

Let us help you take the next step with confidence supported by trusted legal and strategic counsel every step of the way.

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Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

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Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

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Public vs Private Foundation in Canada: Key Differences

When establishing a charitable organization in Canada, understanding the difference between a public foundation and a private foundation is crucial. Both must be set up as corporations or trusts and registered with the Canada Revenue Agency (CRA) to obtain tax-exempt status. However, their governance, funding sources, and operational rules differ significantly.

What Is a Foundation?

A foundation is a type of charity that provides funding or services to support charitable causes. Foundations can either:

• Distribute funds to other charities (grant-making).
• Run their own charitable programs.

What Does a Foundation Do?

Foundations play a vital role in philanthropy by:

• Supporting other nonprofits through grants.
• Funding research, education, and social programs.
• Managing endowments to ensure long-term charitable impact.

Public Foundation vs. Private Foundation: Key Differences

Public Foundation

• Governance: More than 50% of the board members must be independent (at arm’s length).
• Funding: Receives donations from multiple sources; no single donor can contribute more than 50% of funding.
• Disbursement Requirements: Must allocate over 50% of annual funds to other qualified charities.

Private Foundation

• Governance: Typically controlled by a single family or small group; more than 50% of board members may be related or not at arm’s length.
• Funding: Can receive most (or all) of its funding from a single donor, family, or closely connected group.
• Flexibility: Can either fund other charities or run its own charitable programs.

Private Foundation Rules in Canada

If you’re considering setting up a private foundation, it’s important to understand the regulations:

• Must meet annual disbursement quota (currently 3.5% of investment assets).
• Subject to stricter compliance rules than public foundations.
• Donations receive tax benefits, making them attractive for high-net-worth individuals.

Which Is Better: A Donor-Advised Fund or a Private Foundation?

Many donors debate whether to use a donor-advised fund (DAF) or register a private foundation. Here’s a quick comparison:

‍

‍

A private foundation is ideal for those who want full control and long-term family involvement, while a donor-advised fund offers simplicity and lower costs.

What Is a Private Foundation for Tax Purposes?

For tax purposes, a private foundation is a registered charity with specific CRA rules:

• Tax receipts can be issued for donations.
• Subject to penalties if disbursement quotas are not met.
• Investment income is tax-exempt if used for charitable purposes.

When to Choose a Private Foundation in Canada

Private foundations work best in specific scenarios where donor control and family involvement are priorities.

Family Philanthropy Scenarios

Consider a private foundation when:

• Multiple family members want to engage in philanthropy together
• You want to create a vehicle for teaching philanthropic values across generations
• Family members have complementary charitable interests and approaches
• You seek to create a shared legacy reflecting family values
• You want to involve children and grandchildren in giving decisions
• The foundation can serve as a unifying force for family members

Many families find that private foundations strengthen family bonds while making a meaningful impact.

Long-term Giving Strategies

Private foundations excel for:

• Creating a permanent endowment to support causes indefinitely
• Implementing sophisticated, multi-year funding strategies
• Supporting causes that require patient, long-term funding
• Building expertise in specific charitable niches
• Developing deep relationships with grantee organizations
• Creating sustainable support for organizations beyond a donor’s lifetime

The ability to take a long view makes private foundations powerful vehicles for strategic philanthropy.

Legacy Planning Considerations

Choose a private foundation when legacy matters:

• You want to create a lasting philanthropic monument to family values
• You seek to establish a named foundation that will endure for generations
• You wish to institutionalize specific charitable priorities
• You want to influence certain fields or issues beyond your lifetime
• You aim to involve family members in philanthropy even after you’re gone
• You desire to leave a structured, managed charitable vehicle rather than a simple bequest

A private foundation can be a powerful legacy planning tool when properly structured.

Control and Succession Preferences

Private foundations are ideal when:

• Maintaining decision-making authority is a top priority
• You have strong convictions about how charitable dollars should be spent
• You want to handpick successors who will carry forward your vision
• You prefer a small, carefully selected board of directors
• You want final say over investment philosophy and grant recipients
• You wish to preserve founder intent through governing documents

If control matters greatly, a private foundation likely offers the best structure.

If you’re considering setting up a private foundation and want a clearer picture of the steps involved, check out this helpful video guide on how to start a private foundation in Canada.

When to Choose a Public Foundation in Canada

Public foundations shine in situations requiring community engagement, fundraising capacity, and collaborative approaches.

Community Impact Goals

Public foundations work best when:

• Your focus is on addressing broad community needs
• You want to tap into collective community knowledge
• You aim to bring diverse stakeholders together around common causes
• You seek to leverage other community resources and partnerships
• You want to respond nimbly to emerging community issues
• You value inclusive decision-making with community input

Community foundations exemplify this approach by pooling community resources to address local needs.

Fundraising-focused Missions

Choose a public foundation if:

• Ongoing fundraising will be central to your charitable model
• You plan to actively solicit donations from many unrelated donors
• You need to build a broad base of financial support
• You want to offer donor-advised funds or other giving vehicles
• You seek to attract corporate or government funding
• You aim to grow your charitable capital beyond the founder’s contribution

Public foundations can build substantial resources through effective fundraising strategies.

Collaborative Philanthropy Models

Public foundations excel for:

• Bringing multiple donors together around shared causes
• Creating collective impact through coordinated funding
• Building cross-sector partnerships with government and business
• Leveraging diverse expertise in grant-making decisions
• Addressing complex social issues requiring multiple stakeholders
• Sharing knowledge and resources across organizations

This collaborative approach can create impact beyond what any single donor could achieve.

Broader Governance Preferences

Public foundations are ideal when:

• You value diverse perspectives in charitable decision-making
• You want to engage community leaders in governance
• You prefer to separate personal relationships from foundation governance
• You benefit from specialized expertise beyond family members
• You value systems of checks and balances in charitable giving
• You see advantage in broader networks and connections

Diverse governance often leads to more robust decision-making and community connections.

Legal and Tax Implications of Each Foundation Structure

Both foundation types face specific legal and tax considerations that affect their operations.

Disbursement Quota Requirements

The disbursement quota creates different spending obligations:

• Private foundations must generally disburse 5% of their investment assets annually
• Public foundations must disburse at least 3.5% of their investment assets annually
• Failure to meet disbursement quotas can result in penalties or revocation
• Excess disbursements in one year can be carried forward to help meet future quotas
• Certain expenditures qualify toward the quota while others don’t
• Applications can be made for relief from the disbursement quota in exceptional circumstances

Plan your grant-making strategy with these requirements in mind. For more on charity registration, check out our Complete Guide to Canadian Charity Registration.

Investment Restrictions

Investment rules seek to ensure prudent management:

• All foundations must invest assets in a manner consistent with prudent investment standards
• Foundations cannot make investments primarily to benefit related parties
• Private foundations face more scrutiny on investment choices
• Public foundations have somewhat more flexibility but still face restrictions
• Significant penalties can apply for non-compliance with investment rules
• Professional investment management is advisable for both foundation types

Develop a clear investment policy that complies with applicable restrictions.

Related Party Transaction Rules

Rules governing transactions with related parties differ:

• Private foundations face stricter limitations on transactions with related parties
• Public foundations have more flexibility but still must ensure transactions benefit the charity
• Both must avoid conferring undue benefits on related individuals or organizations
• Documentation and fair market value assessments are crucial for any related party transactions
• Non-compliance can lead to serious penalties for both the foundation and the related parties
• Careful governance procedures should be established for any potential related party interactions

Robust policies and documentation are essential, especially for private foundations.

Director Liability Considerations

Directors of both foundation types face significant responsibilities:

• Directors have fiduciary duties to the foundation
• Personal liability can arise for certain compliance failures
• Private foundations directors often face higher scrutiny due to related party concerns
• Public foundations directors must oversee more complex fundraising and program operations
• Insurance and indemnification provisions are important for both
• Regular governance training helps directors understand their obligations

Ensure directors understand their legal duties and provide appropriate liability protection.

Converting Between Foundation Types in Canada

Sometimes, organizations need to change their foundation status as circumstances evolve.

Process for Changing Status

Conversion requires a formal process:

1. Board resolution approving the change
2. Amendment of governing documents to reflect new status requirements
3. Changes to board composition if needed (particularly for private to public conversion)
4. Submission of documentation to CRA requesting redesignation
5. CRA review and approval process
6. Implementation of new governance and operational procedures

This process typically takes several months and requires careful planning.

Potential Challenges and Considerations

Conversion brings several challenges:

• Private to public conversion requires diversifying the board and funding sources
• Public to private conversion may require consolidating control and addressing ongoing fundraising expectations
• Both directions require policy and procedure updates
• Stakeholder communication is essential, especially for public foundations
• Investment and grant-making strategies may need adjustment
• Organizational identity and culture shifts may be difficult

Careful change management helps navigate these challenges successfully.

Timeline and Costs

The conversion process involves:

• 3-6 months for typical conversions (sometimes longer)
• Legal fees for document amendments and CRA submissions
• Potential costs for board recruitment and training
• Communication expenses with stakeholders
• Possible consulting fees for restructuring assistance
• Ongoing compliance costs in the new structure

Budget appropriately for these expenses when planning a conversion.

Case Studies: Successful Canadian Foundations

Real-world examples illustrate effective foundation strategies.

Examples of Well-structured Private Foundations

Several private foundations demonstrate best practices:

• The Lucie and André Chagnon Foundation: Established by the founder of Vidéotron, this family foundation focuses on educational success and poverty prevention in Quebec, demonstrating effective governance while maintaining family control.
• The Sprott Foundation: Founded by resource investor Eric Sprott, this foundation maintains a focused approach to tackling homelessness and hunger in Canada through strategic partnerships with frontline organizations.
• The Azrieli Foundation: This family foundation excels at multi-generational involvement while supporting education, architectural initiatives, and scientific research in both Canada and Israel.

These foundations maintain strong family involvement while creating significant impact in their chosen fields.

Examples of Effective Public Foundations

Successful public foundations include:

• Vancouver Foundation: Canada’s largest community foundation effectively pools resources from thousands of donors to address local needs while offering donor-advised funds and specialized programs.
• The Mastercard Foundation: Though initially founded with corporate funding, this foundation has evolved into a public foundation with diverse governance and partners to advance education and financial inclusion globally.
• The Ontario Trillium Foundation: This public foundation effectively distributes government and lottery proceeds to strengthen community organizations across Ontario through collaborative grant-making processes.

These foundations demonstrate the power of collaborative approaches and diverse funding sources.

Lessons Learned from Each Model

Key lessons emerge from successful foundations:

• Clear mission focus correlates strongly with impact
• Strong governance structures prevent mission drift
• Professional management enhances effectiveness
• Transparent operations build public trust
• Deliberate succession planning ensures continuity
• Strategic collaboration amplifies impact
• Regular evaluation improves outcomes
• Attention to compliance prevents regulatory issues

Apply these lessons regardless of which foundation type you choose.

Need Help Setting Up a Foundation?

Whether you’re exploring a public foundation, a private foundation, or a donor-advised fund, our experienced Foundation Lawyers can guide you through the process.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian charity law and can help ensure your organisation follows proper procedures.

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Let us help you establish your foundation on solid legal footing while maximizing tax benefits and philanthropic impact.

Frequently Asked Questions

What is the difference between a public and private foundation in Canada?

A public foundation receives donations from multiple unrelated donors (no single donor over 50%) and must have more than 50% independent board members. A private foundation can be funded entirely by one donor or family, with more than 50% of board members being family or related parties. Private foundations face a 5% annual disbursement quota compared to 3.5% for public foundations and stricter CRA compliance rules.

How does the Canada Revenue Agency (CRA) define public vs private foundations?

CRA classifies a foundation as “public” if more than 50% of its directors are at arm’s length from each other AND no more than 50% of its capital comes from one person or related group. If a foundation doesn’t meet both criteria, it’s designated as a private foundation. This classification determines disbursement quotas, related party transaction restrictions, and compliance requirements.

Which type of foundation is better for a family that wants control?

A private foundation is ideal for families seeking control. It allows more than 50% of board members to be family members, letting you maintain decision-making authority across generations. You choose which charities receive funding, set grant-making priorities, and pass control to chosen successors. The tradeoff is higher costs and stricter CRA compliance rules.

Which type of foundation is better for community-based fundraising?

Public foundations excel at community-based fundraising because independent governance builds donor trust. They can offer donor-advised funds, host events, launch capital campaigns, and attract government or corporate funding more easily. Community foundations demonstrate this by raising millions from thousands of donors, though this requires investment in fundraising staff and donor relations.

Do public and private foundations in Canada follow different operating rules?

Yes. Private foundations must disburse 5% of investment assets annually versus 3.5% for public foundations. Private foundations face stricter rules on related party transactions—they generally cannot pay family members or make investments benefiting relatives. Public foundations have more flexibility but must maintain independent boards and demonstrate diverse funding sources.

Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.

At Northfield & Associates our expert teams guidance on compliance requirements. Our team understands Canadian law and can help ensure your organization follows proper procedures.

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Our bookkeepers can assist you in setting up your initial payroll service in QBO or Gusto. We are not responsible for entering payroll hours/salary, accruing payroll taxes, nor the transmittal of payroll taxes to the IRS or the state.  Your full-service payroll provider (QBO, Gusto, or whatever other service a client uses) will be the responsible party for payroll and payroll tax compliance.

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Similar to the last item, your full-service payroll provider (QBO/Gusto) is responsible for preparation of Form W2 for employees.

Sales tax reporting

For those nonprofits that sell taxable goods and/or services, your bookkeeper will assist in accounting for sales taxes collected and transmitted, but we do not prepare state sales tax reports.

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We do not provide individual donation data entry into your neither your donor CRM nor Quickbooks Online, nor do we prepare year-end donor acknowledgements.

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We cannot provide administrative services unrelated to our bookkeeping function.

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Due to the constraints of time and distance, we are unable to be present, physically nor virtually, at a meeting of a client’s board of directors.*May incur additional fee per 1099-NEC or 1099-MISC.

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Let us help you take the next step with confidence supported by trusted legal and strategic counsel every step of the way.

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Northfield & Associates International Corporation is a global consulting firm serving private enterprises, public institutions, not-for-profit organizations, and institutional capital providers. Operating across Cambodia, Canada, and global markets, the firm supports capital deployment, regulatory navigation, and enterprise decision-making in complex economic and geopolitical environments. Northfield & Associates delivers customized, execution-focused advisory solutions that drive measurable transformation, strengthen competitiveness, and enhance long-term highest value opportunities. The firm incorporates consulting, legal, regulatory, financial, and risk expertise to enable disciplined capital allocation, strong governance, and operational resilience. Northfield & Associates upholds a culture of applied insight and innovation, supporting clients across digital transformation, growth strategy, and organizational capability building. The firm advises individual, leading global corporations, midsize enterprises, government agencies, and mission-driven organizations through long-term partnerships. Enterprise-wide risk management, professional ethics, and fiduciary standards are embedded across all operations. Northfield & Associates’ diverse, globally unified teams are committed to execution certainty and sustainable, risk-adjusted returns aligned with ESG and stakeholder objectives.

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