The foundation sector in Canada is very diverse in terms of asset size, funding interests and geographical scope. Foundations are registered charities. There are three types of charities in Canada identified by the Income Tax Act: 1) Private foundation; 2) Public foundation or; 3) Charitable organization. To learn more about these designations and other information pertaining to Canadian foundations, read our FAQ below.
For more information on regsitered charities refer to T4063 Registering a Charity for Income Tax Purposes.
|Charity Designation||Public Foundation||Private Foundation||Charitable Organization*||Total|
Source : Canada Revenue Agency, Charities Directorate. Data as at December 2011.
*Charities that primarily carry on their own charitable activities and do not make grants.
|Public Foundation||$16.8 billion|
|Private Foundation*||$19.4 billion|
Source: Canada Revenue Agency, Charities Directorate. Data as at December 2010.
Foundations are found predominantly in central Canada:
|Eastern Canada (NL/PE/NS/NB)||6%|
|Central Canada (ON/QC)||61%|
|Western Canada (BC/AB/SK/MB/YT/NT/NU)||33%|
In our section About PFC Members, you will find information on the granting and charitable activities of PFC member foundations.
First read through the remainder of these questions and answers which will give you an idea of the different definitions of foundations, grantmakers, charities and qualified donees. If you are interested in pursuing the creation of a charitable foundation to fund other charities or to conduct charitable activities, take a look at the PFC guide Starting A Foundation. This guide explains the basic steps. It is helpful to contact a lawyer or other specialized advisor who is knowledgeable about charitable organizations to guide you through the questions relating to incorporation and registration.
A grantmaking foundation is a registered charity that makes grants to other Canadian charities and to those organizations recognized by the federal government as “qualified donees.” A foundation must annually disburse 3.5% of its investment assets (averaged over two years). Most grantmaking foundations set up an endowment and invest the funds to generate an annual income from which they make grants.
Yes they are both charities. The difference is that a private foundation is controlled by a single donor or family through a board that is made up of a majority (more than 50%) of directors at non-arm’s length. A public foundation is governed by a board that is made up of a majority of directors at arm’s length. A private foundation is not allowed to engage in any business activity, but it can operate its own charitable program.
All charities are registered by the Canada Revenue Agency (CRA). When registering a charity, CRA designates it as a “charitable organization,” a “public foundation,” or a “private foundation,” depending on its structure, its source of funding and its operation. The Income Tax Act requirements are different, depending on the type of charity.
The Income Tax Act distinguishes non-profit organizations (NPOs) from registered charities. While both classes of organizations are all or partially tax-exempt, registered charities have the additional privilege of issuing official donation receipts to their donors.
Whether an organization is a registered charity or an NPO depends on its purposes and activities. Charities have a particular set of purposes—such as the relief of poverty, the advancement of education or religion, or other purposes beneficial to the community—that the courts have recognized as charitable.
Registered charities are publicly accountable through the CRA. All registered charities must file an annual Registered Charity Information Return, Form T3010B. Charities are exempt from filing an annual Corporation Income Tax Return, Form T2.
Community foundations are public foundations that focus on building community endowments and supporting a wide range of charitable activities in specific geographical communities. Donor-advised foundations can also be designated as public. These foundations, like community foundations, accept gifts and manage donor-designated funds. Other types of public foundations are grantseeking foundations such as those attached to hospitals or universities.
The purpose of a community foundation is to build an endowment for the benefit of a particular geographic community. Donors can set up individual funds in a community foundation and have as little or as much control as they wish in determining which charities benefit from their fund. Donors can also choose to contribute funds to the community foundation’s general endowment fund, the income from which is distributed by the community foundation’s board of directors to address needs and opportunities in the community.
Community foundations provide many services to donors to help them make the most of their charitable gifts. For more information, or to locate a community foundation near you, contact Community Foundations of Canada.
All registered charitable foundations must grant to registered Canadian charities. Many charitable organizations who have the word foundation in their title are not designated by the CRA as foundations. They operate as grantseeking charities. Others are established to raise funds that are given to a single charitable organization or institution, such as a hospital or university.
Under the Income Tax Act, a registered foundation may make grants or gifts only to qualified donees, including:
A good source of information on foundations with grantmaking programs is Imagine Canada, which produces an online directory of foundations in a searchable online database. If you are interested in a particular foundation, you can write to the foundation directly. You can also search the online database of the Canada Revenue Agency