PFC News Policy Advisories New CRA guidance offers charities greater clarity on charitable purposes and grantmaking flexibility PFC/FPC Policy Advisories 5 mins read June 8, 2026 News & Insights Policy Advisories New CRA guidance offers charities greater clarity on charitable purposes and grantmaking flexibility As charities and federal legislation evolve to meet changing community needs, many foundations are reviewing whether their stated purposes still reflect the work they do today and the work they may want to undertake in the future. The Canada Revenue Agency has recently updated its guidance, Charitable purposes of a registered charity, created a new short guide that summarizes the key elements of the longer guidance, and provided an expanded list of model purposes to help charities draft purposes. The revised guidance was issued on May 5, 2026, and explains how charities can draft purposes that are charitable at common law and how purposes related to qualifying disbursements fit within the Income Tax Act framework. For the charitable and philanthropic sectors, this is a useful and timely set of resources. The updated materials provide clearer guidance on how charities can understand, draft, and update their purposes, while also supporting stronger governance, compliance, and public trust. Importantly, the CRA has also clarified that the Charities Directorate no longer provides pre-approval or advance review of proposed changes to a charity’s purposes or activities. Responsibility now rests with each charity to ensure that any new or revised purposes and activities are charitable at law. Why this matters for foundations For grantmaking foundations, the updated guidance is especially relevant. Many foundations are thinking carefully about how to support communities in more flexible, responsive, and equitable ways. This includes funding registered charities, working with intermediaries, supporting grassroots and community-led organizations, engaging Indigenous partners, participating in collaboratives, and making grants to non-qualified donees under the qualifying disbursement rules. The new guidance provides important clarity on how a foundation’s stated purposes can affect this work. A key point is that any disbursement to a ‘grantee organization’, known by the government of Canada as a non-qualified donee, must further a stated purpose of the charity that is charitable at common law. CRA’s guidance makes clear that a purpose to make qualifying disbursements to grantee organizations does not, on its own, authorize a charity to make those disbursements. The foundation must also be constituted for a charitable purpose at common law that the disbursement furthers. In practice, this means some foundations may wish to review whether their existing purposes are broad enough to support their current and future grantmaking strategies. Older purposes that focus only on making gifts to qualified donees, may not provide sufficient clarity for newer forms of grantmaking. Getting the purpose language right The CRA recommends that charitable purposes identify three elements: the charitable category or subcategory, the scope of activities, and the eligible beneficiary group. In simpler terms: what charitable benefit is being advanced, how the charity will advance it, and who will benefit. For foundations, this does not mean purposes need to be overly narrow (as unfortunately many of the examples provided in the guidance remain). In fact, CRA explicitly notes that a purpose can be broad, as long as it limits the charity to charitable activities. Overly narrow purposes can reduce a charity’s ability to respond to changing needs or pursue other charitable activities that further its charitable purposes. The balance is important. Purpose language should be clear enough to meet CRA guidelines, but flexible enough to support thoughtful and evolving philanthropic work. Another strategy to maintain flexibility might be to list several CRA models of charitable purposes. A foundation need not to be limited to one charitable purpose. Implications for policy, systems change, and sector infrastructure The updated guidance is also relevant for foundations funding public policy work, systems change, capacity building, and sector infrastructure. CRA confirms that charities can carry on public policy dialogue and development activities to further their charitable purposes. However, those activities are not themselves charitable purposes. Charities should avoid framing purposes around influencing law, policy, or government decisions, even where public policy work forms a major part of their activities. Instead, the purpose should describe the public benefit being pursued, such as advancing education, relieving poverty, promoting health, protecting the environment, upholding human rights, or another recognized charitable purpose. This distinction matters for foundations that support advocacy, public policy, civic engagement, movement-building, or systems-change work. These activities may be permissible and important, but they need to be connected to a recognized charitable purpose. A good governance opportunity The CRA’s updated guidance should be seen not only as a compliance update, but also as a governance opportunity. Boards and senior leaders may wish to ask: Do our current purposes reflect what we actually do? Do they support the grantmaking approaches we are using now, including any grants to non-qualified donees? Are our purposes flexible enough to support future work, while still being clearly charitable? Do our governing documents distinguish appropriately between charitable purposes and operational powers, such as holding property, making investments, borrowing money, or entering contracts? Have we considered any federal, provincial, or territorial requirements that may apply to changes in our governing documents? For foundations with trusts, endowments, investment powers, or older governing documents, this is another reason to review purposes carefully and in context. PFC encourages foundations and other registered charities to review CRA’s updated resources and consider whether their purposes remain aligned with their mission, activities, and future direction. PFC welcomes clearer and more accessible regulatory guidance that helps foundations navigate their responsibilities with confidence. As philanthropy continues to evolve, the right purpose language supports both compliance and impact, helping foundations remain responsive to community needs while maintaining the trust and accountability that charitable status requires. Share This Article Facebook Twitter LinkedIn Email