Canadian Foundation Facts
Foundations are registered charities. There are three types of charities in Canada: 1) Private foundation; 2) Public foundation or; 3) Charitable organization. Canadian foundations are a diverse group of funders, dispersed across the country, that contribute close to 6 billion dollars to qualified donees annually.
To learn more about Canadian foundations:
Overview of the Foundation Sector
Source: Canada Revenue Agency (list of charities, online data as of March 2021).
Assets and Grants (2018)
All Private and Public Foundations*
Public and private foundations held about $91.9 billion in assets and made $7.0 billion in grants in 2018. Source: Imagine Canada, February 2021. *Includes Mastercard Foundation which is Canada’s largest foundation (private) with $23.7 billion in assets.
Foundation Assets 2008-2018
Source: Imagine Canada and Ajah (2015).
Foundation Grants 2008-2018
Public foundations make close to double the dollar amount of grants annually. Many such foundations are attached to specific institutions (e.g. hospitals). Source: Imagine Canada (2021).
Growth in Number of Foundations 2005-2021
Source: Canada Revenue Agency (charities listings online as of March 2021).
Geographic Distribution All Foundations (February 2021)
Source: Canada Revenue Agency (charities listings online as of February 2021).
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.
You don’t have to be a multimillionaire to start a foundation. Indeed, the majority of private Canadian foundations have assets of less than $5 million. There is no minimum requirement for capital endowments. Many foundations suggest that there should be enough invested capital to permit the foundation to meet an annual disbursement equal to a minimum 3.5% of invested assets without encroaching on its capital (unless this is desired by the donor). The endowment gift can be added to in subsequent years. You can contribute to the endowment and so can family members and friends.
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.
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.
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:
- Registered charities
- Registered Canadian amateur athletic associations
- Registered national arts service organizations
- Housing corporations resident in Canada constituted exclusively to provide low-cost housing for the elderly
- The United Nations and its agencies
- Universities outside Canada listed in schedule VIII of the Income Tax Act Regulations
- Charities outside Canada to which Her Majesty in right of Canada (the Federal Government) has made a gift during the last 12 months
- Municipalities in Canada
- The Federal Government, Provincial Government, or their agents
By federal law, a private foundation must disburse to qualified donees every year an amount equal to 3.5% of its invested assets. This is called the disbursement quota. Under certain circumstances, if a foundation is not able to meet this quota from its investment returns or donated funds in a given year, it can use excesses accumulated over a five-year rolling average of disbursements. If it cannot meet the quota by using previous excesses, or by encroaching on capital, then it can apply for administrative relief to the Canada Revenue Agency (CRA). Investment management fees are not eligible for inclusion in the calculation of the disbursement quota. It is important to pay attention to the requirement that you must make grants only to qualified recipients. These recipients, called qualified donees by the federal government, are mostly Canadian registered charities; they could also include governments, the United Nations, certain foreign universities, and registered amateur athletic associations.
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.
No. Foundations can be structured as:
- a trust (a separate legal entity established by a trust document and managed by trustees).
- a not-for-profit corporation (incorporated under provincial or federal acts).
- an unincorporated association of individuals. An unincorporated association is not a separate legal entity and has no legal status apart from its members.
All foundations whether incorporated or not, must also register with CRA separately. (See also the question on the on how to register a charity). So, a private foundation can be either a trustor a corporation, but must be designated by CRA as a charitable private foundation.
You should consult your financial and/or legal advisor about which structure is best suited to your particular situation.
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.
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.
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.
No, foundations cannot give grants to individuals. They can only grant to qualified donees (ie. charities or other organizations recognized as qualified donees by Canada Revenue Agency. However, they can operate their own charitable programs which might involve engaging and paying individuals as agents or contract employees of the foundation to carry out the program activities.
Foundations might also give to a qualified done for a scholarship program for example. They could give a grant to a university or school that is a qualified donee, for purposes of having those funds given to individuals in scholarships. But the qualified donee (organization) makes the decision about the recipients, not the foundation. A foundation could also endow a chair at a university but could not select the individual in that chair and give him or her the money directly.