The “non-profit sector” includes almost every type of voluntary association that enjoy special tax exemptions, which they gain by fulfilling the requirements of the Income Tax Act. They enjoy this status unless and until Revenue Canada determines that they are not non-profit in nature according to the terms of the Act. Although they themselves do not pay income taxes (except on their investment income), non-profit organizations are not entitled to offer tax incentives to those who contribute to their work.
Although a non-profit organization may generate earnings, the latter must be used to attain the organization’s objectives rather than pay dividends to its members, as may be the case with commercial enterprises.
A subset of NPOs, the charitable sector is the narrowest concept. It refers specifically to those organizations that are registered under the Income Tax Act as meeting a set of criteria, which exempts them from income taxes and permits them to provide receipts for donations that can be claimed as tax credits. Unlike NPOs, they are required to apply for their status, which is either granted or refused by Revenue Canada, and which can be revoked by it as well.
If non-profit organizations have one or more activities that do conform to the definition of charity, even though they are non-profit, they do not fulfill the requirements of the Income Tax Act for registered charities and therefore, in the eyes of law, cannot be considered charitable institutions.
Many cultural organizations, schools, sports teams and youth groups raise funds in support of their activities, but are not necessarily registered charities. You will probably have more difficulty in finding information about them. They may well deserve your donations, but they are not entitled to issue tax receipts. Their activities are simply less regulated by the government.
Adapted from: Building on Strength: Improving Governance and Accountability in Canada’s Voluntary Sector – Panel on Accountability and Governance in the Voluntary Sector, Final Report (February, 1999). http://library.imaginecanada.ca/files/nonprofitscan/en/library/2458_book.pdf
and from: Consumer and Non-Profit Law – Published by the Public Legal Education and Information Service of New Brunswick, in collaboration with the Consumer Affairs Branch of the Ministry of Justice of New Brunswick, and the Canada Revenue Agency.
Cultural organizations and organizations active in community media that, for one reason or another, cannot be recognized by the CRA as charitable organizations, can obtain a number that authorizes them to issue tax receipts in Quebec only.
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