On December 19, 2023 CRA published their Guidance CG-032, Registered charities making grants to non-qualified donees.
The new guidance is helpful, but because of the complexity of the wording from the Income Tax Act (Canada) and the lack of case law, there are lots of questions about how the rules will be interpreted.
Unlike the direction and control rules that have multiple court cases and decades of refined CRA guidance, there is very little relating to the grant to grantee rules. We also find that if we have a charity application or change to purposes requests, using these new rules can add 3-6 months to the amount of time it takes to receive a response over and above when a similar fact pattern is provided to CRA dealing with direction and control.
In January 2024, we wrote to CRA with various questions relating to the new grant to grantee rules.
In September 2024, CRA provided some responses to these questions. Some of the responses are more clear and helpful than others. Keep in mind that, ultimately, all the facts and circumstances will make a difference.
We are generally suggesting that Canadian charities to avoid using these new grant-to-grantee rules unless absolutely necessary. We have blogged extensively about this topic before.
Here is the CRA response to our various scenarios:
Q and A from CRA about Grant to Grantees under the Qualifying Disbursement Rules