Overview
The Department of Finance and the Canada Revenue Agency (the “CRA”) launched a public consultation on modernizing the federal tax framework for registered charities. The review is broad. It considers how charities become registered, interact with the CRA, file annual information returns, undergo audits and compliance action, and deal with objections and revocation.
The consultation may result in changes to both the Income Tax Act rules governing registered charities and the CRA’s administration of those rules. In particular, the government is asking whether the current framework can reduce unnecessary administrative burdens and make better use of digital services while protecting the integrity of charitable tax incentives and maintaining public confidence in the sector.
Canada’s more than 86,000 registered charities and other sector stakeholders have until December 3, 2026 to provide comments. Access the consultation paper here: Modernizing the Framework for the Charitable Sector.
What Is the Government Reviewing?
The consultation focuses on four areas:
- the registration process for charities
- digital service delivery and filing of annual information returns
- audit and compliance activities
- the revocation and objections processes for charities
The Registration Process
Charitable registration is the gateway to the tax benefits associated with registered charity status. The government is asking whether the current process strikes the appropriate balance between making registration accessible to qualifying organizations and protecting those tax benefits from misuse.
Among other matters, the government is seeking comments on:
- whether CRA guidance and decision letters are sufficiently clear
- whether the online application process is easy to use
- what additional support applicants may require
- how the CRA should deal with incomplete applications or applications that have not satisfied the conditions for registration
The consultation paper provides useful context. In 2025-26, the CRA received 3,077 applications for charitable registration and approved 79% of them. Less than 1% were refused. The CRA aims to provide a final decision on a complete application within nine months and met that service standard approximately 80% of the time in 2025-26.
Moving Charities Online
A second theme is the government’s push toward greater use of digital services. Charities can already apply for registration, correspond with the CRA, update certain account information and file their T3010 Registered Charity Information Return (“T3010”) electronically through available digital services. However, the government notes that paper filings and communications continue to be widely used.
Although approximately 85% of applications for charitable registration are submitted electronically, just under 31% of T3010s were filed electronically in 2025-26. The government is therefore asking:
- what prevents charities from using digital services
- what training or guidance would help
- whether additional services should be available online
- how the accuracy and consistency of information reported in the T3010 could be improved
Audit, Compliance and Greater Transparency
The CRA currently uses a risk-based approach to charity compliance. Depending on the seriousness of the issue, its responses can range from education and compliance agreements to monetary penalties, suspension of receipting privileges and, ultimately, revocation of charitable registration.
The consultation asks whether the CRA should do more to promote voluntary compliance and whether its existing “intermediate sanctions,” including monetary penalties and suspensions, should be used more broadly for moderate non-compliance. It also raises a potentially important transparency issue: whether the CRA should make more information about charity audits and compliance outcomes publicly available, particularly where serious non-compliance results in a penalty, suspension or revocation.
In 2025-26, the CRA completed 227 audits of registered charities and 52 revocations resulted from those audits. At the same time, the government notes that 39% of audits result in no corrective action or only an education letter, illustrating the competing considerations involved in making audit activity public.
Revocations and Objections – A Broader Reconsideration?
The consultation also puts several features of the revocation regime squarely on the table. Where there is serious or repeated non-compliance, the CRA may propose to revoke a charity’s registration. A revoked charity generally has one year to use its remaining assets in its charitable activities or transfer them as gifts to arm’s-length registered charities, failing which it faces a 100% tax on the assets remaining.
The government is asking whether the revocation and objection processes are sufficiently timely, accessible and fair, whether the CRA needs additional tools to respond quickly to misuse of charitable tax incentives, and whether the current objection timelines should change. It is also considering whether eligibility to re-apply for registration should be restricted following revocation for serious non-compliance.
Two proposals may be of particular practical interest to charities:
- Failure to file: In 2025-26, 1,219 organizations had their registration revoked for failing to file their T3010. Approximately 30% re-applied for registration. The government asks whether monetary penalties or suspension should be used instead of revocation to encourage filing.
- Revocation tax: The government asks whether the rules should be tightened where a revoked charity transfers assets to a closely related or newly established charity, thereby reducing the amount subject to the revocation tax.
What Happens Next?
The government has invited charities, sector organizations and other interested stakeholders to comment on the consultation questions. Submissions must be made by December 3, 2026.
Charities may wish to review their own experience with registration, T3010 filing, CRA digital services, audits and compliance processes before responding. Concrete examples of administrative burden, filing difficulties or procedural concerns may be particularly useful when considering the questions raised by the government.
Submissions may be sent by email to [email protected] with “Modernizing the Framework for the Charitable Sector” as the subject line, or by regular mail to the Charities Section, Tax Policy Branch, Department of Finance Canada, 90 Elgin Street, Ottawa, Ontario K1A 0G5.
