The Canadian federal government released Budget 2026, entitled Masters of Our Destiny, on November 5, 2026. While much of the budget focuses on economic development, infrastructure, housing, affordability and national security, it also contains a number of proposals that could affect Canadian registered charities and non-profit organizations.
Some of the proposals are directly related to the regulation of charities and non-profits, while others involve broader tax compliance, corporate transparency and financial crime enforcement.
Of particular interest are proposed changes to the rules governing private foundation investments, administrative requirements for official donation receipts, the regulation of federally incorporated non-profits and reporting obligations for non-profit organizations.
On October 8, 2026, the Department of Finance launched consultations on modernizing Canada’s charitable sector regulatory framework and therefore we may be hearing more about changes affecting charities in the future.
1. Eliminating the Excess Corporate Holdings Regime for Private Foundations
One of the most significant proposals affecting registered charities is the elimination of the excess corporate holdings regime for private foundations.
Currently, the Income Tax Act (Canada) contains complex rules limiting the shareholdings of private foundations and certain persons connected to them. These rules are intended to reduce the risk of self-dealing and the inappropriate use of charitable assets.
Under the existing regime, private foundations must monitor their shareholdings and those of relevant persons, report certain holdings and transactions to the CRA, and potentially dispose of excess shareholdings.
Generally, the regime becomes relevant where a private foundation and relevant persons together hold more than 20% of a class of shares of a corporation and the foundation itself holds more than 2% of that class.
Budget 2026 proposes to eliminate this regime entirely.
Instead, the government proposes extending to private foundations the rules that currently prohibit public foundations from acquiring control of a corporation.
This would represent a significant change in the regulation of private foundations. Rather than requiring foundations to comply with detailed ownership thresholds, reporting obligations and divestiture rules, the government would rely on a prohibition against acquiring corporate control.
The proposed change would apply to taxation years beginning on or after January 1, 2027.
This could reduce administrative burdens for many private foundations, particularly those holding shares in family businesses or other private corporations. However, foundations would still need to consider other applicable rules, including those concerning non-qualifying investments, undue benefits and business activities.
The precise implications for foundations with existing substantial corporate holdings will depend on the legislation and any transitional provisions.
Our initial view is that this change could weaken safeguards against self-dealing and conflicts of interest involving private foundations and wealthy donors or their families and large corporate interests.
The existing regime is complicated, but it serves an important regulatory purpose: it limits the ability of donors and related persons to retain substantial ownership interests in businesses while placing shares in a tax-assisted private foundation. This will potentially allow a private foundation to own a business. Or it could own part of a business. All appreciation of the value of the business would be tax free. This could result in a huge loss of taxes over the years.
This will also result in reduced transparency about private foundations and their investments. Under the existing regime, a private foundation holding more than 2% of a class of corporate shares generally must report information through Form T2081, including:
- The foundation’s shareholdings.
- Holdings of relevant persons.
- Certain material transactions involving the shares.
Eliminating the regime could also eliminate this specialized reporting system.
That would make it more difficult for the public, journalists, researchers and potentially the CRA to identify relationships between private foundations and businesses connected with their donors. The budget does not identify a replacement transparency mechanism.
It also allows for greater potential for conflicts of interest and self-dealing.
Only time will tell, but this could result in charitable assets being more concentrated in family businesses. Private foundations could potentially retain large investments in private corporations rather than diversifying into other investments.
This presents two concerns. First, a foundation may experience financial difficulties if a substantial portion of its assets is concentrated in one business. Second, a foundation with close connections to the business may be reluctant to sell shares, even where divestment would be in the foundation’s interests.
The disbursement quota would continue to apply, but satisfying annual expenditure requirements does not necessarily address investment concentration or governance concerns.
The original Excess Business Holdings Regime was introduced in 2007, partly to address the risk that tax-assisted charitable foundations could retain substantial holdings in businesses connected to their donors. Eliminating it could make private foundations more attractive vehicles for holding shares.
The Budget notes “Instead, the rules that currently prohibit public foundations from acquiring control of a corporation would be extended to private foundations.” While Budget 2026 proposes extending to private foundations the prohibition against acquiring control of corporations that currently applies to public foundations, this prohibition contains an important exception. Under subsection 149.1(12) of the Income Tax Act, a charitable foundation may acquire control of a corporation through donated shares, provided it has not purchased or otherwise acquired for consideration more than 5% of the shares of any class of that corporation. Consequently, eliminating the excess corporate holdings regime could allow private foundations to retain substantial or even controlling interests in businesses received as gifts, without the existing divestiture requirements.
Another interesting issue is that Canada would be moving away from restrictions retained in the United States. The United States continues to have an excess business holdings regime.
It is interesting that there is no attempt to either simplify or adjust the Excess Business Holdings Regime. Now private foundations may end up owning a much larger share of certain businesses and the transparency that we now have will be eliminated and the CRA and the public will have less ability to identify arrangements that warrant closer scrutiny.
It is a little ironic that in this period where food bank is at record levels and income inequality remains at historically high levels in Canada, that the biggest change to the regulation of registered charities in Canada is to provide private foundations which have over $132 billion in assets with more freedom and less transparency over their investments. Private foundations in Canada in 2024 had tax-free revenue of $25.6 billion and only spent $8.1 billion.
Reference: Budget 2026, Tax Measures: Supplementary Information, page 394.
The Income Tax Act contains rules designed to limit the risk of self-dealing associated with private foundations registered as charities, by placing limits on the shareholdings of these foundations. These rules are known as the excess corporate holdings regime. The excess corporate holdings regime prevents private foundations from acquiring more than 20 per cent of a class of shares of any corporation, in combination with all relevant persons (generally, non-arm’s length individuals). Under these rules, private foundations must track their shareholdings, and the shareholdings of any relevant persons. Private foundations must report these holdings, and any material transaction involving these holdings within the year, to the Canada Revenue Agency. If those total holdings exceed 20 per cent, and the private foundation itself holds more than 2 per cent of the class of shares, it is obligated to divest itself of its excess shareholdings within a particular timeframe. Budget 2026 proposes to eliminate the excess corporate holdings regime. Instead, the rules that currently prohibit public foundations from acquiring control of a corporation would be extended to private foundations. This measure would apply to taxation years that begin on or after January 1, 2027.
2. Changes to the Regulation of Official Donation Receipts
Budget 2026 proposes changes to how certain administrative requirements for charities and other qualified donees are established.
Currently, many technical requirements relating to official donation receipts are prescribed in the Income Tax Regulations.
The budget proposes allowing the Minister of National Revenue to designate certain requirements directly rather than requiring amendments to the regulations.
These matters would include the information required on official donation receipts and the determination of which organizations are considered prescribed donees.
The proposed change would take effect 90 days after royal assent of the implementing legislation.
This could make it easier for the federal government to modify donation receipt requirements without going through the traditional regulatory amendment process.
For registered charities, this is potentially important because issuing compliant official donation receipts is one of their most significant ongoing responsibilities.
The budget does not itself introduce specific new receipt content requirements. However, the proposed approach could make future changes easier to implement.
Charities will need to monitor any subsequent designations to ensure their receipts and receipting systems remain compliant.
Reference: Budget 2026, Tax Measures: Supplementary Information, page 422.
Ministerial Delegations – Income Tax Matters
The Income Tax Act requires certain matters to be prescribed by the Income Tax Regulations that require routine updates.
To streamline the approval process for these updates, Budget 2026 proposes to amend the Income Tax Act to allow the following matters to be designated by ministerial authority rather than prescribed by the Income Tax Regulations.
Certain administrative requirements for charities and other qualified donees would be designated by the Minister of National Revenue, including the content of donation receipts and which organizations are considered as prescribed donees, effective 90 days after royal assent of the enacting legislation.
3. Simplifying the Registration of Foreign Charities as Qualified Donees
Budget 2026 also proposes a relatively minor administrative change concerning foreign charities that may qualify as qualified donees under Canadian tax law.
Currently, the Minister of National Revenue must consult the Minister of Finance before registering an eligible foreign charity as a qualified donee.
The budget proposes eliminating this consultation requirement.
The change would take effect on royal assent of the implementing legislation.
This is intended to simplify the approval process. However, it does not substantially expand the categories of foreign charities eligible to become Canadian qualified donees.
Reference: Budget 2026, Tax Measures: Supplementary Information, page 422.
Budget 2026 also proposes to streamline the approval process for foreign charities by amending the Income Tax Act to remove the requirement that the Minister of National Revenue consult the Minister of Finance before registering a foreign charity as a qualified donee, effective on royal assent of the enacting legislation.
4. Proposed Changes to the Canada Not-for-profit Corporations Act
Budget 2026 proposes amendments to the Canada Not-for-profit Corporations Act (CNCA) as part of the government’s broader strategy to combat money laundering and terrorist financing.
The government proposes expanding access to non-public beneficial ownership registry information and providing enhanced powers to dissolve fraudulent corporations.
These measures form part of a broader package affecting federal corporate legislation, including the Canada Business Corporations Act, the CNCA and the Canada Cooperatives Act.
For federally incorporated non-profit organizations, including many registered charities, the proposed amendments are potentially significant.
The government appears interested in strengthening the tools available to identify and address corporations involved in fraudulent activities.
However, the budget does not provide enough detail to determine exactly how these provisions would apply to CNCA corporations, what information would be collected, or the procedural protections that would apply before dissolution.
The legislation will need to be examined carefully when introduced.
These proposals are noteworthy because they involve the use of corporate law mechanisms to address financial crime, rather than relying exclusively on the CRA’s regulatory powers under the Income Tax Act.
Reference: Budget 2026, Chapter 5, financial crime measures.
Make it harder to hide behind corporations
Help more government authorities with regulatory and enforcement responsibilities better detect and address the illicit use of shell companies and other complex corporate ownership structures by giving them access to non-public beneficial ownership registry information.
Strengthen the government’s ability to dissolve corporations being used for fraudulent purposes.”
Also see page 367:
Strengthening Canada’s AML/ATF Regime
In Budget 2026, the government proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), and its regulations, to expand FINTRAC’s ability to share information with the Office of the Superintendent of Financial Institutions, clarify FINTRAC’s powers of examination, extend the scope of the PCMLTFA regime as it applies to the gambling sector, expand the requirement to register with FINTRAC to certain sectors and to make technical amendments. In addition, the government proposes to amend the PCMLTFA and the Office of the Superintendent of Financial Institutions Act, and to make consequential and related amendments to other statutes and regulations, to enhance the anti-moneylaundering and anti-terrorist financing supervision and compliance of the largest financial institutions by transferring the responsibility for anti-money laundering and anti-terrorist financing supervision of federally regulated financial institutions from the Financial Transactions and Reports Analysis Centre of Canada to the Office of the Superintendent of Financial Institutions. Finally, amendments to the Canada Business Corporations Act, the Canada Not-for-profit Corporations Act, and the Canada Cooperatives Act would expand government access to non-public beneficial ownership registry information and provide enhanced powers to dissolve fraudulent corporations.
5. Additional Reporting Requirements for Non-Profit Organizations
The budget reaffirms the federal government’s commitment to proceeding with legislative proposals released on January 29, 2026, relating to reporting requirements for non-profit organizations.
This is particularly relevant to organizations claiming the income tax exemption under paragraph 149(1)(l) of the Income Tax Act.
Unlike registered charities, which generally file the annual T3010 Registered Charity Information Return, many non-profit organizations have relatively limited financial reporting obligations to the CRA.
The federal government has previously proposed expanding reporting requirements to obtain more information about organizations operating on a tax-exempt basis.
Budget 2026 does not introduce an entirely new reporting framework. Rather, it confirms the government’s intention to proceed with the previously released proposals.
Non-profit organizations should review the proposed filing thresholds, information requirements and implementation dates to determine whether they would have additional obligations.
It is important to remember that a budget announcement or reaffirmation of a legislative proposal does not, by itself, change existing filing requirements.
Reference: Budget 2026, Tax Measures: Supplementary Information, page 427.
Previously Announced Measures
Budget 2026 confirms the government’s intention to proceed with the following previously announced tax and related measures, with any modifications resulting from consultations and deliberations since their release.
…
• Legislative proposals released on January 29, 2026, to implement reporting requirements for non-profit organizations.
6. Failure to file information returns
The Budget is proposing that if a charity fails to file a T3010 that the penalty would increase from $500 to $1000. This is unlikely to make much difference, as the CRA currently does not collect that penalty when a charity fails to file the return, they only collect it when the charity applies again to be a registered charity. This would not come into effect until the 2028 taxation year.
Reference: Budget 2026, (page 475):
11 (1) Subsection 188.1(6) of the Act is replaced by the following:
Failure to file information returns
(6) Every registered charity, registered foreign charity, registered Canadian amateur athletic association and registered
journalism organization that fails to file a return for a taxation year as and when required by subsection 149.1(14),
(14.1) or (14.2) is liable to a penalty equal to $1,000.
(2) Subsection (1) applies to the 2028 and subsequent taxation years.
7. Funding Initiatives Relevant to Charities and Non-Profits
Apart from regulatory and tax changes, Budget 2026 contains numerous spending initiatives that may affect registered charities and non-profit organizations.
Some of the more relevant initiatives include:
- Affordable housing and homelessness: A major housing strategy, including approximately $44.7 billion in planned investments, could create opportunities for non-profit housing providers, supportive housing charities and organizations working with people experiencing homelessness.
- Environmental protection: The government’s $3.7 billion Nature Strategy includes measures relating to conservation, biodiversity and environmental protection that could involve environmental charities.
- Indigenous communities: Initiatives involving Indigenous workforce development, education, infrastructure and community services could involve Indigenous non-profits and charities.
- Youth employment: Government-supported employment and skills development initiatives may provide opportunities for charities and non-profits that employ or train young people.
- Mental health and community services: Funding for mental health, home care, violence prevention and victim services may affect charities and non-profit service providers.
These are broader government spending commitments, not funding exclusively reserved for charities or non-profits. Eligibility for particular programs will depend on the applicable program criteria.
8. Changes to the Clergy Residence Deduction
Budget 2026 proposes changes to simplify the calculation of the Clergy Residence Deduction available to eligible members of the clergy.
Currently, eligible clergy members who rent or own their residences may claim a deduction based on certain housing costs and other requirements under the Income Tax Act.
Under the proposed changes, eligible clergy members would have the option of claiming a flat deduction of $1,000 for each month they qualify for the deduction, subject to their annual remuneration as a member of the clergy. Alternatively, they could continue using the existing calculation method.
This change could simplify the calculation of the deduction and reduce administrative burdens for clergy members. Although the deduction is claimed by individuals rather than religious charities themselves, the change may be relevant to religious organizations and charities that employ eligible clergy members.
Reference: Budget 2026, Tax Measures: Supplementary Information, Clergy Residence Deduction. P. 293
Members of the clergy would be able to claim an optional flat $1,000 per month that they are eligible for the Clergy Residence Deduction, up to their annual remuneration. It is expected that this change would benefit around 9,000 individuals. This measure would provide $27 million over four years, starting in 2027-28, and $7 million per year ongoing in additional tax relief.
Clergy Residence Deduction
The Clergy Residence Deduction is available to individuals who are members of the clergy, members of a religious order, or regular ministers of a religious denomination. To qualify, these individuals must be in charge of, or minister to, a diocese, parish, or congregation, or be engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.
Eligible individuals receiving remuneration in the form of employer-provided housing can deduct the entire value of this benefit, including amounts in respect of utilities, from income. Eligible individuals who rent or own their own accommodation can claim a deduction that is the least of:
• the greater of a) $1,000 multiplied by the number of months (to a maximum of ten) in the year during which the individual would qualify for the deduction, and b) one-third of the individual’s remuneration for the year from the office or employment;
• the actual rent and eligible utilities paid or, if the residence is owned by the individual or their spouse or common-law partner, the fair rental value of the residence including eligible utilities, minus amounts claimed in respect of the same accommodation (e.g., home office expenses), during periods of qualifying employment; and
• the individual’s remuneration for the year from their office or employment.
Budget 2026 proposes to allow eligible individuals to deduct a flat amount in a year of $1,000 for each month in which they are eligible for the deduction, up to a maximum of $12,000 for a year, instead of claiming according to the existing detailed method described above. The amount deducted would still be limited to the individual’s remuneration for the year from their office or employment.
If both members of a couple are eligible to claim the deduction and live in the same residence, only one could deduct $1,000 for a month in which both qualify for the deduction. If either the individual or their spouse or common-law partner chooses to deduct the flat amount for a year, neither would be permitted to claim a deduction using the detailed method in respect of that residence for that year.
9. What Is Missing from Budget 2026? Limited Changes to CRA Charity Regulation
From the perspective of the regulation of registered charities, perhaps the most interesting aspect of Budget 2026 is what it does not address.
The federal government has been consulting on potential improvements to the regulation of registered charities, including CRA compliance measures, audit procedures and the available tools for addressing serious non-compliance.
Despite these discussions, Budget 2026 does not appear to introduce a comprehensive package of reforms to the CRA’s regulatory powers concerning registered charities.
Some other important takeaways are what is not included in the Budget:
Transparency
Currently, CRA is limited in the information it can disclose on registered charities, and it cannot provide any information on NPOs that are not registered charities. Here is a recent submission from Blumbergs on this topic.
The Department of Finance consultations on modernizing Canada’s charitable sector regulatory frameworkhave raised the issue but there is no reference to this in the Budget. Here is what the Finance consultation provides:
Transparency has long been an important part of Canada’s approach to the regulation of charities, as it helps the public understand why particular decisions are made. For many years, the CRA has been able to publicly release information pertaining to its decisions to take particular actions with respect to charities, specifically where it applies monetary penalties or suspends or revokes a charity’s registration. At the same time, much of the CRA’s audit and compliance work with respect to charities takes place behind the veil of taxpayer confidentiality, as required by law. This does not provide the public with a complete picture of CRA’s audit activities and may give the impression that certain, often high profile, non-compliance is being left unaddressed, or that the CRA is conducting its audits unfairly. Conversely, the confidentiality of audit actions can help protect against public presumptions of malfeasance in cases where a charity is under audit; 39% of audits in the charitable sector result in no corrective action or an education letter.
- Should the CRA be more proactive in publicizing the results of charity audits where it identifies serious non-compliance, resulting in a monetary penalty or the suspension or revocation of a charity’s registration?
- Should more information about CRA’s audit and compliance activities with respect to charities be publicly available in order to increase transparency around its compliance activities? If so, what additional information should be available and at what stage of the audit process?
Unfortunately, so far, the Federal government is not doing much to address the fact that trust in the charity sector is plummeting in Canada, which is partly owing to a lack of transparency. Without adequate transparency, it is unlikely that the public will trust charities. Having robust transparency discourages the sort of inappropriate behaviours that the media has extensively covered and would make it easier to hold problematic non-profits and charities accountable.
This Budget has confirmed the implementation of changes in 2027 to the T1044 such that NPOs with revenues over $100,000 would have had to file the form. This is positive in that it will increase the number of NPOs that will need to file the T1044 and increase CRA visibility into the NPO sector. However, this Budget did not provide that the T1044s will be available to the public, like the T3010s. Therefore, you can have NPOs with revenues of hundreds of millions or billions of dollars and even though they receive significant benefits such as paying no taxes, the public may not even know that they exist.
Non-Profit Regulation
The regulation of NPOs that are not registered charities has not changed significantly since 1917; despite discussions about changes to the NPO regime, there is nothing in the budget to indicate this is even being considered.
10. Conclusion
Federal Budget 2026 contains several developments that Canadian registered charities and non-profit organizations should be aware of.
As the Department of Finance continues examining possible improvements to the regulation of registered charities, these remain important issues for consideration.
Charities and non-profits will need to monitor the proposed legislation, particularly the changes affecting private foundations, official donation receipts, federal non-profit corporations and non-profit reporting requirements to see how and when they are rolled out.Mark Blumberg and Jessie Lang are both lawyers at Blumbergs Professional Corporation. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit www.CanadianCharityLaw.ca Blumbergs also maintains Canada’s largest charity information portal at www.CharityData.ca with up to 20 years of information on every Canadian registered charity. The portal is free and the aim is to increase transparency in the Canadian charity sector. This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional
