Middle aged businessman woking on laptop at the office
Tax & Accounting November 09, 2022

I Can Donate To Any Organization in the World and Get Tax Relief? Not so Fast: The 168(1)(F) Trap

Introduction: Tax relief for charitable donations

As all readers know, a Canadian taxpayer may donate property to a registered charity and obtain income tax relief for doing so: a tax credit for individuals and a tax deduction for corporations.(2)

Of course this is a general statement: there are many rules surrounding charitable donations, but as a general statement it has been true for many, many years.

Only in Canada you say?

As another general statement, taxpayers may obtain tax relief for donations only to Canadian charities.(3) Why is this?

Speaking for myself, I think the policy behind this rule is this: the Act provides tax relief for charitable donations because, at least in part, the federal government would spend money on those charitable causes anyway. By granting tax relief, the government spends that money indirectly and at the same time encourages taxpayers to donate more than the government would spend on its own. It makes sense, therefore, that tax relief is limited to donations to Canadian charities, because the government is unlikely to pay money to non-Canadian charities.


However, there are four situations in which a taxpayer may claim tax relief for donations to non-Canadian charities. The first is for a donation to a university outside Canada, the student body of which ordinarily includes students from Canada, that has applied to the Minister of National Revenue (the “Minister”) for registration as a charity.(4) One assumes that taxpayers are granted tax relief for donations to such universities to encourage support for such students.

Second, tax relief is granted for donations to non-Canadian charities that meet the following criteria:

(a) the government has made a gift to the foreign charity within 24 months of the charity’s registration;

(b) the foreign charity is not resident in Canada; and

(c) the Minister is satisfied that the foreign charity is

(i) carrying on relief activities in response to a disaster,

(ii) providing urgent humanitarian aid, or

(iii) carrying on activities in the national interest of Canada.(5)

The policy behind granting tax relief for donations to such charities seems to be that, if the government thinks the charity is worthy of a governmental gift, it must be worthwhile to encourage taxpayers to donate to that charity.

Third, if a Canadian taxpayer earns US income, then a donation to a US charity will attract tax relief to the extent of that income.(6) Presumably this just matches the tax relief with the tax payable.

The fourth exception to the general rule is a list of three specific US charities: (a) Friends of the Nature Conservancy of Canada, Inc., (b) The Nature Conservancy; and (c) American Friends of Canadian Land Trusts.(7) This exception applies only to taxpayers not resident in Canada who donate real or immovable property situated in Canada and only if the charity provides an undertaking, in a form satisfactory to the Minister, that the property will be held for use in the public interest.(8)

A new exception?

Recently, the Act was amended to permit Canadian charities to transfer property to a “grantee organization”, defined(9) to include(10) a person, club, society, association or organization, or prescribed entity, but not a qualified donee.

More specifically, to be a “charitable organization”, a charity must be such that all of its resources are devoted to charitable activities carried on by the organization itself or to making “qualifying disbursements”.(11) The definition of “qualifying disbursement”(12) has been amended to mean a disbursement by a charity, by way of a gift or by otherwise making resources available, to a grantee organization, if

(i) the disbursement is in furtherance of the charity’s charitable purpose (determined without reference to the definition “charitable purposes”),

(ii) the charity ensures that the disbursement is exclusively applied to charitable activities in furtherance of its charitable purpose, and

(iii) the charity maintains documentation sufficient to demonstrate

(A) the purpose for which the disbursement is made, and

(B) that the disbursement is exclusively applied by the grantee organization to charitable activities in furtherance of the charity’s charitable purpose.

As there is no restriction on the location of the “grantee organization” and as the definition of that term excludes “qualified donees”, which is defined to mean various Canadian charities or persons (and the foreign charities described above), it seems evident that grantee organizations are intended to include foreign persons.

On the surface, these amendments suggest that a Canadian taxpayer could donate property to a Canadian charity, claim tax relief for the donation, and then direct the Canadian charity to transfer the property to a Canadian or non-Canadian organization.


That suggestion ignores paragraph 168(1)(f). Prior to its most recent amendment it read as follows:

168(1) Notice of intention to revoke registration

The Minister may, by registered mail, give notice to a person described in any of paragraphs (a) to (c) of the definition “qualified donee” in subsection 149.1(1) that the Minister proposes to revoke its registration if the person


(f) in the case of a registered Canadian amateur athletic association or registered journalism organization, accepts a gift the granting of which was expressly or implicitly conditional on the association or organization making a gift to another person, club, society, association or organization.

As amended,(13) together with the amendment to subsection 149.1(2),(14) paragraph 168(1)(f) now permits the Minister to revoke a charity’s registration as follows:

168(1) Notice of intention to revoke registration

The Minister may, by registered mail, give notice to a person described in any of paragraphs (a) to (c) of the definition “qualified donee” in subsection 149.1(1) that the Minister proposes to revoke its registration if the person


(f)  in the case of a registered charity, registered Canadian amateur athletic association or registered journalism organization, accepts a gift the granting of which was expressly or implicitly conditional on the charity, association or organization making a gift to another person, club, society, association or organization other than a qualified donee. [emphasis added]

This means that a taxpayer cannot donate property to a Canadian charity and direct it, expressly or implicitly, to transfer the property to a grantee organization.

Letters of wishes?

As all trust lawyers know, once a person settles a trust, he or she cannot direct the trustee as to how to exercise any discretion granted to the trustee by the Trust Deed.

Nevertheless, settlors often provide “letters of wishes” to the trustee; such letters express how the settlor hopes the trustee will exercise such discretion. The settlor knows that the letter is not binding on the trustee(15) but usually is comforted by assuming that, all things being equal, the trustee will exercise its discretion in conformity with the letter.

May a taxpayer donate property to a charity along with a letter of wishes expressing the hope that the charity will transfer the funds to a named grantee organization? If the charity makes that transfer, will the Minister assume simply that the donation was “implicitly conditional” on the charity doing so, notwithstanding that the letter says that it was not? Does “conditional” in the context of paragraph 168(1)(f) mean “legally conditional” or is it enough if the donation is “morally conditional” on the subsequent transfer? The word “conditional” in a statute would normally mean the former. But the purpose of paragraph 168(1)(f) obviously is to prevent non-qualified donees from “borrowing” a Canadian charity’s registered status. In that context, the Minister may well argue that conditional means “morally conditional”.

Donor advised fund

I think the Minister’s argument would be weakened considerably, if not disabled completely, by the recent decision in The Joseph Lebovic Charitable Foundation v. Jewish Foundation of Greater Toronto.(16) Joseph Lebovic (“Joseph”) established the Joseph Lebovic Charitable Foundation (the “JLCF’) as a private foundation. In or before 2011, the JLCF entered into an arrangement (for the reasons discussed below, it cannot be called an agreement) with the Jewish Foundation of Greater Toronto (the “Jewish Foundation”), a registered charity. Under the arrangement, the JLCF would make donations to the Jewish Foundation, to be held by the Jewish Foundation in the Joseph Lebovic Charitable Fund (the “Lebovic Fund”). The Jewish Foundation would make grants to various donees out of the Lebovic Fund in accordance with Joseph’s recommendations.

From 2011 to 2016, the JLCF donated just under $20 million to the Jewish Foundation. The latter made donations on the recommendations of the former. No recommendation was not carried out and no donation was made without a recommendation.

Joseph died in 2021. His brother Wolf was his executor and also became the head of the JLCF.(17) A month after Joseph died the JLCF, through Wolf, requested the Jewish Foundation to grant almost $17 million to some 16 organizations. The Jewish Foundation refused. Two months after Wolf’s request, the JLCF filed a statement of claim in the Ontario Superior Court for an order forcing the Jewish Foundation to make the grants, on the basis that the Jewish Foundation was required to comply with any JLCF request.(18)

In March 2022, while that action was percolating through the Court’s system, the Jewish Foundation advised the JLCF that the Jewish Foundation intended to grant just over $600,000 to various grantees, none of which were among the 16 that Wolf had requested. In response, the JLCF filed a motion to prevent the Jewish Foundation from making those grants.

The Court dismissed the motion on a simple basis. It held that, for the JLCF to have made “donations” (that is, gifts) to the Jewish Foundation, it must have divested itself of all control over the donated funds and transferred full ownership of the funds to the Jewish Foundation. Having done so, the JLCF could not then argue that it had the right to direct the Jewish Foundation as to how to deal with those funds, as such a right of control would be inconsistent with a divesture of complete ownership of the funds. For this proposition (which is undoubtedly correct), the Court cited Cassan v. The Queen,(19) which in turn followed an Ontario Court of Appeal decision, McNamee v. McNamee,(20) where that Court said:

[25] … the trial judge found two [criteria for a valid gift] to be significant. First, he concluded,  correctly , that  the donor must divest himself or herself of all power and control over the property  and  transfer such control to the donee . [emphasis added](21)

Application to paragraph 168(1)(F)

Assuming that a donor has made a valid gift to a registered charity, my view is that the decision in The Joseph Lebovic Charitable Foundation supports the argument that a mere letter of wishes should not be construed as an express or implied condition that imposes a legal requirement on the charity to make grants in accordance with the letter; this is true even if, in fact, the charity makes all grants in accordance with the letter and makes no grants that are not in accordance with the letter.


No Canadian charity would (or should) run the risk of being de-registered by acting on a letter of wishes without assurance that the Minister will not object to such letters. Only time will tell if the Canada Revenue Agency will provide advance rulings allowing such letters.


  1. Joel Nitikman, K.C., Dentons Canada LLP, Vancouver. My thanks to Susannah Blary, articling student at Dentons, Vancouver, for her research assistance. All errors are my responsibility.
  2. See subsections 110.1(1) and 118.1(3) of the Income Tax Act, RSC 1985, c. 1 (5th Supp), as amended (the “Act”). All statutory references herein are to the Act unless stated otherwise.
  3. Subsections 110.1(1) and 118.1(3) refer to donations made to “qualified donees”, defined in subsection 248(1) to have the meaning assigned by subsection 149.1(1). That subsection defines the term to mean various Canadian institutions. As discussed below, it includes also two types of non-Canadian institutions.
  4. Up to February 27, 2018, such universities were listed in Schedule VIII to the Act, as prescribed by Reg. 3503. That regulation and Schedule were repealed by S.C. 2018, c. 12, s. 44(1) and 46(1), respectively, deemed to be in force February 27, 2018. See now subparagraph (a)(iv) of the definition of “qualified donee” in subsection 149.1(1).
  5. See subparagraph (a)(v) of the definition of “qualified donee” in subsection 149.1(1) and subsection 149.1(26).
  6. See Article XIII(7) of the 1980 Canada-United States Income Tax Convention, as amended.
  7. See Reg. 3504.
  8. See subparagraphs 110.1(2.1)(a)(ii) and 118.1(5.4)(a)(ii).
  9. See subsection 149.1(1).
  10. It is not clear why the definition says “includes” rather than “means”. Given the breadth of the definition, who else could be included?
  11. See paragraph (a.1) of the definition of “charitable organization” in subsection 149.1(1).
  12. In subsection 149.1(1).
  13. S.C. 2022, c. 10, s. 21, in force on June 23, 2022.
  14. Id., s. 16(4), in force June 23, 2022.
  15. In Technical Interpretation 2000-0023997, “Non-resident bearing loans immigrant to non-resident trust”, November 3, 2000, the Canada Revenue Agency (the “CRA”) considered whether a letter of wishes could be viewed as being part of the Trust Deed. Space does not allow a complete discussion of that Interpretation. The Interpretation notes that, generally, letters of wishes are not legally binding (see Fedel v. Tan, 2008 CarswellOnt 5398 (SCJ) at paragraph 154, rev’d in part on another point 2010 ONCA 473, add’l reasons 2011 ONCA 73; Hui Chi Ming v. Kong Wing Yee, [2010] HKEC 634 (CFI) at paragraph 57). The CRA’s Interpretation has been noted in several articles and criticized in some of them (see for example Richard Weiland and Kevin Wong, “Discretionary Trusts—Recent Developments, Perspectives and Practical Guidance”, 2017 British Columbia Tax Conference (Toronto: Canadian Tax Foundation, 2017) 14:1 at 14:12-13). Speaking for myself, I think that there could be circumstances under which a letter of wishes contradicts the terms of the trust to such a degree that it casts doubt on whether the settlor had the necessary certainty of intention to create a trust. But that is different than saying that the letter forms part of the terms of the trust.
  16. 2022 ONSC 4012. My attention was drawn to this case by the following article: Jacqueline M. Demczur, “Ontario Court Rejects Donor’s Claim to Direct Gift’s Allocation” in Terrance Carter, ed., Charity & NFP Law Update, September 2022, 5.
  17. Demczur suggests that he was the de facto head.
  18. Somewhat curiously, the application demanded that the Jewish Foundation disburse an amount that was not only greater than the amount originally requested but that exceeded the amount in the Lebovic Fund by over $400,000.
  19. 2017 DTC 1105 (TCC) at paragraph 263.
  20. 2011 ONCA 533.
  21. While this motion was being heard, the JLCF under Wolf filed a petition to have the Jewish Foundation declared bankrupt, on the ground that the Jewish Foundation owed a debt of $15 million to the JLCF and could not repay it. The Court dismissed the petition on the basis that the donations were true gifts rather than loans (Bankruptcy of the Jewish Foundation of Greater Toronto, 2022 ONSC 2120). At paragraph 19 the Court held that “the JLCF lost all interest in the donated funds once the gifts were made, while the Foundation assumed the duty to direct and control the gifts”. Further, the Court held that the fact that the Jewish Foundation had always agreed with the JLCF’s recommendations in the past did not mean that it was obligated to do so, either legally or morally, in the future:

[29] The JLCF argues that that the Foundation has both a legal and moral obligation to consider the recommendations from JLCF in good faith. The Foundation always complied with the direction of the JLCF in the past. Failing to do so now is akin to failing to meet their obligations as they come due. I reject this argument entirely. First, the Foundation has no obligation to make donations in accordance with the DAF Advisor’s recommendations. Doing so would mean that the JLCF retained some form of control over the funds. This would put into question their status as legal gifts and permissible tax deductions.

Previously published in Tax Topics, Report 2639, October 4, 2022

Dentons Logo
Partner, Tax Group, Dentons

Joel Nitikman is a partner in the Tax group at Dentons. For more than three decades, Joel’s practice has focused on resolving tax disputes between taxpayers and federal and provincial tax authorities. He has extensive experience in federal and provincial income/commodity tax litigation. Joel has acted as counsel in numerous tax cases at all levels of court, both provincially and federally. He has also settled many cases out of court at the pre-assessment or Objection stage.

Back To Top