- with readers working within the Healthcare industries
In the past year, U.S. charities have faced an increasingly uncertain landscape. Executive orders and federal funding freezes have made it difficult for many organizations—especially those with international missions or virtual operations—to plan for the future.1As a result, a growing number of U.S. charities are considering Canada as a safer, more stable base for their activities and long-term growth.
Why Are U.S. Charities Interested in Moving to Canada?
Recent policy changes in the U.S. have created significant challenges for U.S. charities. Large organizations with assets over $500 million could now be targeted for federal investigations, increasing both legal risks and administrative burdens. New regulations restrict how grants can be used, often requiring agency approval before funds are accessed.
Additionally, grants can be terminated at any time if they are not seen as advancing government priorities, putting organizations at risk of sudden funding loss and operational disruption. Future funding decisions must now align with shifting government priorities, making it harder for charities with broader or independent missions to secure support. The requirement for presidential appointees to review and approve new funding opportunities adds another layer of political oversight and uncertainty.
Why Canada Is an Attractive Option
Canada stands out as a welcoming destination for U.S. charities for several reasons. Obtaining Canadian charitable status can open doors to new funding sources, both within Canada and internationally, that may not be accessible to U.S.-based organizations.
Another benefit is the stability and predictability offered by the Canadian governance regime. In contrast to the U.S., where new proposals would impose stricter prohibitions on funding certain activities, require agency approval before accessing funds, and allow grants to be terminated immediately for convenience or for not advancing agency or national priorities,2these risks have not materialized in Canada. The Canadian governance regime is less likely to politically interfere with the operations of charities. In recent years, where the government has been reproached for alleged interference (as this is bound to occur in any democracy), the sector has rallied and generally staved off any policy measures, or the draft legislation died on the order table and to date has not been re-introduced in the legislature.3
What U.S. Charities Should Consider Before Moving
Relocating or expanding a U.S. charity to Canada involves much more than simply incorporating a new entity in Canada. There are several critical legal, financial, and operational considerations that must be addressed to ensure a smooth transition and ongoing compliance.
If a charity intends to wind down its U.S. operations, it must manage legal, tax, and reporting obligations in both countries. Many organizations opt to maintain a presence in both the U.S. and Canada, which demands thoughtful structuring to comply with the regulations of each jurisdiction. In such cases, the charity will need the support of both Canadian and U.S. legal counsel to determine whether and how funds may be transferred into Canada and back to the U.S. With careful structuring, it should be possible to transfer funds into Canada and back to the U.S. through proper granting mechanisms. The charity should also consider whether funds from the U.S. will be used to carry on activities in Canada, and whether it will raise funds in Canada through the new Canadian charity for activities that further the charitable purposes of the Canadian charity, as required under theIncome Tax Act(Canada) (the "Tax Act").
Where a U.S. charity seeks to establish a Canadian presence, it is important to consider the membership structure and board composition of the Canadian entity in order to maintain the connection with the U.S. TheCanada Not-for-profit Corporations Actand other provincial corporate statutes allow for different membership models, each with implications for control. Registration as a charity in Canada and classification of the charity are done by the Canada Revenue Agency ("CRA"). Thoughtful planning and the right legal structure are essential to ensure compliance, protect assets, and support long-term goals on both sides of the border.
From the perspective of existing Canadian registered charities, the arrival of U.S. charities may create opportunities for new collaboration; however, it is important to ensure compliance with CRA regulations and relevant tax provisions, especially regarding the transfer of funds as already mentioned. Currently, U.S. charities are not recognized as "qualified donees", meaning Canadian charities cannot fund or collaborate with these foreign charities in the same way they do with Canadian charities. Nevertheless, by leveraging professional support and adopting best practices, many other options can be explored for U.S. charities to transfer funds and assets to existing Canadian charities.
It is also worth noting that Robert Hayhoe, who leads our firm's Charities and Non-Profits practice, has proposed to the Department of Finance that a special "qualified donee" category for international charities should be created. This would make it easier to transfer resources to non-Canadian affiliates, while ensuring funds are used for charitable purposes in accordance with theTax Act. This is an area to watch for future developments.
Key Takeaway
With growing regulatory uncertainty and funding risks in the U.S., Canada offers a stable and supportive environment for charities looking to continue their mission and expand their impact. However, making the move requires thoughtful planning. Seeking experienced legal guidance is essential for a smooth transition and long-term success.
Footnotes
1 United States, The White House, "Executive Orders" (2024).
2 Ibid.
3 Examples include the proposed amendments to theIncome Tax Act(Canada) andIncome Tax Regulationstabled in October 2024 which would have introduced new disclosure requirements for charities that "provide services, advice or information in respect of the prevention, preservation or termination of pregnancy" and the Standing Senate Committee recommendations from May 2024 to remove the tax-exempt status of organizations that spread or promote false information about the seal harvest or seal industry.
To view the original article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
