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HomePolicy Articles Article Summary

Firm Foundations: Putting Private and Public Foundations on Level Ground

Backgrounder by A. Abigail Payne

In her paper, Abigail Payne suggests that charitable organizations play an important role in Canadian society. They provide beneficial goods and services not offered by governments or the private sector. However, Payne also points out that these organizations rely on private donors, whose contributions help to fund the goods and services provided by these foundations. Governments encourage donor support by providing charities with favourable tax status. According to Payne, however, these tax exemptions raise a number of issues.

Payne looks at the classification system of the Canada Revenue Agency (CRA) as it relates to charities. The key to the system, she points out, is whether or not a given organization is a grant-maker or service provider. If it is primarily a grant-maker, the organization is classified as a foundation. The CRA then further classifies foundations into public and private organizations. If there is a close link between the donors and the foundation (which the CRA assumes leaves greater room for tax-related abuse), the foundation is classified as private, and thus merits closer scrutiny.

Payne posits that greater scrutiny of private foundations seems reasonable; she also argues, however, that it remains unclear whether this scrutiny actually prevents serious abuses of the tax system. Throughout her paper, Payne explores the differences in the regulatory treatment of private and public foundations, and whether or not this differential treatment is justified. She concludes that tax provisions for private foundations should be similar to those of charitable organizations and public foundations.

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Policy Publication Details

Author(s): A. Abigail Payne;
Publisher: C.D. Howe Institute [ Visit Website ]
Year Published: 2005; Publisher Type: Research Institute
Publicly Available: Yes Research Focus: National;
Registration Required: No Language: English
Payment Required: No Publication Format: Adobe PDF

Subjects / Categories:

Policy Articles / Monetary & Capital Management / Privatization
Policy Articles / Monetary & Capital Management / Privatization / 2005
Policy Articles / Monetary & Capital Management

Keywords / Tags:

private foundations; charitable organizations; public foundations; tax exemptions; grant-makers; scrutiny of foundations;