CRA confirms that the “undue benefit” penalty can extend to private benefits conferred by a registered charity on those without a specified relationship to it

S. 188.1(4) imposes a penalty of 105% or 110% on a registered charity that confers an “undue benefit.” The “includes” definition of "undue benefit" in s. 188.1(5) refers inter alia to transfers of property for the personal benefit of persons with a specified relationship to the registered charity, such as a member, trustee, settlor, substantial contributor, or person not dealing at arm's length with such a person or the charity. Ss. 188.1(5)(a) to (c) provide specified exclusions.

CRA confirmed that this indeed is an “includes” definition, so that an "undue benefit" is not limited to the listed situations, and also encompass “any benefit conferred on a person that may be considered undue within the ordinary meaning of the term.” CRA noted:

[T[he term “undue” is defined by Black’s Law Dictionary as “excessive or unwarranted”. Moreover, the Oxford English Dictionary, defines “undue” as “going beyond what is appropriate, warranted, or natural…”.

Thus, CRA responded affirmatively to the question: can the “undue benefit” penalty under s. 188.1(4) apply where a registered charity provides a non-incidental private benefit directly to a beneficiary, without the beneficiary having any connection to the registered charity?

Neal Armstrong. Summary of 31 March 2026 Internal T.I. 2025-1076591I7 under s. 188.1(5).