What is the revocation tax and what does a charity have to pay if the CRA revokes its status?

When the Canada Revenue Agency revokes a charity's registration, the organization becomes subject to a special tax under the Income Tax Act sometimes called the revocation tax, applied to the value of the charity's remaining property. The underlying idea is that assets accumulated while the organization enjoyed tax-exempt, receipt-issuing status should not simply be kept or redirected outside the charitable sector once that status ends.

The organization is generally given a winding-up period after revocation during which it can reduce the tax otherwise owing by spending its remaining assets on its own charitable activities or by transferring them to an eligible donee — typically another registered charity — rather than simply holding onto them. Assets that are not spent or properly transferred within that period remain exposed to the tax.

Because the amounts involved can be very significant for a charity with real assets — property, investments, or endowment funds — an organization facing revocation, whether voluntary or CRA-initiated, should get advice well before the process is complete on how to wind down its holdings properly, rather than treating the revocation tax as an afterthought once the decision is already final.