By Theresa L.M. Man

The Federal Court of Appeal, in its decision in Priority Foundation v. Canada (National Revenue) on October 7, 2025, held that Article XXI(7) of the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital, September 26, 1980 (“Tax Convention”) does not operate to render U.S. 501(c)(3) tax-exempt entities to be “qualified donees” under the Canadian Income Tax Act (“ITA”) for the purposes of allowing Canadian registered charities to make disbursements by way of gifts to such entities. The Court dismissed Priority Foundation’s (“Priority) appeal of the Canada Revenue Agency’s (“CRA”) decision to revoke its charitable status for having made gifts to U.S. 501(c)(3) tax-exempt entities and thereby was not operating exclusively for charitable purposes and was not meeting the definition of a charitable foundation.

The decision of the Court provided juridical consideration on the interpretation of Article XXI(7) which has been unclear for many years. As pointed out by the Court, this is not the first time the interpretation of Article XXI(7) of the Tax Convention has been raised in the Federal Court of Appeal (“FCA”), (see Prescient Foundation v. Canada (National Revenue), and Public Television Association of Quebec v. Canada (National Revenue)). However, in both cases, the FCA resolved the appeals without having to interpret Article XXI(7) on this issue.

To read the balance of this Bulletin, please click here.

​Read the October 2025 Charity & NFP Law Update