To Receipt or Not to Receipt
The application of the rules and regulations in issuing charitable donation receipts seems
to come as a great surprise to many charitable organizations.
The basis of compliance to Canada Customs and Revenue Agency (CCRA) Guidelines
has not changed in many, many years. The gifts must be voluntary; they must be
property; and no
benefit can accrue to the donor. These considerations should be applies when determining
whether or not a charitable receipt can be issued in a particular circumstance.
In addition, the concept of fair market value needs to be understood when determining
the valuation of the property donated and the amount of the receipt.
The four concepts mentioned above are applied as follows:
1. The gift must be voluntary.
There must not be strings attached to the gift that forces the donor to make the gift.
For example, a payment cannot be treated as a gift if it is required for the provision of
a service or the sale of merchandise to the donor.
2. The gift must be a transfer of property.
Ownership of the property must transfer to the charity. Property includes cash, capital
assets and inventory. In other words, it must be something where ownership can be
transferred. Services are not property and, therefore, no receipts can be issued directly
for gifts of services.
3. No benefit can accrue to the donor.
This concept is easy to apply, but hard to live with. There seems to be a need for
charities to “give something back” to donors beyond a thank you. Some concessions
have been made by CCRA with the establishment of the notion of nominal value in
relation to donor recognition. Nominal value has been defined as giving recognition
of up to 10% of the value of the gift to a maximum of $50.00. The most common
quandary is the application of this concept in the case of corporate sponsorship when
we offer recognition that is usually immeasurable such as advertising for the
corporation of their donation.
4. Fair market value
As mentioned, this concept relates to the valuation of the gift or for what amount is
the receipt going to be issued. Fair market value is defined as the result of a
transaction between arm’s length parties. The challenge is in applying this concept to
the donation of gifts in kind. A donor’s idea of the value of their gift is often quite
different from reality or fair market value.
Why does it appear that the “rules keep changing”? It’s not the rules. It’s the application.
The reasons the application may change usually involve a stepping too far over the line in
the application of one of the concepts. Each charitable donation receipt that is issued
reduces the tax payable of an individual or a corporation to Federal and most Provincial
Governments, which of course, reduces their revenue.
New situations continue to arise that give cause to consider the application of the
guidelines. A current example is the donation of air travel and other loyalty incentive
plan points. If we apply the concepts discussed, we can determine that this is property
with an owner and if ownership can be transferred to a charity, the donor could receive a
charitable donation receipt. The other issue is valuation. The fair market value of the
points must be determinable on a sound basis of valuation.
Another reason for confusion is the sharing or non-sharing of information on
interpretations of the concepts by CCRA. Through the CCRA website, information is
becoming more timely. The Charities Directorate of CCRA is attempting to provide
guidance through newsletters and frequently asked questions and answers.
What would also be useful information would be general results of charitable audits. For
a charity to changes their receipting policies as a result of an audit in the sometimes short
time frame required can upset donors and threaten the charity’s credibility. By knowing
the experiences of other organizations in particular situations, they are better able to
develop and change their own policies in a timely fashion. This information would also
be of great benefit for professionals such as accountants and lawyers who counsel not
only charities, but individual and corporate taxpayers as well.
Information dissemination by individuals in the Charities Directorate of CCRA also
needs to be more consistent. Organizations can talk to different individuals and obtain
opposing viewpoints on the application of the guidelines. Of course, the opinion that
matters most is in the results of a charitable audit.
What steps can be taken in receipting to ensure compliance with the guidelines?
One of the information challenges of charitable organizations is consistent application of
their own receipting policies. Personnel in the fund development field change frequently
and volunteers are often a large part of fund raising endeavors. Written charitable
receipting policies should be developed by charities that can be applied consistently no
matter who the players are. The policies can be geared to the particular fund development
activities of the charity so can be quite specific to the organization.
We can push for more information from CCRA on their policy applications in specific
We can share information among charities on their experiences so that we learn from one
One of the most common questions heard when counseling charities in this area is:
“where does it say that?” It says “that” in the basic concepts. As with much of the tax
legislation, there are some grey areas and reasonableness must be applied in
interpretation. We cannot allow our charities to be party to tax payer attempts at tax
evasion or fraud. When one charity steps over the line, the whole sector pays in terms of
loss of public credibility and a potential stricter application or changed application of the
guidelines. This also threatens the opportunities we are able to take advantage of in
encouraging greater philanthropic giving.