Our charity gives a very small token of appreciation to each donor. It is worth almost nothing. Must the amount as it appears on the official donation tax receipt be reduced by the cost of that token?
It depends on the value of the token. The token of appreciation is considered an “advantage”. How the value of the advantage influences the amount of the donation receipt is dependent on the amount of the de minimis threshold.
Certain advantages are considered too small (known as “de minimis”) to affect the amount of the donation receipt. The de minimis threshold is the lesser of 10 per cent of the value of the property transferred or $75.
A donor gives a charity $200
- As a thank you, the charity gives the donor a tote bag worth $17
- The de minimis threshold is the lesser of $20 (10 per cent of $200) or $75. Therefore, $20
- The $17 tote bag is worth less than $20
- Therefore, the receipt will show a donation in the amount $200
A donor gives a charity $200
- As a thank you, the charity gives the donor a sweatshirt worth $22
- The de minimis threshold is $20 (10 per cent of $200) or $75. Therefore the threshold is $20
- The $22 sweatshirt is worth more than $20
- Therefore, the receipt will show a donation in the amount $178
Exception to the de minimis
De minimis does not apply to cash or near cash equivalents such as gift certificates, coupons, and vouchers.
A donor gives a charity $200
- As a thank you, the charity gives the donor a coupon worth $15
- The de minimis threshold does not apply
- Therefore, the receipt will show a donation in the amount $185
A donor gave our charity a cash donation, but asked that the monies be forwarded to a specific family. Do we issue an official donation receipt?
No. Your charity may not issue a receipt if the donor has directed the charity to give funds to a specified person or family.
A donation subject to a general direction from the donor that the gift be used in a particular program operated by the charity may be receipted as long as the donor or anyone close to the donor will not receive any benefits.
An international development organization or faith-based group selects individuals who are eligible for an overseas posting based on the candidate for the placement raising a set amount of contributions to defray the cost of the trip and the posting. Under such arrangements, official donation receipts may not be issued for these contributions.
A donor may be able to receive a receipt for a gift directed toward a person, family, or other non-qualified donee if they have been identified beforehand by your charity as recipients of your charitable program. The charity, however, must be able to reallocate all donated funds to other charitable programs or activities when it deems appropriate.
Are membership fees considered donations? Can donation tax receipts be issued?
The payment of a membership fee may or may not result in an eligible amount: it depends on whether there is an advantage, what amount that advantage is, and whether the membership fee exceeds the amount of the advantage. Specifically, if the amount of the advantage is 80 per cent or less of the amount of the membership fee, an official donation tax receipt may be issued for the eligible amount.
A membership fee is considered a gift as long as it gives only the right to vote at a meeting and to receive reports of the charity’s activities, unless such reports are also sold. If the reports are available for a fee to non-members, they are valued as an advantage (benefit) and may affect the amount of the official donation tax receipt.
The purpose of the registered charity is to promote musical education in youth through the creation of a youth orchestra. For a membership fee of $200, a member will receive:
- the right to notice of, and attendance at, all meetings of the charity;
- recognition as a donor on all concert programs;
- a subscription to the charity’s monthly e-mail updates otherwise available free of charge, which provides concert dates, reviews, performer profiles, and so on;
- an “I Support the Youth Orchestra” bumper sticker normally sold for $5;
- a discount on all performances throughout the year, valued at $50;
- tickets for free refreshments at the concerts, valued at $25;
|Determination of eligible amount|
As the amount of the advantage ($80) is less than 80 per cent of the $200 membership fee (80 per cent is $160), it meets the intention to make a gift threshold. An official donation receipt may be issued for the
Can a company donate goods out of its inventory? If so, how much can the official donation receipt be issued for?
Yes, this is considered gifts in kind. A company can donate from its inventory and a receipt may be issued for gifts in kind of property included in the donor’s inventory.
A gift of inventory is considered to be given at fair market value. So, the value on the official donation receipt should be identical to the fair market value. The receipt issued must state that the gift is a gift in kind and must provide a brief description. The business then has to include in its income the fair market value of the gift.
The income of the company who donated from its inventory is increased because it must include the value of the gift. This increase, however, is offset by the charitable deduction.
Where a transaction results in a material benefit to the business,
- the rules related to split receipting may apply;
- the benefit may be such that no part of the transaction can be considered a gift.
In cases where there is consideration, a business may claim these costs as promotional expenses rather than seeking a charitable donation receipt.
Our charity wants to show its appreciation for a volunteer who spent many hours on a project. Can we issue a donation receipt for the volunteer’s services?
No. Contributions of services (that is, time, skills, or effort) do not qualify as gifts. To qualify as gifts, there has to be voluntary transfer of property.
To show its appreciation, your charity could pay the volunteer for services rendered and later accept the return of all or a portion of the payment as a gift, provided it is returned voluntarily. An official donation tax receipt can then be issued. In this case, the volunteer is responsible to claim the income.
Can an official donation receipt be issued to volunteers for expenses incurred on behalf of our charity if they bear the cost of those expenses?
Yes, your charity can issue an official donation receipt as long as there is proper documentation to support the expenses and certain requirements are fulfilled.
The requirements are that
- the volunteer has incurred the expenditures on behalf of the charity
- the volunteer has a right to be reimbursed for such expenditures by the charity under an agreement between the volunteer and the charity
If the requirements are met, there are two options:
- the charity issues the volunteer a cheque for the amount of the expenses claimed by the volunteer and which are supported by receipts and the volunteer freely chooses to give some or all of the reimbursement back to the charityThe CRA encourages the charity and the volunteer to exchange cheques: that is, the charity issues a cheque to the volunteer covering the expenses and the volunteer then writes a cheque to the charity for the same amount. Using this cheque exchange results in proper financial records for the charity and a document confirming the volunteer’s gift.
- the charity may treat the reimbursement as a gift in kind and issue a receipt for income tax purposes. In this case, the charity should have written direction from the volunteer.For example, the volunteer might write and sign:“I [name written out in full] donate as a gift to [name of the charity in full] $[the amount owing] to which I am entitled as reimbursement for [purpose of the expenses] and would otherwise be given to me by cash or cheque.”
If the charity issues a donation receipt, it should report the amount of the eligible amount as an expense and the gift or donation as revenue on its Registered Charity Information Return (Form T3010).
A charity should have a policy in place on reimbursing volunteers. Such a policy should specify both the type of expenses the charity is prepared to repay (for example, for materials purchased for the use on a charitable activity or for reasonable accommodation if the volunteer is travelling on the charity’s business) and appropriate procedures to document the volunteers’ payments, such as submitting credit-card slips. With such a policy in place, the charity can demonstrate that it is controlling the use of its resources for charitable purposes.
For details, read the CRA policy on out of pocket expenses and volunteer expenses.
One of our donors would like to make a donation and receive advertising or sponsorship status in return. Can our charity do this and, if so, how should we make out the receipt?
Generally no, but there’s more that you should know. Sponsorship is not considered a gift, since the sponsor receives an economic benefit. Note, however, that a corporation may choose to support the same event or the same organization through both a sponsorship and a charitable gift. Where it does so, the charitable receipt must acknowledge only the amount of the gift. Since businesses receive a deduction rather than a credit for charitable gifts, the tax treatment is the same whether the business gives the funding in exchange for advertising or purely as a donation.
Distinguishing between gifts and sponsorships can be difficult. If a business receives a nominal level of recognition, and is essentially treated the same as other donors, a receipt may be issued for the full amount of the donation. Exceptional treatment, or heightened recognition above other donors, however, can constitute advertising, which is seen as an advantage.
A contribution can be considered to be both a sponsorship and a donation if
- the fair market value of the advantage (often advertising) can be established and
- the amount contributed exceeds the fair market value of that advantage.
In this circumstance, a charitable receipt may be given for that portion that exceeds the fair market value.
If the advantage outweighs the value of the gift, a receipt is not appropriate.
In most cases, it is a challenge to establish the fair market value of advertising or sponsorship. Putting a value on something as hard to define as advertising requires professional help. Some professionals have developed methods for valuing such things as a banner, a print ad, and a website ad. It’s best to use an expert in these matters given the consequences of an inaccurate valuation and the CRA’s concern with a valuator’s qualifications. The CRA recommends using an independent valuator when the estimated value of the transaction is greater than $1000.
Even without a charitable receipt, a business contributor may still enjoy the advantageous tax treatment of advertising or sponsorship. Corporations can deduct advertising expenses against their income. If a business makes a payment to a charity partly for business reasons and partly for philanthropic reasons, it is entitled to deduct both parts of the contribution from its expenses – although one portion as advertising or promotional expenses and the other portion as charitable expenses. Make sure when approaching businesses that you discuss with them both a contribution in the form of a sponsorship and a contribution in the form of a gift.
Can we take up a collection and raffle the receipt? A group of 20 people from work will each contribute $20 toward a $400 donation to charity. We would like to raffle a receipt for $400. Can we do this?
No. A charitable donation receipt can only be issued to the actual donor.
In this case, each of the 20 donors has contributed $20. To issue a receipt, the charity must be able to identify the actual donor or donors. If a lump sum is donated without detailed donor information, the charity may not be able to issue any receipt.
Our charity received a donation of a $100 gift certificate from an aesthetician for a facial. How much should the receipt be for?
Zero. Your charity cannot issue an official donation receipt because there is no transfer of property. The gift certificate is for services and services are not property.
See: CRA Policy on Donation of Gift Certificates or Gift Cards
Our charity received a donation of a $100 gift certificate from someone who purchased the gift certificate from an aesthetician. Can we issue an official donation receipt and for how much?
Yes, an official donation tax receipt can be issued for $100, the fair market value of the gift certificate.
A gift certificate that was bought from the person who created the gift certificate is considered property. When the purchaser donated the certificate to your charity, there is a transfer of property. An official donation receipt can be issued.
See: CRA Policy on Donation of Gift Certificates or Gift Cards
Can official donation receipts be issued for publicly traded shares or stock options?
It depends who the donor is.
- Yes, if a person who has acquired the shares or stock options donates them to a charity. The charity may issue an official donation receipt for the fair market value of the gift.
- No, if the corporation who issued them donates the shares or stock options.
For purposes of the Income Tax Act, in order to make a gift, there must be an actual transfer of property. Where a corporation issues shares of its capital stock or grants a stock option, there is no transfer of property by the corporation, as the corporate assets have not been reduced as a result. Therefore, there is no “gift.” As a result, the charity should not issue a receipt even though the shares or options will normally have value.
Shares or other types of rights to stock that are not traded on a public Canadian stock exchange are generally excluded from the Income Tax Act provisions that permit receipting of donations of shares or rights to stock.
Our charity received a donation of a life insurance policy. How should the receipt be issued?
It depends on whether the life insurance policy was donated after or before death.
Donated after death. For receipting purposes, the proceeds bequeathed represent the fair market value of the gift. So, a receipt for the value of the proceeds of the insurance policy can be issued.
Donated before death. When the taxpayer assigns his or her life insurance policy to a registered charity and the registered charity becomes the beneficiary, this is a transfer of property. A donation receipt can be issued. The amount of the donation is equal to the cash surrender value of the policy at the time of transfer plus any accumulated dividends and interest assigned at that time. If the policy has no cash surrender value, it is not considered a gift and the transfer cannot be receipted for tax purposes.
If the policy is not fully paid, the premiums have to be paid by the donor directly to the insurance company or a gift of an amount of money is made to the registered charity to provide for the payment of the premiums.
The future payment of premiums can constitute a gift and receipts can be issued.
In an arrangement is where the charity pays the premiums out of a gift of money made by the donor, these payments constitute fundraising costs.
For more information, see Income Tax Interpretation Bulletin IT-244R3 Gifts by individuals of life insurance policies as charitable donations.
Our registered charity received a donation in the form of an RRSP death benefit. How should we issue the receipt?
The proceeds of an RRSP death benefit may be bequeathed to the charity upon the death of the donor. For receipting purposes, the proceeds bequeathed represent the fair market value of the gift. A receipt may be issued for the fair market value.
The annual contributions paid by the taxpayer until his or her death do not constitute charitable donations.
Our registered charity received a donation of an artist’s painting. How do we determine the amount for the official donation receipt?
The amount of the official donation receipt is the fair market value set by the artist.
When an artist creates a work of art intending to sell it, but instead donates it to a qualified donee, the gift is considered to be a disposition of property from the artist’s inventory (that is, not capital property).
An artist can set the value of a gift from his or her inventory at any amount between the artist’s cost of time and materials and the work’s fair market value, provided that its fair market value is greater than its cost. If, at the time of the donation, the fair market value is less than the cost amount, the receipt must still equal the fair market value of the donated property as set by the artist.
As in the case of business inventory, the artist who donated the painting will have
- an income of the value set by him or her
- a tax receipt for donation of the same amount.
An artist’s donation may also be a work of cultural property.
To be sure, the charity should seek professional advice.
What are loanbacks and how do they work?
In the context of charitable giving and taxation, a loanback occurs when a donor makes a gift to a qualified donee and within 60 months of making the gift, at least one of the following two situations occur. These situations have the effect of reducing the fair market value of the gift for income tax purposes.
- The qualified donee holds a non-qualifying security of the donor that it acquired after the time that is 60 months before the gift was made.
- The donor (or a person or partnership not dealing at arm’s length with the donor) uses the qualified donee’s property under an agreement that was made or modified after the time that is 60 months before the gift was made; and
- The property was not used by the qualified donee in its charitable activities.
For more information see: Loanbacks
Our charity was offered a one week stay at a holiday condo as an auction item. Can we issue a charitable receipt to the donor for the FMV of the gift?
No. One of the criteria for a gift is that there be a voluntary transfer of property. In this situation, no property is being transferred—instead, use of the condo is being provided. Since no property is transferred, no “gift” is made. A tax receipt for the value of the loan of condo cannot be issued. p>
Although the loan of property does not constitute a gift, a charity may pay rent on a property to an individual and later accept a gift of all or part of the payment, as long as the gift is voluntary. The charity may then issue a donation receipt for tax purposes. The donor would have to report the income earned but would be able to claim the tax relief associated with the gift.