publication date: Mar 6, 2012
How do you issue correct receipts for a golf tournament,
gala, auction or other occasion where supporters receive something, but part
with more money than the benefits they receive are worth? The common-sense
answer, says Malcolm Burrows
about as our understanding of the law evolved.
In common law, he explained to delegates at Being Good@Doing Good*
, a charitable
gift has traditionally been "a voluntary transfer of property without
consideration [benefit]" from a donor to a donee (charity). There was absolutely
no benefit to the donor, as the tax receipt itself is not considered to be a
Because federal law has absorbed some perspectives from
Quebec civil law, new rules introduced (but never officially passed) in 2002
have become the standard. A gift may now include some consideration. When it
does, the eligible amount for a receipt is the fair market value (FMV) of the
gift minus the FMV of any advantage to the donor resulting from the gift.
Four tests to pass
Income Tax Technical
outlines the changes. The transfer of property must be voluntary
and its value must be ascertainable by some objective reference or appraisal.
If the donor gains an advantage, it must be clearly identified and valued. The
donor must intend to enrich the charity, rather than gaining a tax advantage
that exceeds the value of the gift.
When all these tests are met, the tax-receiptable portion of
the gift will be the excess of the value of the property transferred to the
charity over the amount of the donor's advantage - provided the advantage is
not so high that it exceeds 80% of the gift.
What receipts always need
Whether or not a there is a benefit to the donor, receipts
for gifts of cash must include -
statement that it is an "official receipt for income tax purposes";
name and address of the charity as shown on file with the Canada Revenue Agency (Burrow cautions small and volunteer-run
charities to use their lawyer's address for consistency rather than changing
the tax receipts with each new treasurer);
charity's registration number (technically its "Business Number" or "BN");
serial number of the receipt (and those numbers must be sequential);
place or locality where the receipt was issued;
day or year the donation was received;
issue date of receipt if different from the day of donation;
full name and address of the donor;
value and description of any advantage to the donor;
eligible amount of the gift (There must be a statement or a checked box if the
advantage is zero. Burrows says that crucial point is often over looked);
signature of an individual authorized by the charity to acknowledge donations
(Have a board motion authorizing the signer, says Burrows. Signatures need not
be manual; stamps are fine, and so are pre-printed receipts provided they're
name and website address of the Canada
Revenue Agency (www.cra-arc.gc.ca/charities)
If someone gives you securities, an automobile or a piece of
art, for example, you must include extra information on the receipt. CRA will
want to see the following:
When you can't give a
day on which the donation was received (not the day you sold it);
brief description of the property or securities;
name and address of the appraiser, if used (required if the value of the gift
public securities, the market price per unit on the day the shares are received
(most charities use the closing price); or
deemed or appraised fair market value of the property on the day it was
It doesn't feel fair to most people, but professional
services do not qualify as gifts. A professional who provides services pro bono
and wants a gift receipt should first invoice the charity. When the charity
pays the invoice, the professional may contribute an equivalent cash amount to
the charity and receive a tax receipt.
Don't ever issue a receipt on behalf of another organization
or charity, even if you're working in partnership. Nor can you issue a receipt
in a name other than the name of the true donor; for example, by substituting the
company owner's individual name when the cheque is drawn on the company bank
Registered charities, including foundations, can't use tax
receipts because they don't pay taxes. Often when a foundation asks for a
"receipt," it really wants a formal acknowledgement that its gift has arrived.
Create a signed receipt form that confirms that gift without being part of your
income tax receipt series.
Finally, where the advantage to the donor is greater than
80% of the contributed amount, you may not issue a tax receipt.
* Being Good@Doing
Good, held in Toronto in February, was organized by Capacity Builders and the
Charity Law Information Program.
More information on correct receipting
procedures is available at http://www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/rcpts-eng.html