Are your charitable tax receipts to J. Doe putting your charity at risk?

publication date: Jul 6, 2021
author/source: Marlena McCarthy

In my daily dealings with a long-time charity client, I correspond with their Executive Director, a man who diligently keeps on top of Canada Revenue Agency’s tax receipting rules. To his credit, this is not an easy task.

If you’ve ever looked at the CRA rules registered charities must live by, they can be confusing. Getting clarification may require phoning CRA and getting a “definitive” answer from the first support rep that picks up your call. But let’s say you have a follow-up question on the same topic, and on your second call, you speak with another rep. It’s not unusual that the answer you received from the first and second reps aren’t exactly the same.

Recently, my client drilled down on what CRA demands of charities regarding how a donor’s name is represented on a receipt. Specifically he asked me if I knew if he could issue a tax receipt to a donor who has only supplied his charity with a first initial instead of their full first name. We looked at CRA’s list of requirements on what constitutes a legal charitable tax receipt, which include that a charity must include on their receipts “the full name, including middle initial, and address of the donor.”

We felt that “full name” meant the donor must spell out their full first and last name for CRA to consider the receipt legitimate. I expressed concern that the rule stated a middle initial was also necessary. In the direct mail appeals I’ve created for his and 135+ other charities, I’ve never created a reply form requesting a donor to supply their middle initial or name.

Wanting to make sure he got a bullet-proof answer from CRA on the issue, he emailed them, forcing them to supply an answer in writing. This was their disturbing reply:

Tax Receipts must have the donors full name, including the middle initial if known. The full name means: John Doe. A tax receipt with J. Doe is not valid, and if issued as such, and the charity or the donor is audited. A registered charity that issues an official donation receipt that includes incorrect or incomplete information is liable to a penalty equal to 5% of the eligible amount stated on the receipt. This penalty increases to 10% for a repeat offence within five years. When issuing replacement receipts, the old and new serial number must appear.

It was good to learn that requiring a middle initial is not mandatory. Contacting every donor to get that information would be a nightmare. As it was, I wrote a letter to be sent to J. Doe donors, pointing out that according to CRA rules, we cannot issue a tax receipt for current or future donations unless they notify the charity of their full first name.

It was quite the surprise to learn that a charity could end up in the crosshairs of a CRA audit or face increasing financial penalties for sending a tax receipt to J. Doe.

To point out how serious CRA is on this issue, Mark Blumberg, a respected Canadian lawyer who specializes in charity law, wrote a blog in April about a donor whose full name includes a first name and two middle names, and who had supplied charities with his second middle name and last name. The donor’s receipts were deemed invalid. Taking this up with the Federal Court of Appeal, Tax Court stood by their ruling. Although the donor argued that the charity should also carry some of the blame for issuing a receipt with deficiencies, the Court insisted that “a donor who wishes to claim a tax credit for a charitable donation must be responsible for ensuring he meets all of the requirements for making such a claim.”

Word to the wise: To ensure your charity isn’t placed at risk of CRA fines or worse, a full audit, please ensure your receipting meets CRA receipting rules.

Done Write Communications was founded in 1999 by president Marlena McCarthy. She has been an active member of the Association of Fundraising Professionals since 1995, and the Canadian Association of Gift Planners since 2011, attending regular conferences and webinars. In 2013 and 2017, she presented at CAGP's national conference. The Done Write team has helped more than 230 charitable organizations, and come highly recommended for their success rates, creativity, knowledge of the science of fundraising and donor communications, and ease to work with. She has a B.A. in Journalism from Ryerson University and a Certificate in Public Relations from Humber College.

Cover photo Charles Deluvio on Unsplash

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