Improper issuance of charitable receipts

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There are many situations in which charitable receipts may be improperly issued. The tax issues involved, however, are so many and detailed that any charity actively involved in a number of fundraising programs should have access to a summary of the resource materials available from Canada Customs & Revenue Agency on the subject. Here, in addition, is a brief summary of some of the more common instances of the improper issuance of charitable receipts.

Inducements or gifts for a donation - A charity cannot issue a receipt where the donor receives an inducement or gift, or where the fair market value of such inducement or gift exceeds the lesser of $50.00 or 10% of the amount of the donation.

Contributions of services may not be acknowledged by the issuance of a charitable receipt. A gift must involve the gift of property. A contribution of services, that is time, skill, or effort, is not considered to be a gift of property and therefore will not qualify for a charitable receipt.

The purchase of goods or services from a charity cannot be acknowledged by the issuance of an official charitable receipt for income tax purposes for all or any part of the payment for such purchase. Where a donor can both purchase an item from a charity at the same time as making a donation, the purchase and gift must be treated as two separate transactions that are carried out independently. A charitable receipt can only be issued for a payment that is solely a donation. A charity cannot issue a split receipt for the portion of the payment/donation in excess of the fair marked value of the item being purchased.

Funds directed to individuals or families - A charity may not issue an official receipt where the donor has directed the charity to give the funds to a specified person or family.

Donations subject to a general direction from the donor - that the gift be used in a particular program operated by the charity are acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arms length with the donor, and the decisions regarding utilization of the donation within a program rests with the charity.

Tuition fees - A charity cannot issue receipts for 100% of a student's tuition fees paid to a privately funded secular or religious school by having the tuition fees paid by the parents indirectly through a scholarship fund operated by the school or by another charity associated with the school that purports to grant 'scholarships' for tuition fees to children attending the school.

Non-qualified donees - A charity may not issue a charitable receipt if the donor has directed the charity to give the funds to a non-qualified donee as defined under subsection 149.1(1) of the Income Tax Act. Most foreign charities or foreign affiliates of a Canadian charity, with the exception of a 'prescribed university', would not meet the definition of a qualified donee, and as such, gifts directed to them would not be eligible for an official charitable receipt.

Admission fees - The payment of a basic fee for admission to an event or program will not qualify as a charitable donation for tax receipting purposes, with the exception of the purchase price of a ticket to attend a "dinner, ball, concert or show or a like event" where the charitable receipt is limited to the price of the ticket less the fair market value of the event.

Dinners with lotteries or draws - A charitable receipt cannot be issued for the price of admission to a "dinner, ball, concert, or show or like event" that includes participation in a lottery or draw for prizes or awards which have more than a nominal value.

Dinner/auction tickets - A charitable receipt cannot be issued for any portion of the admission price to a dinner coupled with an auction, since an auction is not considered to be a "like event", unless individuals are invited to bid and can bid at the auction without paying the admission price for the dinner.

Membership fees conferring material benefits - A charitable receipt cannot be issued for payment of a membership fee for a charity that entitles members to attend events, receive literature, receive services or be eligible for entitlement of any material value. However, membership fees that only provide the member with the right to vote at meetings and to receive reports of the activities of the charity are not considered to be of material value, unless such reports are otherwise only available for a fee.

Lotteries and draws - A charitable receipt cannot be issued for the payment of a lottery ticket or other chance to win a prize.

Gifts in kind - A charity that receives a gift in kind can only issue receipts for the fair market value of the gift as of the date that it was given. When a gift in kind has a fair market value of $1,000 or more, a qualified written appraisal is required to justify the amount shown on the receipt.

Non-qualifying securities - If an individual gives a security to a charity that is a "non qualifying security" as defined under subsection 118.1(18) of the Income Tax Act, a credit for the donation will be denied at the time that the gift is made and the donor will only be entitled to receive a charitable receipt if the charity subsequently disposes of the "non qualified security" within a period of sixty (60) months from the date of the gift. A "non qualifying security" is defined as including shares, obligations or securities of a corporation or person with whom the donor does not deal "at arms length". Specifically excluded from the definition of "non qualifying securities" are shares, obligations and other securities listed on prescribed stock exchanges and amounts deposited with financial institutions. Excluded as well from "non qualifying securities" are "excepted gifts" as defined under subsection 118.1 (19) of the Income Tax Act as gifts that meet the following requirements:

  • they are limited to shares of a corporation as opposed to debt;
  • the donee charity must not be a "private foundation";
  • the donor must deal at arms length with the donee charity; and
  • the donor must deal at arms length with each director, trustee, officer and like official of the donee charity.

The practical effect of the definition of "excepted gift" and "non qualifying security" is that a charitable organization or public foundation may not issue a charitable receipt at the time that the gift is made for the gift of shares or securities of a corporation that are not the shares or securities of a publicly traded company on a "prescribed stock exchange", or where such gift is made by a director, trustee, officer or other like official of the charitable organization or public foundation, or by anyone related to or otherwise not dealing at arms length with such person.

Loanbacks - In accordance with Resolution 21 in the 1997 Federal Budget intended to stop "loanbacks", subsection 118.(16) provides that the amount of a charitable tax credit that a donor can claim will be reduced in a situation where a gift is made to a charity, other than a gift of a "non-qualifying security", and within five years thereafter if;

(i) the charity holds a "non-qualifying security" of the donor where the charity acquired the security no earlier than five years before the gift was made; or

(ii) the charity allows the donor to use the property so gifted within five years of the original gift, the use of such property was pursuant to an agreement made or modified no earlier than five years before the making of the gift, and the use of the property was not in the course of the charity's charitable activities.

Pursuant to Section 118.1 (16) and (17) of the Income Tax Act, and depending upon the applicable circumstances, the amount of the tax credit or deduction that had been claimed for the gift will have to be reduced by the amount the charity gave to acquire the "non qualifying security" or by the value of the property the charity allows the donor to use.

Use of vacation property - A gift to a charity for the use of vacation property, usually auctioned by a charity at a fundraising event, has now been determined by the CCRA to be ineligible as a receiptable gift. An earlier position by CCRA setting out circumstances under which a charitable receipt could be issued for the fair market value of a gift of vacation property was explained in a 1998 letter by Carl Juneau, assistant director of charities. The letter was considered to be a reasonable interpretation of Department policy at that time.

However, in April 1999, the Rulings Directorate, which is responsible for policy at CCRA, reversed its earlier position and stated that since a receiptable gift requires the voluntary transfer of property without consideration, the mere granting of a right to use property for a limited period of time did not constitute an acceptable "transfer of property". The CCRA notified taxpayers of its change in position in Bulletin ITTN-17. As a result, as of April 26, 1999, loans of vacation property to a charity will no longer be considered to be a gift of property for which a charitable receipt can be issued. This will no doubt cause problems for charities that have relied upon such gifts as part of a successful charity auction event.

Resource Materials from Canada Customs and Revenue Agency on the Issuance of Charitable Receipts

All the resource materials referred to below are accessible by referring to the Canada Customs and Revenue Agency web site at A few of the more important publications from CCRA concerning when charitable receipts can be issued are listed below.

(a) Publications

  • A booklet entitled Tax Advantages of Donating to Charity-RC4142 (e) 1507, released on October 3rd, 1999 that provides a succinct summary of the tax advantages of donating to charities, as well as situations where charitable receipts cannot be issued.
  • A pamphlet entitled Gifts and Income Tax/P113 that provides a general summary on the topic that would be helpful for board members or prospective donors.
  • Registered Charities Newsletters, No. 1, August 1991; No. 2, Spring 1992; No, 3, Winter 1992/93; No. 4, Spring 1994; No. 5, Winter 1995/96; No. 6, Summer 1996; Special Release, Autumn 1996; No. 7, Summer 1998; No. 8, 1999 that provide more detailed and practical interpretations of CCRA's position concerning the numerous rules affecting the issuance of charitable receipts.

(b) Interpretation Bulletins

  • IT-110R3 Deductible Gifts and Official Donation Receipts;
  • IT-111R2: Annuities Purchased From Charitable Organizations;
  • IT-111R2SR: Annuities Purchased From Charitable Organizations;
  • IT-226R: Gift to a Charity of a Residual Interest in Real Property or Inequitable Interests in a Trust;
  • IT-244R3: Gifts by Individuals of Life Insurance Policies as Charitable Donations;
  • IT-288R2: Gifts of Tangible Capital Properties to a Charity and Others;
  • IT-297R2: Gifts in kind to Charity and Others.

(c) Information Circulars

  • IC75-23: Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools;
  • IC-80-10R: Registered Charities: Operating a Registered Charity;
  • IC-84-3R4: Gifts in Right of Canada;

Terry Carter is a partner in the law firm Wardlaw, Mullin, Carter, Thwaites & Ward, Barristers, Solicitors & Trade-Mark Agents, 235 Broadway, P.O. Box 67, Orangeville, Ontario, L9W 2Z5. Telephone:(519) 941-1760, Fax:(519) 941-3688, email, web

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