Ti Tle opinion
Subtitle
Receipting Front and
Centre in Budget
Author Name Mark Blumberg
Blumberg Segal LLP
fFor anyone interested in the charity sec- tor it was hard to miss the approximately 25 pages in the March 22, 2011 proposed Federal budget (the “Budget”) dealing with registered charities and certain entities other
than registered charities that can issue offi-
cial donation receipts, which are cumula-
tively referred to as “qualified donees” under
the Income Tax Act. The Budget made it clear
that the requirements that apply to regis-
tered charities in terms of receipting also
apply to these qualified donees such as:
• registered Canadian amateur athletic asso-
ciations (RCAAAs);
• municipalities in Canada;
• municipal and public bodies performing a
function of government in Canada;
• housing corporations in Canada constituted exclusively to provide low-cost
housing for the aged;
• universities outside of Canada, the student
body of which ordinarily includes stu-
dents from Canada; and
• certain other charitable organizations out-
side of Canada that have received a gift
from Her Majesty in right of Canada.
The proposals will not apply to certain
qualified donees such as the Government of
Canada, Canadian provincial and territorial
governments, and the United Nations and
its agencies.
The budget notes:
Official Donation Receipts
Registered charities must abide by rules
that relate to the issuance of official dona-
tion receipts and are subject to sanctions if
they fail to comply. These rules include the
requirement to:
• issue receipts only for transactions that
qualify as gifts;
• properly establish the fair market value of
donated property; and
• ensure that receipts contain accurate and
complete information.
Budget 2011 proposes that if a qualified
donee issues a donation receipt other than
in accordance with the Income Tax Act and
its regulations, then the CRA be authorized
to suspend the receipting privileges of the
qualified donee or revoke its qualified donee
status. Budget 2011 also proposes that the
monetary penalties associated with improper issuance of receipts that apply to registered charities be extended to registered
Canadian amateur athletic associations.
The most important benefit that Canadian
registered charities and other qualified
donees receive is the ability to issue “official
donation receipts”, also sometimes referred
to as donation receipts or tax receipts.
All qualified donees will now need to pay
far closer attention to their receipting practices and abide by the rules for receipting as
discussed or they will face revocation of
their qualified donee status.
The ability to issue a tax receipt is almost
akin to having a license to print money. If a
donor makes a donation of $1 million and a
charity issues a receipt for $1 million, the
value of that receipt in Ontario for a taxpayer at the highest marginal tax rate is
approximately $460,000. One tiny little
piece of paper that only takes minutes to
produce is worth $460,000.
It is important that qualified donees issue
official donation receipts according to the
rules set out in the Income Tax Act (Canada)
and according to the guidance of the
Charities Directorate of the Canada Revenue
Agency (“CRA”). According to the CRA,
when it audits Canadian registered charities
approximately 89% of charities are issuing
inappropriate receipts . Clearly, this is a very
large proportion of charities and this is a
problem that charities need to work on.
There is a misconception among many
charities that if a proper gift is made to the
charity, then the charity is obliged to issue a
tax receipt. This is not true. Charities are not
obliged to issue tax receipts. Furthermore,
charities may have administrative policies or
guidelines setting out when they will issue
tax receipts. For example, many charities do
not issue tax receipts for donations under a
certain amount, say $10 or $20. It is very
important in terms of maintaining the confidence of charities in the public’s mind that
charities are upfront in explaining to donors
what their policy is with respect to donations and the issuance of tax receipts.
Therefore, if your charity will not issue official donation receipts for small donations, it
should be clear about that. If for a particular
event donation receipts will not be issued, it
should advise as such.
Furthermore, if at an event a charity will
be providing an advantage, such as a meal to
the guests, in advertising the event it may
wish to include a statement essentially
warning donors that they will not be getting
a full receipt for the amount that they are
giving to the charity. If qualified donees cannot determine how to appropriately receipt
then their mantra should be: “if in doubt
don’t receipt.”
To read the entire article, please go to the digital
edition of the 2011-12 Canadian Donor’s Guide,
found at www.donorsguide.ca. Go to the same
page number you are currently reading, and click
here http://www.donorsguide.ca/blumberg.htm.
Mark Blumberg is a Partner at the law firm
of Blumberg Segal LLP
