What do you mean our charitable tax receipts are incomplete? We’ve been using the same ones for the last 20 years!

I won’t pretend to be the authority on tax receipting. I’d prefer to leave that up to Canada Revenue Agency (CRA) Charities Directorate. However, what I will offer you today is some of the typical areas of concern on issuing charitable receipts and provide you with some excellent links for more help. Again, I recommend you to share this article with your senior staff person and board members to help strengthen your fundraising team and encourage informed questions and engagement.

Would you believe 89% of registered charities have incomplete or incorrect tax receipts? Unfortunately this is not a case of majority rules! CRA has explicit guidelines of what components are necessary to include on a charitable tax receipt. In fact, there is very thorough information available to you at their website (see link above) and it’s particularly important that those responsible for issuing receipts to donors, understand what you should and should not do. “But we’re always done it that way” won’t pass the test when it comes to protecting your charitable status.

What does the Canada Revenue Agency consider a gift?

A good place to start is CRA’s definition of what constitutes a gift. Once you understand their criteria (which is admittedly complicated but worth trying to comprehend) then you are better equipped to issue correct tax receipts. Failing to adhere to CRA’s guidelines can result in penalties or potentially, even revocation of your charitable status. See the Consequences of Improper Receipting.

Elements of a tax receipt

The most common oversight I’ve encountered on charitable tax receipts is having only one reference for “date.” To be considered complete, there are actually thirteen (13) separate points that need to be covered, including the day or year when the donation was received and the day on which the receipt was issued. An additional four (4) elements are required on Gift-In-Kind receipts. Take a moment and review your blank receipts (remembering to void the sample you’re using in order to account for numbered copies). Compare the components of the organization’s charitable tax receipts with CRA’s list to insure your copy is complete. If it’s not, notify the designated individual who signs the organization’s T3010 (Registered Charity Information Return) in writing and indicate the need for correct tax receipts to be printed (or corrected in your computer program if that’s how they’re being issued).

Donated services

Over the past two (plus) decades, I have encountered a lot of confusion over what circumstances can charities issue tax receipts. For instance, (when possible and considering schedule, priorities and finances) I’ve contributed my time to organizations to help strengthen their fundraising or governance. In turn, I’ve sometimes been offered a charitable tax receipt as an acknowledgement of my gift. The donation of services cannot be receipted for tax purposes. However, if the service provider wanted to invoice the charity and then donate those funds back, there would need to be a thorough paper trail. Personally, I would rather not go through the back and forth of a cheque exchange because it’s time consuming and I still have to claim the gift as 100% income and my donation back in the full amount as a (lesser) tax credit. That does not mean I don’t appreciate being considered a donor to the organization! Unfortunately, very few charities recognize that they can and should still acknowledge the generosity of those who provide services. See Gifts of Services for more information.

Gifts-in-kind

Another area that causes much bewilderment and discussion is the donation of Gifts-In-Kind. For those who are unfamiliar with this term, these are gifts of property other than cash. They cover items such as artwork, equipment, securities, and cultural and ecological property. The “Fair Market Value” of these donations can be debatable so CRA strongly recommends, particularly on gifts worth more than $1000, that a competent third party appraiser document its value and reasons for their assessment, before a tax receipt for that amount is issued. This added effort will insure your charity has followed protocol. At the same time, unless you can convince a qualified appraiser to donate their services, be prepared to pay their fee. Don’t avoid this important step just because there is a cost attached. And remember, IF you don’t want the gift, and it’s costing you money to accept it, be honest with the donor. It’s possible they will cover the appraisal costs or find a more appropriate charity who will welcome their contribution.

As I mentioned above, Gift-In-Kind receipts must contain an additional four elements. These are:

  • day on which the donation was received (if not already indicated);
  • brief description of the property transferred to the charity;
  • name and address of the appraiser (if property was appraised); and
  • (under proposed legislation) deemed fair market value of the property in place of amount of gift above.

 

See Samples 3 and 4 for the correct format on Gift-In-Kind receipts.

Event tickets

Special events are a common form of fundraising (albeit quite labour intensive). Charities often question how much of the “admission” can be receipted. The difference between the ticket price and the value of the goods being offered or consumed (dinner, gifts, dancing, etc.) is the “eligible amount” and represents what can be receipted to the donor/ticket buyer. If you have been extremely successful at having items donated to your event, it’s quite possible that there is no receiptable amount. You have two choices in a case like that…either charge more and promote the tax receipt as a bonus or market the fact that this is a value-added event guaranteeing lots of fun at an extremely affordable price. Given a choice and today’s economy, I’d opt for the latter! It’s less labour-intensive and is probably more appealing to an audience with limited resources.

Ignorance isn’t bliss

As a result of recent CRA workshops on the topic of charitable receipting you can find a very helpful list of Questions & Answers. When in doubt, don’t make any assumptions. The last thing you want to do is consciously or unconsciously risk your charitable status.

Help is at hand!

Your first stop should definitely be the Canada Revenue Agency links that I’ve mentioned above – their website is constantly evolving and improving. However, research always represents more than one source of information. Thanks to CRA’s Charities Partnership and Outreach Program (CPOP) there are a number of organizations funded to help you with your Income Tax Act compliance. You can find a list of projects at www.cra-arc.gc.ca/tx/chrts/fndng/grmnts-eng.html.

The organization that I’m most familiar with as a recipient of these funds is the Ontario Community Support Association (OCSA). I worked with them from 1995 until 2000 as their roving Fundraising Trainer, traveling throughout the province to help their member agencies (Meals on Wheels and home support services for seniors and people with disabilities) with board governance and fund development. It was through this contract that I gained such an exceptional perspective of the needs of small and rural charities.

Capacity Builders is the training division of OCSA. Thanks to CRA’s funding and lawyer Mark Blumberg, the Charity Law Information Program (CLIP) has been established and is eager to help your organization. In order to keep postage costs at a minimum, they request online registration to their Communiqués so you can hear about workshops, webinars and web-based tools that will help answer your questions. To register for their help, go to www.capacitybuilders.ca/clip and sign up for their newsletter…you won’t regret the practical, affordable, accessible resources that will be available to you in the next few months!

Cynthia Armour is a freelance specialist in fundraising and governance. A Certified FundRaising Executive (CFRE) since 1995, she volunteers as a subject matter expert with CFRE International. She works with boards and senior staff to ensure that strong leadership will enhance organizational capacity to govern and fundraise effectively. Contact Cynthia directly at 705-799-0636, e-mail answers@elderstone.ca, or visit www.elderstone.ca for more information about her services.

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