CHARITABLE TAX RECEIPT GUIDELINES
Grandview Children’s Foundation, like all other registered charities, must adhere to the Canada Revenue Agency (CRA) Income Tax Act when issuing charitable tax receipts. A sample of these regulations is provided below. To learn more about charitable tax receipts visit cra-arc.gc.ca. Issuing inappropriate charitable tax receipts can put our charitable status in jeopardy so please do not promise any kind of receipt without first discussing it with the Foundation.
It is important that you understand the rules about tax receipts before you plan your community fundraiser. It is your responsibility to communicate decisions surrounding tax receipts to the event participants. Please be sure you have discussed the situation with the Foundation’s Executive Director of Development and that you are clear about what can be receipted.
In general, a gift is made and a receipt may be issued if all three of the conditions listed below are satisfied.
• Some property, either in the form of cash or a gift-in-kind, is transferred by a donor to a registered charity and the value of the gift can be determined.
• The property is given voluntarily.
• There is a clear intent to donate.
Is there a minimum donation amount required for a tax receipt?
Yes, a minimum donation amount of $10 has been established by the Foundation due to the various costs associated with receipting.
Whose name goes on the tax receipt?
The receipt must be made out to the entity listed on the cheque. The individual owner can only receive the receipt if they are the true donor, for example, the donation is made by a personal cheque, cash or credit card.
A corporation often issues one cheque representing donations collected from its employees. For example, this practice is common for workplace casual days. Although the corporation’s name appears on the cheque, the gift was, in fact, that of the corporation’s employees. In this case, the corporation will not be issued the charitable tax receipt.
Can the Foundation issue receipt booklets to third party fundraisers?
No, the Foundation cannot supply receipt booklets. There are CRA regulations that we must adhere to with regards to charitable tax receipts. We have no way of ensuring that these regulations are followed if receipt books are distributed to third parties.
Can a receipt be issued for the price of a ticket to an event?
A charitable tax receipt may be issued for the purchase of a ticket to a charitable event, but not for the entire ticket price. The value of goods and services received (not including taxes), such as dinner or prizes will be deducted from the receipt amount.
For example, if the price of a ticket to attend a dinner is $100 and the value of the dinner is $40, a receipt may be issued for the $60 difference. Please note: it is the value of the goods and services received and not the cost that will be deducted from the tax receipt amount. The value is the price that a customer would normally pay to receive that product or service. It is acceptable to take into account group or banquet rates. The cost to supply the dinner in the above example may be $20, but it is the price or $40 that will be deducted off the tax receipt amount.
The CRA refers to these goods and services received in exchange for a gift as the Advantage. In the above example the advantage is the value of the dinner, i.e. $40.
In situations where the cost or portion of the cost is covered by a sponsor or corporation, the same rule applies, the value that the product or goods would normally be sold for is still the advantage amount. Only the price paid beyond the total value of the advantages received is eligible for a tax receipt.
What do you mean by clear intent to donate?
The CRA maintains that in order for receipts to be issued there must be a clear intent by the donor to enrich the charity, otherwise the gift is not considered a donation and is not tax deductible. According to the CRA, the value of the benefits received in exchange for a gift cannot exceed 80% of the gift amount; otherwise a tax receipt cannot be issued. For example, a person pays $100 to attend a benefit dinner, the value of the dinner is $40 and the value of a gift bag received is $45, then the total advantage is $85 or 85% of the ticket price and therefore cannot be receipted.
However if the value of the benefits received is of nominal or insignificant value then a tax receipt may be issued for the full gift amount. According to the CRA, if the value of the advantage does not exceed the lesser of 10% of the value of the gift and $75, then the value of the advantage is considered to be zero. For example, if the price to attend the benefit dinner is $200 and the value of the dinner is $15, then a receipt may be issued for the full gift amount of $200. This is because the value of the advantage is less than 10% of the gift amount.
Can I receive a tax receipt for the proceeds of the sale of a product or service?
Yes, funds sent in as proceeds from the sale of a product or service are tax deductible to the seller, but not to the buyer.
Can a receipt be issued for a donation of service?
Contributions of services are not property and therefore do not qualify as gifts for purposes of issuing official charitable receipts. However, a charity may issue an official donation receipt if an entity provides a service to the charity, the charity pays for the service and the entity then returns the payment to the charity as a gift. The CRA recommends that in this situation, the parties should proceed by way of an exchange of cheques to ensure the presence of an audit trail.
What is a gift-in-kind and are they eligible for a tax receipt?
“Gifts-in-kind” are gifts of physical property and according to the CRA are eligible for tax receipts. A receipt may be issued for the value of an item before taxes. The Foundation requests that organizations donating a gift-in-kind provide an invoice stating the value (not cost) of the item as of the date of the donation. A gift-in-kind does not include a gift of service.
Can sponsorship gifts receive a charitable tax receipt?
No, a payment from a business for which the business receives a material benefit, such as promotion or advertising in return cannot be issued a charitable tax receipt. However, for tax purposes, the business may be able to claim the contribution as an advertising expense. In other words, a business may deduct gifts made to registered charities from taxable business income.
Can a receipt be issued where door or achievement prizes are issued to event participants?
Yes, but not for the full cost of the event. The retail value of all such prizes is to be aggregated and allocated evenly amongst all attendees. Furthermore, the allocated amount must not exceed 80% of the ticket price. For example, 10 people purchase $20 tickets to attend a benefit dinner and in exchange receive a chance to win prizes valued at $50. The value of the prize advantage works out to be $5 per person ($50/10 people). Since the value of the achievement or door prizes is less than 80% of the ticket price, then donors will receive tax receipts in the amount of $15 ($20 – $5).
Can a receipt be issued for the purchase of a prize draw?
No, you have purchased a chance to win a prize. No part of the cost of a raffle ticket is a gift which may be receipted for income tax purposes.
Can property donated for sale at an auction be considered a charitable donation?
Yes, how the charity uses donated property is generally not relevant in determining whether the donor has made a gift to the charity.
Can a charity issue an official donation receipt when it receives a donation of a gift certificate?
No, the gift certificate is similar to a pledge and like a pledge, cannot be receipted. Rather, the retailer is entitled to claim the cost of the property transferred to the certificate holder as a business expense.
After the fundraiser, in a timely manner, please provide the Foundation with a list of supporters, full addresses including postal codes, and the amounts of each individual who would like to be receipted. The total funds donated must equal or be in excess of the amount to be receipted. We cannot issue receipts for more than the donation amount.
Develop a personalized sponsorship request letter for each potential sponsor. State exactly the kind of support you are requesting, i.e., a particular product or a specified dollar amount. You should also state its purpose, for example a silent auction item or prize give-away. Include event details, such as the date, location and time. Ensure your letter states who you are and the event is in support of, not hosted by, the Foundation. Clearly state the recognition available to sponsors such as name or logo
recognition on event signage, recognition in a program, website, etc. Provide both your email and phone number so they can easily contact you. We also recommend that you state a sponsorship deadline so businesses will not put your request aside and forget about it.
A follow-up phone call is just as important as the sponsorship letter. Wait a week after sending your letters before making follow-up phone calls. Again, when talking with sponsors it is important that you inform them that you are not soliciting on behalf of the Foundation, but rather you are raising funds to support the Foundation. You should also clearly communicate to potential sponsors how their gift will be recognized.
Do not promise charitable tax receipts. Sponsorship gifts are not eligible for charitable tax receipts. Sponsors receive a material benefit, such as promotion or advertising in return for their contribution and are not eligible to receive a charitable tax receipt. They may be able to claim their contribution as a business expense for tax purposes.
Track all companies, organizations and individuals that sponsored your fundraiser. Keep records of the contact person and sponsorship received. This information is needed for sponsorship recognition and for drafting thank you letters post event.
Thank your supporters
Remember to thank all sponsors with a personalized letter. Do this within a few weeks of the event. Provide details on how successful the event was and how their support contributed to its success. It is always a nice touch to add photos of the event in an email or in your thank you letters. Sponsorship thank you letters are important in helping secure their continued support for future Community Fundraisers for Grandview Children’s Foundation.