Glossary:

Sponsorship occurs when a business makes a donation to a charity and in return receives advertising or promotion of its brand, products, or services.

Generally, tax receipts cannot be issued for sponsorships. However, the cost of the sponsorship to the business is generally considered a tax-deductible business expense, which is typically as attractive to a business as a donation receipt.

A community foundation is an organization established to manage a community endowment fund, the income from which is distributed to registered charities within a community. A community foundation can qualify for registration as a charity.

(CRA : Charities Glossary)

Compensation, for persons (employees) working full-time or part-time for a registered charity, includes salaries, wages, commissions, bonuses, fees, and honoraria, plus the value of taxable and non-taxable benefits.

(CRA : Charities Glossary)

An activity that relates to and supports a charity's purpose and is a reasonable way to achieve it.

A legal document that sets out the fundamental principles and structure of an organization that is not a corporation.

A legal document that sets out the fundamental principles and structure of an organization that is not a corporation.

The disbursement quota (or DQ) is the minimum amount a registered charity has to spend on charitable activities or gifts to qualified donees to keep its registered status.

Director of Research, Imagine Canada

David has been with Imagine Canada for 13 years. Over this time, he has been involved with a number of surveys, most notably the Canada Survey of Giving, Volunteering, and Participating (CSGVP) and the National Survey of Nonprofit and Voluntary Organizations (NSNVO). He has also worked extensively with data from the T3010 returns that charities file with CRA.

Most recently he has been leading Imagine Canada's Sector Monitor Program which regularly surveys charity leaders to assess the current "state of the sector" and explores key emergent issues of interest to the sector.

Depreciable property is a type of capital property, usually used to earn income from a business or property. It is property that is expected to decline in value, or be used over a number of years, such as vehicles, machinery, etc. The cost of this property can be "depreciated" (or "amortized") over a number of years.

Directors and trustees are persons who make up the registered charity's elected or appointed governing body. This generally means persons who hold positions identified in the registered charity's governing documents, such as chair, treasurer, secretary, or past president. The registered charity's governing board includes all its directors and trustees.

(CRA : Charities Glossary)

The disbursement quota (or DQ) is the minimum amount a registered charity has to spend on charitable activities or gifts to qualified donees to keep its registered status.

These are the documents that formally establish an organization and govern its operations. Some examples of governing documents are :

• letters patent
• certificate of incorporation
• memorandum or articles of association
• constitution
• trust documents
• bylaws
• written copies of minutes of directors’ meetings
• written copies of minutes of annual general meetings of members
• annual reports to government and any other regulatory agencies (for example, a T3010 filing or audited financial statements)

Generally, a gift is a voluntary transfer of property to a charity that is intended to enrich the charity.

A service (that is, providing time, skill or effort) is not property and, therefore, is not a gift.

Artworks that are donated by the person who created them.

Examples: Paintings, sculptures, jewellery, etc., produced by the artist. Artworks or cultural property donated by the artist are considered to be donated from the artist’s inventory. Inventory is normally valued at fair market value.

In this case, the charity issues the tax receipt for the fair market value. However, the artist can choose to report a lower value for his or her tax purposes, if the cost of creating the property is less than fair market value. In this case, the value must be:

• no less than the cost of the property to the donor; 
• no less than the value of any advantage; 
• and no more than fair market value.

This rule lets artists choose how much income they recognize for tax purposes on the donation of the artwork.

For further information see CRA's IT-504.

A gift in kind is a gift other than cash.

A donee is the recipient of a gift. See also "qualfied donee" and "eligible donee".

Generally, an eligible donee is a registered charity that is in good standing with the Canada Revenue Agency, and that has more than half of its directors at arm's length with each of the directors of the charity gifting to it.

Qualified donees are generally organizations that can issue official tax receipts for gifts.

A person, foundation, or corporation that makes a gift.

A donor cannot specify the ultimate beneficiary of a gift, and the gift generally cannot benefit the donor or anyone who is not at arm’s length from the donor. That is, there can be no private benefit. If either of these conditions apply to the gift, CRA does not allow the charity to issue a tax receipt.

Example 1: A donor gives $1,000 to a charity for the specific purpose of funding Jean David’s attendance at a music course given by the charity. For a donation to be eligible for a tax receipt, the charity must be able to freely apply the funds within a program (the music course) or within other similar programs at its discretion. In this case, the donor has directed specific individuals on whom the funds must be spent. Therefore no tax receipt can be issued.

Example 2: A donor gives $1,000 to a charity specifically to help reduce the cost of offering a music program. The charity is then able to lower the fees it charges its students. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.

Example 3: A donor gives $1,000 to a charity specifically to fund a bursary program to help disadvantaged youth participate in a music program. The charity sets the criteria and selects the students to be supported. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.

Example 4: A donor gives $10,000 to benefit the family of a specific victim of a traffic accident. Because particular individuals have been identified by the donor, it is not eligible for a tax receipt. If the donation was instead intended to benefit any victim of a traffic accident, it would be within the charity’s discretion as to how to apply it, and therefore a tax receipt could be issued.

Donations that are primarily intended to benefit the individual making the donation are not eligible for a tax receipt. Benefits to the donor can include:

• admission fees to concerts or other performances;
• tickets to attend events where a meal is served or entertainment is provided;
• events that include auctions, lotteries, or draws;
• provision of services, such as the use of a charity’s premises or meeting facilities; and
• recognition for sponsors.

In some conditions, however, a receipt can be issued for a part of the payment (see Split Receipting for more information and examples).

A charity may generally not issue a tax receipt for the gift of shares or securities of a corporation unless they are publicly traded on a “prescribed stock exchange” or if the donor is at arm’s length from the charity and each of its director and officers. This is a complex area of the regulations, however. You should get professional advice or ask CRA if you are in this situation.

Contributions of services (for example, time, labour, skills) are not transfers of property and therefore are not gifts. No tax receipt may be issued for the contribution of services.

See 'Gifts of Services' (CRA, 2011)

However, if the charity pays for the services provided, the service provider may then donate that payment to the charity. In this case, this is considered to be a cash donation and the charity can issue a tax receipt to the donor. This is sometimes called a cheque swap.

Example 1: A charity maintains a roster of volunteers to drive seniors to various appointments, to shopping, etc. The volunteers’ time is a gift of services. Therefore no tax receipt can be issued.

Example 2: A gardener offers to voluntarily take care of a charity's lawn and garden. No tax receipt can be issued for the provision of this service. But if the gardener decides to invoice the charity at her normal prices for such work and the charity pays this invoice, the gardener may then choose to donate all or part of the payment to the charity. The charity can then issue a tax receipt for this cash donation. Of course, the gardener would have to declare the amount invoiced as income for tax purposes, so there is likely no net benefit to her in doing so.

Caution: For a donation to qualify for a tax receipt, there must be an actual cash donation. Funds must actually change hands.

Charities cannot issue tax receipts for donations when:

• the donor was required to make the donation (for example, as the result of a court order) or
• the donor was induced in any way to make a donation that he or she otherwise would not have made.

In these cases, the donation is not considered voluntary, and therefore is not a gift.

Example 1: As part of a settlement in a court case, the loser in the case is required to make a donation to charity. Because the donation did not meet the definition of a gift (it was not voluntary), no tax receipt can be issued.

Example 2: A charity contacts a potential donor and proposes the following: Consistent with its charitable objects, the charity is able to provide relief to farmers, although it has no program set up to do so. The charity knows that the potential donor is interested in helping a specific farming family, so it offers to provide a program for which only this family would qualify if the donor donates to the charity. Although the donor does not receive any personal advantage for his donation, he has been induced to make his gift. Therefore no tax receipt can be issued.

A donee is the recipient of a gift. See also "qualfied donee" and "eligible donee".

Financial information includes:

• annual financial statements,
• copies of official donation receipts,
• copies of annual information returns (Form T3010, Registered Charity Information Return),
• general ledgers,
• bank statements,
• revenue and expense account details,
• documents supporting GST/HST/QST filings,
• investment agreements and monthly reports,
• all records concerning 10-year gifts,
• accountant's working papers,
• payroll records,
• annual reports, and
• fundraising materials.

For more information on financial documents, see Keeping financial records.

A person, foundation, or corporation that makes a gift.

Donations that are primarily intended to benefit the individual making the donation are not eligible for a tax receipt. Benefits to the donor can include:

• admission fees to concerts or other performances;
• tickets to attend events where a meal is served or entertainment is provided;
• events that include auctions, lotteries, or draws;
• provision of services, such as the use of a charity’s premises or meeting facilities; and
• recognition for sponsors.

In some conditions, however, a receipt can be issued for a part of the payment (see Split Receipting for more information and examples).

Charities cannot issue tax receipts for donations when:

• the donor was required to make the donation (for example, as the result of a court order) or
• the donor was induced in any way to make a donation that he or she otherwise would not have made.

In these cases, the donation is not considered voluntary, and therefore is not a gift.

Example 1: As part of a settlement in a court case, the loser in the case is required to make a donation to charity. Because the donation did not meet the definition of a gift (it was not voluntary), no tax receipt can be issued.

Example 2: A charity contacts a potential donor and proposes the following: Consistent with its charitable objects, the charity is able to provide relief to farmers, although it has no program set up to do so. The charity knows that the potential donor is interested in helping a specific farming family, so it offers to provide a program for which only this family would qualify if the donor donates to the charity. Although the donor does not receive any personal advantage for his donation, he has been induced to make his gift. Therefore no tax receipt can be issued.

Contributions of services (for example, time, labour, skills) are not transfers of property and therefore are not gifts. No tax receipt may be issued for the contribution of services.

See 'Gifts of Services' (CRA, 2011)

However, if the charity pays for the services provided, the service provider may then donate that payment to the charity. In this case, this is considered to be a cash donation and the charity can issue a tax receipt to the donor. This is sometimes called a cheque swap.

Example 1: A charity maintains a roster of volunteers to drive seniors to various appointments, to shopping, etc. The volunteers’ time is a gift of services. Therefore no tax receipt can be issued.

Example 2: A gardener offers to voluntarily take care of a charity's lawn and garden. No tax receipt can be issued for the provision of this service. But if the gardener decides to invoice the charity at her normal prices for such work and the charity pays this invoice, the gardener may then choose to donate all or part of the payment to the charity. The charity can then issue a tax receipt for this cash donation. Of course, the gardener would have to declare the amount invoiced as income for tax purposes, so there is likely no net benefit to her in doing so.

Caution: For a donation to qualify for a tax receipt, there must be an actual cash donation. Funds must actually change hands.

A charity may generally not issue a tax receipt for the gift of shares or securities of a corporation unless they are publicly traded on a “prescribed stock exchange” or if the donor is at arm’s length from the charity and each of its director and officers. This is a complex area of the regulations, however. You should get professional advice or ask CRA if you are in this situation.

A donor cannot specify the ultimate beneficiary of a gift, and the gift generally cannot benefit the donor or anyone who is not at arm’s length from the donor. That is, there can be no private benefit. If either of these conditions apply to the gift, CRA does not allow the charity to issue a tax receipt.

Example 1: A donor gives $1,000 to a charity for the specific purpose of funding Jean David’s attendance at a music course given by the charity. For a donation to be eligible for a tax receipt, the charity must be able to freely apply the funds within a program (the music course) or within other similar programs at its discretion. In this case, the donor has directed specific individuals on whom the funds must be spent. Therefore no tax receipt can be issued.

Example 2: A donor gives $1,000 to a charity specifically to help reduce the cost of offering a music program. The charity is then able to lower the fees it charges its students. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.

Example 3: A donor gives $1,000 to a charity specifically to fund a bursary program to help disadvantaged youth participate in a music program. The charity sets the criteria and selects the students to be supported. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.

Example 4: A donor gives $10,000 to benefit the family of a specific victim of a traffic accident. Because particular individuals have been identified by the donor, it is not eligible for a tax receipt. If the donation was instead intended to benefit any victim of a traffic accident, it would be within the charity’s discretion as to how to apply it, and therefore a tax receipt could be issued.

Planned giving is a fundraising program that involves arranging donations to serve the interests of the registered charity and that suits the personal, financial, and tax situation of the individual donor. Through a planned-giving program, a registered charity seeks to attract significant gifts by identifying potential donors and helping them with information and advice.

Examples of planned giving include bequests, annuities, life insurance policies, and residual interests or charitable remainder trusts.

(CRA : Charities Glossary)

Accrual accounting is the method of recording transactions, where revenues and expenses show in the results for the period in which they were earned and/or incurred, whether or not cash has changed hands for the transaction.

The eligible amount is the part of a gift for which a charity can issue a tax receipt. Generally, this is the amount by which the fair market value of the gift exceeds the amount of any advantage given in respect of the donation.

An individual is eligible to serve as a Director of a charity, unless the individual:

• has been found guilty of a relevant criminal offence for which the individual has not received a pardon; 
• has been found guilty of a relevant offence in the last five years; 
• was a director, trustee or like official of a charity or RCAAA during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration, for which its registration was revoked in the past five years; 
• controlled or managed a charity or association during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration for which its registration was revoked in the past five years; or 
• has been a promoter of a tax shelter that involved a gift to a registered charity or RCAAA the registration of which was revoked within the last five years for participation in the tax shelter.