Glossary:

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  • Tax shelter

    Generally, a tax shelter is any arrangement where the tax benefits equal or exceed the net cost of entering into the arrangement.

  • The purchase of goods or services from a charity

    The purchase of goods or services from a charity is a commercial transaction, not a gift, and is therefore not eligible for a tax receipt. In certain circumstances, however (for example, when the purchaser pays more than the fair market value of the goods or services with the intention that the overpayment be donated to the charity), a receipt can be issued for that part of the payment that represents a donation (see Split Receipting)

    Example 1: A person buys a book worth $30 from a charity and pays the charity $30 for it. This is a commercial transaction, not a gift. Therefore no receipt can be issued.

    Example 2: A person buys a book worth $30 from a charity but gives the charity a cheque for $50. Part of the payment ($30) represents an advantage to the donor (that is, the book), and the rest ($20) represents a donation. Therefore a receipt can be issued for $20 – the difference between the cash received by the charity and the advantage obtained by the person (see Split Receipting for limitations on issuing receipts in such cases).

  • Charitable activity

    A charitable activity is an activity carried out by a registered charity to further its mission.

  • Connected activity

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

  • Subordinate activities

    Activities are subordinate if they that are subservient to a charity's charitable purpose or are a minor focus of the charity in relation to its entire program of activities.

  • Partisan political activities

    Political activities are partisan if they directly or indirectly support or oppose a political party or candidate for public office.

  • Directors/trustees

    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)

  • Advantage

    An advantage is the total fair market value of all property, services, compensation, or other benefits that a donor receives or is entitled to receive in return for making a gift. The benefits may be contingent or receivable in the future, by either the donor or any person or partnership not dealing at arm's length with the donor.

    Determining the fair market value of an advantage is similar to determining the fair market value of a gift in kind. However, while only property is a gift in kind, all types of advantage (for example services, accommodation, use of property) must be valued.

    An advantage also includes any limited-recourse debt in respect of the gift. However, the calculation of an advantage does not include taxes such as GST, PST, or HST. As well, it does not include gratuities, unless they are included in the cost and are not discretionary.
    For more information, see Pamphlet P113, Gifts and Income Tax.

    (CRA : Charities Glossary)

  • Depreciable property

    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.

  • Capital Property

    Description: Capital property includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. Capital property does not include the trading assets of a business, such as inventory.

    Examples: The following properties are generally capital properties:

    • securities, such as stocks, bonds, and units of a mutual fund trust; and
    • equipment you use in a business or a rental operation.

    Capital property is normally valued at fair market value for tax receipt purposes. In some cases, however, the donor (not the charity) can choose a lower value. The donor can do this where their cost of the property for tax purposes (the "adjusted cost base") is less than fair market value. In this case, the donor may choose which value to use so long as it is:

    • no lower than the donor's adjusted cost base;
    • no lower than the value of any advantage; and
    • no higher than the fair market value.

    This rule lets donors choose how much capital gain (if any) they recognize for tax purposes on the donation of the capital property.

    Note: If the fair market value is less than the adjusted cost base, the donor does not have a choice: the fair market value must be used.

    For further information, see CRA's IT-288.

  • Real Property

    Description: Land, and buildings or other structures permanently attached to land.

    Examples: A family home, a cottage, or a vacant piece of land.

    The value of real property for tax receipt purposes is its fair market value. You should almost always get an appraisal or valuation from a professional real estate appraiser to support the gift.

    Real property located in Canada is not subject to the deemed fair market value rule, but property outside Canada is.

    Special case: For gifts of ecologically sensitive land, you should refer to the Canadian Ecological Gifts Program.

  • Personal use property

    Personal use property refers to items that you own primarily for the personal use or enjoyment of your family and yourself. It includes all personal and household items, such as furniture, automobiles, boats, a cottage, and other similar properties. It also includes listed personal property.

  • Listed personal property

    Description: Certain kinds of property that are intended for personal use or enjoyment and that typically increase in value over time.

    Examples: Jewellery, stamp and coin collections, and artwork.

    It is often difficult to establish a fair market value for listed personal property since many items are unique. To determine a value for these items, it is usually best to check with an appropriate dealer or to get a formal appraisal.

    If the estimated value of the property is more than $1,000, it is strongly recommended that you have the property appraised to support the value for tax receipt purposes.

    Special case: If your charity receives a gift of art or cultural property that is deemed to be of national significance and is donated by someone other than its creator, you should have it certified by the Canadian Cultural Property Export Review Board.

  • Lottery or raffle tickets

    CRA considers that donors who buy lottery or raffle tickets do so primarily because they want a chance to win the prizes that are offered and not because they want to make a donation to the charity that is holding the event. Therefore it does not allow tax receipts to be issued.

  • Gift Cards and Certificates

    Gift cards or certificates are often donated to charities and are commonly used in fundraising activities such as silent auctions.

    Tax receipts cannot be issued for a gift card or certificate if the donor is the business that issued it and if the gift card or certificate is redeemed by a third party (for example, by someone who purchased it in a silent auction). In this case, the gift card or certificate is considered only to be a promise by the business to give merchandise sometime in the future (that is, when the gift card is actually redeemed). Until then, there has been no gift of property. If the charity itself redeems the gift card or certificate for goods (not services), then a receipt may be issued, as the donor (the business) has then fulfilled its promise and transferred property to the charity.

    Tax receipts may be issued if the person who donates the gift card or certificate purchased it from the issuer and then donates it to a charity. Once purchased, the gift card or certificate is considered to be property and, if donated to a charity, is eligible for a tax receipt.

    The following table illustrates when a tax receipt may be issued in exchange for a gift card or certificate donated to a registered charity:

     

    Redeemed by ...

    Charity 3rd party

    Donated by ...

    Issuer (a business) Issue tax receipt Do not issue tax receipt
    3rd party Issue tax receipt Issue tax receipt

    Example 1: A book store donates one of its gift cards to a charity for use in its auction. Because the gift card is only considered to be a promise at the time of the donation, a tax receipt cannot be issued.

    When the card is redeemed by whoever purchased it at the auction, the charity still cannot issue a receipt. This is because the redemption transaction is between the book store and the purchaser. The charity is not involved in this transaction (and specifically does not receive any donation as part of the transaction), so no tax receipt can be issued.

    Example 2: A person buys a gift certificate for cooking classes from the cooking school and then donates it to a charity for use in its auction. The donor can receive a tax receipt for the full amount of the gift certificate because it is now considered to be property. The person who is giving the cooking classes does not get a receipt from the charity.

    See 'Gift certificates or gift cards' (CRA, 2014)

  • Sponsorship

    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.

  • Constitution

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

  • Disbursement quota

    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.

  • Governing documents

    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)
  • Gift

    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 donated by the artist

    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.

  • Gift in kind

    A gift in kind is a gift other than cash.

  • Donee

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

  • 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 donee

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

  • Donor

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

  • Financial information

    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.

  • Donations for the benefit of the donor

    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).

  • Donations received as a result of an obligation or inducement

    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.

  • Donations of services

    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.

  • Donations of non-qualifying securities

    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.

  • Donations directed to specific individuals, families, or non-qualified donees

    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

    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

    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.

  • Registered

    An organization has applied to the CRA and received approval as meeting the requirements for registration as a charity, and has been issued a charitable registration number.

    A registered charity is exempt from paying income tax and can issue official donation receipts for gifts it receives. However, if a registered charity is under suspension, it no longer has receipting privileges during the suspension period.

    A registered charity is designated by the CRA as a charitable organization, a public foundation, or private foundation.

    (CRA : Charities Glossary)

  • Financial statements

    At a minimum, financial statements consist of a statement of assets and liabilities and a statement of revenue and expenditures for the fiscal period. They should show the different sources of a registered charity's revenue and how it spent its money.

    (CRA : Charities Glossary)

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