Mikestrathdee’s Blog

It is a gift, but is it charitable?
April 27, 2011, 3:32 pm
Filed under: Charitable Giving

Originally published in Christian Week Ontario, May 2011 Your Money column

People who attend church regularly donate significantly more money than the general population, studies show.

But not all “gifts” are eligible for a charitable receipt.

To understand the difference, we need to distinguish between charitable gifts, which are receiptable, and donations which Canada Revenue Agency (CRA) views as private benevolence, where the donor controls the use or specifies a person or family to receive the funds. No tax receipts can be issued for private benevolence. Here are some examples of gifts that donors can’t get a charitable receipt for:

  • Designating a gift to pay the tuition of a child, grandchild or some other relative at a Christian high school or college. This is private benevolence.
  • Donations designated for camp staff salary. Young people who serve as counsellors or in other summer camp positions may only receive only a small honorarium for the season’s work. Some donors want to give a camp a gift so a particular individual can receive a higher honorarium. A camp can’t issue a receipt for that gift.

Congregations are becoming more aware of the rules around what is and isn’t charitable, says Milly Siderius, manager of stewardship services for the Canadian Council of Christian Charities. “It’s moving, which is really good.”

At the same time, “We’ve still got a lot of work to do” in increasing awareness, she said.

Other things that are not always well understood:

  • Donations of services are not eligible for a charitable receipt.
  • Reimbursement of expenses. Some people who buy supplies for a program at their church are willing to accept a charitable receipt for the value of the out of pocket expenses. CRA strongly encourages churches not to give receipts, but to issue cheques for the documented expense.
  • Renting space to a church for meetings, youth group gatherings or other events. A church issuing a gift receipt in lieu of payment is offside of CRA rules. If the owner of the space truly wants to make a donation, an exchange of cheques is necessary.
  • You can’t make a profit from a charitable donation. As thousands of Canadians are now learning to their sorrow, the leveraged donations of medical supplies and other goods that were all the rage a few years back are now leading to massive tax reassessments, penalties and lawsuits against financial advisors and lawyers who promoted or blessed these shenanigans.

Flow-through shares are the latest example of an abused gifting vehicle. At time of this writing, the fate of the 2011 federal budget is an open question. But regardless of who is in charge of our government this fall, it’s likely that proposed changes around gifts of flow-through shares will become law. This type of gifting had become flavour of the month. Ottawa is cracking down because some organizations were approaching charities, offering to match buyers and sellers, and valuing donations up front, when the true value of the shares wouldn’t be known til later.


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