Can I issue a tax receipt for a gift of service?

No. A donation of services is not a gift, according to the Canada Revenue Agency (CRA) which states: “At law, a gift is a voluntary transfer of property without consideration. Contributions of services (for example, time, skills, effort) are not property”. However, a charity can issue a tax receipt if the service provider participates in a ‘cheque exchange’ with the charity. In this case, the service provider does the work and invoices the charity, the charity pays the service provider for the work, and then the service provider voluntarily donates the money back to the charity.

Why does a cheque exchange make the transaction acceptable? Because the service provider has been paid for their work. It’s now taxable income for them, and they have made a gift of property (the cash) from their after-tax income. That’s the scenario that charitable donation receipts are designed to serve.

Make sure to keep a copy of the invoice issued by the service provider, but remember, you can only issue the tax receipt once you’ve paid the service provider and they donate the money back to your charity.

Read this page on the CRA website for more information.

An editorial note on the term “gift”:  “Gift” is frequently used colloquially to describe any kind of donation (be it of cash, goods, or services).  Even Young Associates uses it – see our glossary entry for “donation”.  The varied and widespread use of “gift” and “donation” to cover all kinds of charitable contributions (whether they are eligible to receive a tax receipt or not) is a source of confusion. Make sure you are up to date with the CRA (or other appropriate body, depending on your location) regulations and wording to be absolutely sure you are operating within the law.

How do I determine fair market value?

If you have received a non-cash gift of property, you need to have it appraised for fair market value (FMV) – for your charity’s books, and so you are able to issue a tax receipt to the donor. According to the Canada Revenue Agency, fair market value is normally the highest price that the property could bring in if the market was open and unrestricted and the buyer and seller are both willing, knowledgeable, informed, prudent, and independent of one another.

It is important to keep in mind the following:

• The $1,000 threshold – If the FMV is less than $1,000, a member of the registered charity or other competent, knowledgeable individual can determine the property’s value. If the FMV is likely more than $1,000, the CRA recommends third party professional assessment of the property. Remember to include the name and address of the appraiser on the tax receipt.
• Deemed fair market value – The FMV of the property might be different at the time of donation then when the donor originally acquired it. In some cases the charity would then only be able to issue a tax receipt for the lesser amount. This can also be the case when the donor originally acquired the property as part of a tax shelter. Read this page on the CRA website for more information on when deemed fair market value is applicable.
• Fair market value for Advantages – For any donation, a charity must deduct the FMV of the advantages the donor receives (if any) to determine if only a portion of the amount of the gift can be receipted. Depending on the ratio of the value of the advantage to the value of the donation, the charity will: a) only be able to receipt for the amount of the donation less the value of the advantage, b) be able to issue a receipt for the full amount of the donation, or c) might not be able to issue a receipt at all. See this FAQ or visit this page on the CRA website for more information on these ratios and on how to handle split receipting.

Remember, it is the onus of the registered charity, and not the donor, to ensure that the FMV recorded on tax receipts is accurate.

What is split receipting and how do I do it?

Sometimes a charity acknowledges a donation with some sort of advantage. Common examples include providing a donor with complimentary tickets to a performance, or providing anyone who purchases a ticket to a fundraising event with a catered meal. In cases like these, where the patron is both making a gift and buying something, it is possible that only a portion of the amount of the donation would be eligible to be tax receipted. This is called split receipting.

Anytime a donor receives an advantage, the charity must deduct the value of the advantage – (click here for information on calculating fair market value) – from the amount of the donation and determine whether split receipting is necessary. The donation, less the advantage, must still represent a voluntary transfer of property by the donor to the charity.

Sometimes, even when a donor receives an advantage, split receipting is not necessary. It is important to remember the following:

• The 80% rule – If the advantage the donor receives is valued at more than 80% of the amount of the donation, the CRA does not consider the donor as having intended to make a gift and the charity cannot provide a tax receipt at all.
• The de minimis rule – Some advantages are too small to warrant split receipting. The de minimis rule dictates that if the value of an advantage (or combined advantages) does not exceed the lesser of $75 or 10% of the value of the gift, it is too minimal to have any effect on the amount of the gift. In these cases, a charity can issue a tax receipt for the full amount of the donation.

Visit this page on the CRA website for information on split receipting.

Can I lend my charitable registration number to another organization or issue tax receipts on their behalf?

No. According to the Canada Revenue Agency, “a registered charity is responsible for all receipts issued under its name and registration number” and “it must be able to account for the corresponding donations on its annual information return and in its books and records”.

It risks losing its charitable status by lending out its number.

Do I have to pay tax on a bonus?

Emphatically, yes!

Bonuses are compensation and, as such, are taxable. Here’s a link to the Canada Revenue Agency’s Special Payments Chart. It lays out the requirements for source deductions on an array of payments, including bonuses.

If I have a surplus, why don’t I have any money?

It’s probably a timing issue.

You might be strapped for cash if you are paying off bills from past year losses. In the same way, if you’re doing some early spending on future projects, this year’s money might be flying out the door to get ready for next year.

You could also be tight if you haven’t collected all the money people owe you. For instance, maybe you’ve rented a lot of studio time or gathered a lot of event registrations. If those people have booked but not yet paid you could be in trouble. In the same way, you could have solid fundraising pledges, or a confirmed grant, but still be awaiting the funds.