Tips for Creating Your Organization’s Privacy Policy

When it comes to collecting and using data about your organization’s patrons and donors, it is imperative to have a privacy policy which meets the requirements of federal legislation, PIPEDA (the Personal Information Protection and Electronic Documents Act), and in some cases additional provincial legislation. The Office of the Privacy Commissioner of Canada has some information about the application of PIPEDA to charitable and non-profit organizations here.

Need help wading through the PIPEDA waters? Want to draft a privacy policy but don’t know where to begin?  Charity Central has created a Privacy Policy Checklist, a tipsheet designed to help you better understand your organization’s information-handling practices and why and how you should create a privacy policy.

Click here to view Charity Central’s Privacy Policy Checklist.

Disclaimer 

We received a gift from a foundation and they want a tax receipt. Should I send one?

No.

In Canada, the function of a charitable donation receipt is to confer an income tax credit on the donor. This credit reduces the amount of tax payable. Foundations are registered charities and, as such, are exempt from paying income tax. They cannot use the tax credit for any purpose.

Here’s the Canada Revenue Agency’s word on the topic.

As the CRA suggests, you can provide a thank-you letter and/or an ordinary receipt (not an official receipt for income tax purposes). Also, your foundation supporter will need your charitable registration number in order to complete their own T3010 Charities Return reporting.

We held a fundraising raffle. Can I issue charitable donation receipts for raffle ticket purchases?

No.

You can’t issue a charitable donation receipt for a lottery ticket or other chance to win a prize. Your supporters have purchased something from you – the chance to win. They have not made a donation.

Here’s the citation from the CRA website.

I got a bonus, and I had to pay a huge chunk of it as tax. What happened?

The bonus becomes part of your total compensation for the year. Let’s say your salary is $36,000 and your employer gives you a $500 bonus. You now need to be taxed as though you’re making $36,500. The bonus calculations need to adjust for the boost in your annual earnings.

Employment Insurance (EI) is a straight percentage of earnings up to an annual maximum. It’s not the culprit, here.

Canada Pension Plan (CPP) is a straight percentage of earnings over $3,500, to an annual maximum. The first $3,500 of earnings is not pensionable. This exempt amount is spread over all of the pays in the year. So, on a salary of $36,000, your weekly gross would be $36,000 ÷ 52 = $692.31. Your weekly non-pensionable earnings would be $3,500 ÷ 52 = $67.31. You pay CPP on only $692.31 – $67.31 = $625.00.

However, if you receive the $500 bonus on a separate cheque, you need to pay CPP on the whole bonus, because you’ve already had the exempt amount on your paycheque. That may make the CPP feel extra expensive.

Tax works in a similar way. In Canada, the first chunk of our income is tax-free: the basic personal exemption (for 2012, $10,822 federally). Thereafter, increasing tax rates apply to different slices of our income. Here are the rates for 2012.

The tax amount on your weekly paycheque is a blended rate: 0% on the first slice, 15% on the next slice, and so on. However, a lump sum such as a bonus must be taxed at the marginal rate: the tax rate that applies to the next dollar of earnings. This can feel very costly, but in fact it’s fair.

To work this out for yourself, you can use the CRA Payroll Deductions Online Calculator, or your can try the manual method, explained in more detail here.

What should appear on a tax receipt?

The Canada Revenue Agency (CRA) provides templates to guide you in what information should appear on a tax receipt (donation receipt). In addition to showing what basic identification information about the charity and donor should appear, the CRA provides ‘4 flavours’ of sample receipts:

1. Cash gift (no advantage) – The most common scenario, this receipt acknowledges the full cash amount donated (e.g. $20 donation = $20 tax receipt).
2. Cash gift with advantage – This receipt is issued for only the eligible amount of the cash donation – the full amount minus the amount of the advantage, or what the donor receives in exchange for the gift (e.g. a $50 donation to attend a fundraising lunch for which meal is valued at $20 receives a tax receipt for $30). The full gift amount, the advantage value, and the eligible amount are all noted on the tax receipt.
3. Non-cash gift (no advantage) – This receipt includes the appraised value of a non-cash item donated to a charity (e.g. a donation of an artwork appraised at $1500 receives a tax receipt for $1500).
4. Non-cash gift with advantage – This receipt is issued for only the eligible amount of the non-cash donation – the full amount minus the amount of the advantage, or what the donor receives in exchange for the gift (e.g. if an individual donates a house valued at $100,000 but receives $20,000 cash in return, the tax receipt is issued for $80,000). The full gift amount, the advantage value, and the eligible amount are all noted on the tax receipt).

Visit this page on the CRA website to view sample receipts. Remember, these are guides. They are intended to show you what relevant information needs to appear, but you can format yours differently and brand it for your own organization.

What is the difference between a gift-in-kind and a gift-of-service?

According to the Canada Revenue Agency charities glossary, “Gifts-in-kind, also known as non-cash gifts, are gifts of property. They cover items such as artwork, equipment, securities, and cultural and ecological property.

A contribution of service, that is, of time, skills or efforts, is not property and, therefore, does not qualify as a gift or gift in kind for purposes of issuing official donation receipts.”

See also the Young Associates glossary entry on in-kind donations.