CRA Compliance

Q. We are a religious Charity based out of Winnipeg and have a donor who just gave us a huge donation, the biggest our charity has seen to date. It’s big, in the millions. We would like to show our appreciation by giving her a token gift. Is that allowed under Canadian Charity Law?

Short Answer: Absolutely, but…

Comprehensive Answer: In legal parlance, a token of appreciation is called “advantage” and “consideration.” In some cases, depending on the value of the “consideration”, the charity may have to reduce the amount of the receipt by the value of the gift.

So what does it depend on? A Charity must determine the FMV (Fair Market Value) of the consideration (token appreciation) given to the donor. If the FMV of the consideration is minimal, then the value of the receipt will not have to be reduced.

If, however, the gift given to the donor is significant, then the amount of the donation that appears on the official donation receipt will have to be reduced by the value of the consideration. Again, in legalese, this is called “split receipting.”

Note: Even if the gift the Charity is giving to the donor was obtained at no cost to the Charity, the Charity must still determine the Fair Market Value of the gift.