CRA Compliance

Question: As a religious charity based in Winnipeg, we are thrilled to have received a massive donation from our most generous donor. This donation is the largest we have ever received, totaling millions of dollars. We are incredibly grateful for this support and would like to show our appreciation by giving our donor a token gift. Is that allowed under Canadian Charity Law?

‍

Answer: According to Canadian Charity Law, offering a token of appreciation to a donor is allowed, but specific considerations must be made. The legal terms for this token of appreciation are "advantage" and "consideration."

‍

The deciding factor for whether or not the receipt amount needs to be reduced is the Fair Market Value (FMV) of the consideration or token of 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; however, if the gift given to the donor is significant, in that case, the amount of the donation that appears on the official donation receipt will have to be reduced by the value of the consideration. This is known as "split receipting" in legal terms. It's important to note that even if the gift is obtained at no cost to the Charity, the FMV of the gift must still be determined. This is because the value of the gift is different from what it costs to produce but rather what it would be worth in the current market.

‍

We want to recognize and appreciate our donor's generosity while adhering to all legal requirements. By determining the FMV of the gift and following the guidelines set by the law, charities can show their appreciation to donors while also maintaining compliance with Canadian Charity Law.

‍

In conclusion, charities must know the legal requirements surrounding donor token gifts. By following the guidelines set by the Income Tax Act, the CRA and relevant provincial legislation, charities can show their appreciation to donors while maintaining compliance.

‍