Can I Return A Donation?

We are a Canadian Charity in the poverty sector, operating out of British Columbia, Vancouver to be specific. We recently received a sizable donation from a shady individual who has proceeded to publicize his contribution to our Charity. We would like to return the donation and dissasociate from him.

Q. Are we allowed by Canadian Law to return a donation or gift to a donor?

Short Answer: Generally, No…

Comprehensive Answer: Generally, a Charity cannot return a donation or gift that it has received. Why? Because a gift transfers ownership to the Charity, and the Charity’s purposes in its constating and governing documents will require it to use the donation to further its charitable purposes. For more detailed guidance from the CRA, see here.

Follow up question: So what are our options?

Answer: One option is to make a court application to return the donation to the donor. A second option is to transfer the donation to another Registered Charity. But note, a Charity may only do so if your governing or constating documents allow assistance to other Registered Charities.

Note: Where a Charity fundraises for a special project and later reneges on the project, whether intentionally or because of matters beyond its control, the donations would have to be returned to the donors (unless the Charity made it clear to the potential donors that the donations will be used for other projects if the said project doesn’t materialize).

Final note on this matter: When a donation is returned to the donor, an amended tax receipt must be issued to the donor.

Understanding Donation Returns for Canadian Charities

Canadian registered charities face strict rules about returning donations. The Canada Revenue Agency (CRA) sets clear guidelines for these situations.

Most donations become the charity's property once received. This means charities cannot simply decide to return funds later.

However, specific circumstances may allow returns. Understanding these exceptions helps charities navigate complex donation situations.

Legal Requirements for Returning Charitable Donations

The general rule is no. Registered charities cannot return gifts to donors under normal circumstances.

When you receive a donation, ownership transfers to your organization. Your governing documents require you to use these funds for charitable purposes only.

The CRA considers returned donations as potentially problematic. They may question whether the original transaction was truly a gift.

Some exceptions exist for specific situations. These require careful legal consideration and proper documentation.

Mandatory Situations for Donation Returns

Certain situations legally require charities to return donations. These circumstances are rare but important to understand.

Fraudulent or illegal donations must be returned immediately. This includes funds obtained through criminal activity or deception.

Donations made under false pretenses may require return. If donors were misled about how funds would be used, returns may be necessary.

Court-ordered returns are mandatory. Judges may order donation returns in legal disputes or fraud cases.

Specified project failures trigger return requirements. When charities cannot complete promised projects, funds may need returning.

Donor capacity issues may require returns. Donations from individuals lacking mental capacity to make gifts must be returned.

Prevention Strategies for Donation Complications

Prevention is better than dealing with return complications later. Smart policies protect both charities and donors.

Clear donation policies prevent misunderstandings. Explain exactly how donations will be used in all fundraising materials.

Proper donor screening identifies potential issues early. Research major donors and their backgrounds before accepting large gifts.

Written agreements clarify expectations. For significant donations, create formal agreements outlining terms and conditions.

Flexible project language provides options if plans change. Include clauses allowing fund reallocation to similar charitable purposes.

Regular communication keeps donors informed. Update supporters about project progress and any necessary changes.

Professional legal review ensures compliance. Have lawyers review donation policies and agreements before implementation.

Documentation standards protect your organization. Keep detailed records of all donation communications and decisions.

These practices reduce the likelihood of needing to return donations. They also demonstrate good governance to regulators and supporters.

Conclusion

Navigating donation return situations requires expert legal guidance to protect your charity's reputation and compliance status. Whether you're dealing with problematic donors, project changes, or complex gift arrangements, understanding your legal obligations is crucial for maintaining your registered charity status.

B.I.G. Charity Law Group specializes in helping Canadian charities handle these delicate situations while maintaining CRA compliance. Our experienced team understands the nuances of charitable law and can guide you through donation return processes, policy development, and risk prevention strategies.

Don't let donation complications jeopardize your charitable mission. Contact us at dov.goldberg@charitylawgroup.ca or call 416-488-5888 to discuss your specific situation. Visit CharityLawGroup.ca to learn more about our services, or schedule a FREE consultation today to get the legal support your charity deserves.

Frequently Asked Questions

These common questions help clarify specific donation return scenarios that Canadian charities frequently encounter. Each situation has unique legal considerations under CRA guidelines.

Can donations be refunded? 

Generally no. Once a donation is made to a registered charity, it becomes the charity's property and must be used for charitable purposes. Refunds are only permitted in exceptional circumstances like fraud or court orders.

Can charitable donations be carried back in Canada? 

Yes, unused charitable donation tax credits can be carried back one year or carried forward up to five years on your personal tax return. This refers to tax benefits, not actual donation returns.

Can donations be charged back? 

Credit card chargebacks can occur if donors dispute transactions with their banks. Charities should maintain clear donation records and communication to defend against unwarranted chargebacks.

Can you revoke a donation? 

Donors cannot simply revoke completed donations. Once ownership transfers to the charity, the donation cannot be undone except through legal processes or in cases of fraud or misrepresentation.