13 February 2001 External T.I. 2000-0051255 - Pledge incentives - XXXXXXXXXX

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

A charity undertakes fund raising through workplace campaigns. Whether the charity should provide official tax receipts when employees who return their pledge forms by a set deadline are eligible to be entered into a draw for a prize.

Position:

If an employee's eligibility to be entered into the draw is based solely on the return of the pledge form by a set deadline and not on whether a donation is actually made, the entry into the draw, in and of itself, should not disqualify the employee's donation as a gift for income tax purposes.

Reasons:

The employee's entry into the draw is not conditional on the employee also making a donation. Accordingly, it should not, in our view, constitute consideration for a donation made by the employee.

XXXXXXXXXX 2000-005125
J. Leigh
February 14, 2001

Dear XXXXXXXXXX:

Re: Donation Receipts - Incentive Draws

This is in reply to your facsimile letter dated October 12, 2000 requesting our views as to whether an official tax receipt should be issued in the specific fact situation described below.

XXXXXXXXXX undertakes fund raising through workplace campaigns. In the workplace, each employee is given a pledge form to donate to XXXXXXXXXX. Some workplaces track pledge forms distributed to ensure each employee is given the opportunity to make a donation. In order to ensure all forms are returned and their campaign totals can be finalized in an accurate and timely manner, some workplaces use incentive draws for returning pledge forms by a set deadline. Anyone returning a pledge form by that date and time, including forms indicating no donation will be made, is eligible for the draw. Prizes involved would likely be in excess of a nominal value. Your question is whether the entry into the draw constitutes consideration for those employees who actually make donations.

Our Comments

As stated in paragraph 3 of our Interpretation Bulletin IT-110R3, a gift, for the purposes of sections 110.1 and 118.1 of the Income Tax Act (the "Act"), is a voluntary transfer of property without valuable consideration. Generally, a gift is made if all three of the following conditions are met:

1. some property - usually cash - is transferred by the donor to a registered charity;

2. the transfer is voluntary; and

3. the transfer is made without expectation of return. No benefit of any kind may be provided to the donor or to anyone designated by the donor, except where the benefit is of nominal value.

An official tax receipt can be issued where a gift has been made to a "qualified donee" within the meaning of subsection 149.1(1) of the Act. A pledge is an undertaking to make a gift and an official tax receipt may be issued when the amount pledged is actually paid to the qualified donee.

In the situation described, you advise that it is expected that a significant number of employees who have no intention of making a donation will return the pledge form solely for a chance to win the prize in the draw. Given that the only prerequisite for entry into the draw is the return of the pledge form by a set deadline, the entry into the draw would not, in our view, constitute consideration to those employees who actually make donations since employees who do not make donations are also eligible for entry into the draw. Accordingly, donations made by employees in such circumstances are gifts for income tax purposes and official tax receipts may be issued for such donations.

While we hope that our comments will be of assistance to you, they are given in accordance with the practice referred to in paragraph 22 of IC 70-6R4 and are not binding on the Agency in respect of any particular situation.

Yours truly,

Manager
Financial Institutions Team
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch