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: Whether it is appropriate for a charity to issue receipts in respect of gifts directed to programs of the charity that benefit specified persons or families.
Position: It will depend upon the facts. A charity may adopt a program that benefits a specified person or family where the program is consistent with the charity's mandate. Gifts directed to such a program may be receipted. In order for a transfer of property to constitute a gift, however, no benefit may accrue to the donor directly or indirectly.
Reasons: A gift at law includes only transfers of property without consideration. Where the donor benefits from the transfer of property either directly or indirectly (e.g. by arranging to have the benefit accrue to a designated person), there is not gift. Whether or not such a benefit exists depends upon the facts.
XXXXXXXXXX 2001-008672
R. Maley
July 9, 2001
Dear XXXXXXXXXX:
Re: Issuance of charitable tax receipts
This is in reply to your letter of May 25, 2001, regarding the issuance of charitable tax receipts in circumstances where funds have been raised to benefit a particular person or family.
As we understand it, your concern is based on two comments published in Canada Customs and Revenue Agency (CCRA) interpretation bulletin IT-110R3, "Gifts and Official Donation Receipts". The first, set out in paragraph 3(c) of the bulletin provides that gifts include only transfers of property made without expectation of return, with no benefit being provided to the donor or to anyone designated by the donor. The second, set out in paragraph 15(f) of the bulletin, states that a charity may not issue a receipt to a donor who has directed the charity to give the funds to a specified person or family. This latter paragraph further provides that a charity may issue a receipt to a donor where the donor makes a gift subject to a general direction that it be used in a particular program operated by the charity, where the gift provides no benefit to the donor or to persons not dealing at arm's length to the donor. You are unclear, however, whether it is appropriate for a charity to issue receipts in respect of gifts directed to programs of the charity that benefit specified persons or families and have asked that we comment on five specific questions.
1. Is IT-110R3 still valid?
2. Is the writer's understanding that program-directed gifts qualify for charitable tax receipts while gifts directed towards individuals do not qualify correct?
3. Do gifts made to programs that involve very small numbers of children (i.e. less than 10 per year) constitute qualifying gifts?
4. If a child has a unique or highly unusual disorder such that only one child per million is affected, and donors make gifts to the program supporting this child, are these considered qualifying gifts?
5. In the case of #4 above, would qualifying gifts be those that went to medical research, capital equipment or some other purpose, such that no individual or group of individuals benefit?
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.
IT-110R3 is still valid and your understanding that "program-directed" gifts may be receipted is correct. However, this concept of a "program" would not, in our view, necessarily exclude a program implemented to benefit specific individuals or families as long as the program is consistent with the charity's mandate. Questions respecting the propriety of a charity undertaking a particular program where the benefit is to a specific individual or family, rather than a broader public benefit, should be referred to the CCRA Charities Directorate (1-800-267-2384).
Where a charity has undertaken such a program, the primary concern in assessing whether or not a particular transfer of property constitutes a gift and hence, whether a donation receipt should be issued, is whether the particular facts of the situation indicate that the donor is obtaining a direct or indirect benefit from the transfer of property. For example, if a charity adopts a program to help pay extraordinary costs incurred by a person or family, and those costs would otherwise be obligations of the donor, a transfer of property to the charity by that donor and directed to that program clearly would not be a gift. However, there may be circumstances where it is less clear whether or not the transfer of property at issue is a gift, and each circumstance must be considered on its facts. Where a charity is unsure whether a particular "program-directed gift" may be receipted, we recommend that it contact that CCRA Charities Directorate for assistance.
While the foregoing comments are not binding on the CCRA, we trust that they are helpful.
F. Lee Workman
Manager
Financial Institutions
Financial Industries Division
Income Tax Rulings Directorate
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