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.
Principal Issues: Can a municipality issue a donation receipt for an eligible amount of a gift that is directed to a non-profit organization?
Position: A municipality can issue a donation receipt for the eligible amount of a gift that is directed to a non-profit organization provided the municipality retains control over the gift and the municipality is not merely acting as a conduit for the organization.
2008-030447
XXXXXXXXXX Sylvie Danis
(613) 957-3496
March 16, 2009
Dear XXXXXXXXXX :
Re: Issuance of donation receipts for directed gifts
This is in response to your e-mail of December 20, 2008, wherein you requested our comments on whether a municipality is permitted to issue donation receipts in circumstances where a gift received by the municipality is directed to a non-profit organization which is responsible for the maintenance of a building on a site owned by the municipality and to which it has been delegated the operation of municipal programs.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency (CRA).
Section 118.1 of the Income Tax Act (the "Act") provides that individual taxpayers may claim a credit against taxes payable, within specified limits, for an eligible amount of a gift made to a "qualified donee", if supported by official receipts. Section 110.1 of the Act permits a corporation to claim a deduction, within specified limits, in computing taxable income in respect of an eligible amount of a gift made by the corporation to a "qualified donee". A municipality in Canada is a "qualified donee" for purposes of the Act, by virtue of the subsection 149.1(1) of the Act, and the definition of "total charitable gifts" in subsection 118.1(1) of the Act. Therefore, when a municipality in Canada receives a "gift" from an individual or corporation, the municipality may issue an official tax receipt for the eligible amount of the gift which will permit an individual donor to claim a tax credit or a corporate donor to claim a tax deduction. A non-profit organization is not a "qualified donee" for purposes of the Act.
Under the proposed split-receipting rules, the eligible amount of a gift is the amount by which the fair market value of the gift exceeds the amount of the advantage. The amount of the advantage is generally the value, at the time the gift is made of any property, service, compensation or other benefit received, or expected to be received in the future, as partial consideration for, or in gratitude for the gift.
It is our general view that donations can be receipted by a municipality in Canada on behalf of an organization which operates under the authority of the municipality (e.g., a committee established by a municipal bylaw) provided the municipality retains discretion as to how the donated funds are to be spent. If the Municipality is merely collecting funds from donors on behalf of the non-profit organization and the latter is legally or otherwise entitled to the property so transferred, the Municipality is not in receipt of a gift and cannot issue a donation receipt. In that case, the municipality is merely acting as a conduit for the other organization and it is our view that payments received by the municipality on behalf of the organization could not qualify as gifts to a municipality in Canada for purposes of subsections 118.1(1) and 110.1(1) of the Act.
We trust the above comments are of assistance. However, as stated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency in respect of any particular situation.
Yours truly,
F. Lee Workman
Manager
Charitable and Financial Institutions Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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