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:
1. Whether a municipality can issue charitable receipts for donations that may be subject to a general direction.
2. Can the municipality issue a charitable donation receipt on behalf of a community association.
3. Can the Municipality issue receipts for the donation of equipment to be used at a community building.
Position:
1. Yes provided they meet the Department's criteria as noted in IT-110R3 and ATR 63
2. Yes provided the community association is an organization which operates under the authority of the municipality (e.g. a committee established by a municipal bylaw)
3. Gifts in kind are acceptable provided they are gifts and meet criteria.
Reasons:
Established positions
XXXXXXXXXX M.P. Baldwin
981366
Attention : XXXXXXXXXX
January 13, 1999
Dear Sirs:
Re: Charitable Gifts
This is in reply to your letter of May 19, 1998 requesting a technical interpretation with respect to section 118.1 of the Income Tax Act (the “Act”). We apologize for the delay in responding to your request.
The situation described in your letter appears to be an actual fact situation and written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3 (copy enclosed). Where a completed transaction is involved, the inquiry should be addressed to your local District Tax Services Office. Consequently, we can only offer the following general comments.
Subsections 118.1(2) and (3) of the Act permit a deduction from tax payable, within specified limits, for gifts made to qualified donees, which includes a Canadian municipality, if supported by official receipts. A gift would include a gift in kind. As indicated in paragraph 3 of Interpretation Bulletin IT-110R3 (copy enclosed) a gift is a voluntary transfer of property without valuable consideration. Generally, a gift is made if all three of the conditions listed below are satisfied :
(a) some property - usually cash - is transferred by a donor to a registered charity;
(b) the transfer is voluntary; and
(c) 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.
Also as noted in paragraph 15(f) of the IT-110R3, in the true sense of a gift, the donee must have unfettered right to use the money. However, donations subject to general direction from the donor that the gift be used in a particular program operated by the donee are acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm’s length with the donor, and that decisions regarding the utilization within the program rest with the donee.
In addition to the above, the Department has taken the view that donations can be receipted by a Canadian municipality on behalf of an organization which operates under the authority of the municipality (e.g., a committee established by a municipal bylaw). However, where the municipality is merely acting as a conduit for some other organization, it is our view that payments received by the municipality on behalf of the organization could not qualify as gifts to a Canadian municipality for purposes of subsection 118.1(1) of the Act.
We trust that the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
Enclosures
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