Policy commentary

Release date
June 28, 2000

Reference number
CPC-019

Subject

Official donation receipts - Whether a payment for participation in a youth band or choir qualifies as a charitable donation

Purpose

To clarify the Directorate's policy regarding payments to youth bands and choirs that are registered charities.

Commentary

1. The Income Tax Act permits a registered charity to issue official donation receipts for tax purposes only for donations that legally qualify as gifts.

2. A charity may not issue an official donation receipt if the donor has directed the charity to use the funds to defray or pay the costs of a particular band player or chorister's participation in the band or choir. In reality, such a transaction can be viewed in one of two ways, neither of them acceptable:

• it is either a gift made to an individual rather than the charity - the charity merely being an intermediary to facilitate the issuance of an official donation receipt
• it is a quid pro quo arrangement rather than a gift - the benefit to the individual is tied to the payment

3. If a band member has to collect amounts corresponding to his/her expenses to participate in band or choir activities, failing which the member will not be able to participate in the activities, it is likely that payments collected particularly from friends and family are not gifts at law, but rather payments made for the benefit of that particular member.

4. If a member can participate in the band or choir activities regardless of the amounts he/she raises, those amounts will likely be considered gifts.

References

• S7-F1-C1, Split-receipting and Deemed Fair Market Value