Transcript

"Issue Complete and Accurate Donation Receipts." A registered charity may only issue official donation receipts for donations that legally qualify as gifts. You may also want to refer to the webinar that we have on gifting and receipting. Receipts must contain all required information specified in Regulation 3501 of the Income Tax Act. The details are available on the following slide. As well, sample receipts are available on the Charities and Giving website. The link is available at the bottom of our next slide.

The content of a donation receipt. All official income tax receipts must contain all required information as specified in Regulation 3501 of the Income Tax Act. This listing provides all mandatory elements required of a receipt.

Continuing now on to "Examples of Improper Use of Donation Receipts." Receipting on behalf of another organization. A charity is responsible for all receipts issued under its name and registration number. It must account for the corresponding donations on its annual information return and in its books and records. Under no circumstances should a registered charity issue donation receipts on behalf of another organization or lend its registration number to another organization for receipting purposes.

Inaccurate or missing information. A charity must ensure that it issues donation receipts that meet the Act's regulations about the required contents of an official donation receipt. Charities often issue receipts with inaccurate or missing information. For example, a charity may improperly issue a receipt without the address of a donor or they might leave out the fair market value, the appraised amount, or who appraised it. Charities must also be aware of the different requirements for receipts issued for cash gifts and non-cash gifts.

Transactions that do not qualify as gifts. To avoid improper receipting, a charity must know when it can and cannot issue a donation receipt. A donation receipt can be issued only if there has been a voluntary transfer of property by way of gift. Property includes such tangible items such as cash, stocks, computers, and sports equipment. Charities often make mistakes regarding the type of gifts that are receiptable. For example, a charity cannot issue an official donation receipt for a gift of services.

Inflated amounts. Issuing a donation receipt with a dollar amount that is far in excess of what the charity has actually received as a gift can be a deliberate attempt by a charity to abuse the tax system. However, issuing a receipt for an inflated amount is not always deliberate. For example, establishing the fair market value of a non-cash gift is frequently problematic for charities. Charities should not solely rely on the donor to give them a value for the item that's being receipted. The amount on the receipt should be the fair market value and if the value cannot be determined, a receipt cannot be issued.

"Consequences of Improper Receipting." A registered charity that issues an official donation receipt that includes incorrect information is liable to a penalty equal to 5% of the eligible amount stated on the receipt. This penalty will increase to 10% for a repeat infraction within 5 years. A registered charity that issues a donation receipt that includes incorrect information is liable to a penalty equal to 125% of the eligible amount stated on the receipt, where the total does not exceed $25,000. Where the total does exceed $25,000, the charity is liable to a penalty equal to 125% and it'll be suspended of its tax receipting privileges. A registered charity that contravenes or continues to contravene the Act would also have its registered status revoked.

"Filing the Annual T3010 Information Return." A registered charity must file form T3010 together with its financial statements and other required attachments no later than 6 months after its fiscal period end. A registered charity that does not file its return can lose its registration status. Once it loses its status, it can no longer issue tax receipt for donations, it will be liable to pay that revocation tax that's equal to the full value of all its remaining assets, and it will be liable for a $500 late filing penalty fee if it chooses to re-register.

"Consequences of Failing to Meet the Requirements of the Income Tax Act." Failing to meet the requirements of the Income Tax Act will result in the following consequences: sanctions, monetary penalties, or suspension of tax receipting privileges. Revocation, loss of registered status, therefore the charity will again no longer be tax exempt, no longer able to issue tax receipts, it will be liable for the Part V tax and it will no longer be able to receive gifts from other registered charities, and it will lose other indirect benefits such as the GST/HST rebates, property tax rebates, lottery and gaming permits. The charity will also be subject to the late filing penalty fee of $500 again, if it chooses to reapply.

"Maintaining the Charity's Status as a Legal Entity." To maintain the charity status as a legal entity, registered charities that are incorporated also have to comply with the requirements of their incorporating statute. This often includes filing an annual report and/or paying annual fees, and the charity should inquire with the appropriate incorporating body and other requirements that they may have. If a charity's corporate existence is dissolved, it may also lose its charitable registration. Please contact our Client Service Section for further information.

"Informing the Charities Directorate of Changes." A registered charity must be established for charitable purposes, sometimes also referred to as objects. If a charity introduces purposes that do not qualify as charitable, it will be placing its registered status in jeopardy. By consulting with the Charities Directorate before making changes, a charity can avoid the need to further amend its purposes. The charity should provide both its proposed purposes and a detailed statement of its activities for our review. The statement of activities should fully describe in detail how the charity intends to accomplish its new purposes. After the charity has legally changed its purposes, it should provide the Charities Directorate with the applicable documentation. This can sometimes be the supplementary letters patent or the amended constitution.

So, "Informing the Charities Directorate of the Changes, continued." A charity should inform the Directorate if it changes its name, address, telephone or fax number, email address or contact information, its governing document, if the charity has been part of an amalgamation, merger or consolidation, and if the charity is no longer in operation and it wishes to have its registration voluntarily revoked. A charity must obtain prior approval from the Directorate before changing its fiscal period end. A charity that changes its fiscal period end without approval may miss important reminders to file that are sent out based on the fiscal period end that we have on file and may end up filing late because they haven't informed us of the change.

So this is how you would inform the Charities Directorate of any changes. Please send any notifications requesting changes separately from your T3010 annual information return. They're processed separately, so please send them in a separate envelope. You can either mail the requests or you can fax them, and our information, our address and our fax number is available on the screen.