The Canada Revenue Agency (the “CRA“) requires registered charities to be diligent in their record keeping. For example, charities must maintain proper books of account which include records of all revenues and charitable donations received and how resources were spent on charitable programs. A charity must also maintain up to date corporate or trust records (as applicable), including all governing documents and bylaws, and minutes of the meetings of the members and the board of directors or board of trustees. Financial statements and tax returns should be kept for a minimum of six years from the end of the last tax year to which they relate.
From a receipting perspective, a duplicate copy of every tax receipt that has been issued must be kept for a minimum of two years from the end of the calendar year in which the donation was made (and longer in the case of 10-year gifts).
The CRA allows registered charities to utilize “split receipting” to provide some tax relief to donors who receive a benefit from a donation (e.g., a meal at a fundraiser or a round of golf at a charity golf tournament). To determine the amount eligible for a donation receipt, the charity has to subtract the value of the “advantage” received by the donor from the value of the gift.
In order for a gift to qualify for the split receipting policy:
- the charity must be able to determine an accurate value for the advantage conferred on the donor by donating; and
- the value of the advantage received by the donor must not be more than 80% of the total value of the donation. If the value of the advantage is more than 80% of the value of the donation, the CRA takes the view that there was no intention to gift such that a tax receipt cannot be issued.
As an example, if a person donated $200 to charity and received a ticket to a hockey game worth $175, the charity could not issue the donor a charitable tax receipt because the value of the advantage received was too high.
Conversely, the CRA also accepts that some advantages are of such insignificant value that they should not impact the value of the donation receipt at all. This de minimis rule stipulates that if an advantage received through donation does not exceed the lesser of $75 or 10% of the value of the gift, the advantage is too insignificant to affect the value of the gift and a full donation receipt can be issued.
Using the above hockey ticket as an example, the de minimis threshold for a $200 donation would be $20 (this is because 10% of the donation’s value is $20, which is less than $75). As such, a receipt for the full $200 donation could be issued to the donor if the advantage conferred on the donor (the hockey ticket) is worth $20 or less.
Recording keeping for registered charities is extremely important and improper recordkeeping can have significant negative impacts to both registered charities and their donors.