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March/April 2008 Public Policy Update

IRA Rollover Extension Introduced in the Senate


The Alternative Minimum Tax and Extenders Tax Relief Act of 2008 (S. 2886) was introduced by Sens. Max Baucus (D-Mont.), the chair of the Senate Finance Committee, and Charles Grassley (R-Iowa), the committee’s ranking member. This tax extenders package includes an extension of the IRA Rollover provision that would retroactively cover Jan. 1, 2008 through Dec. 31, 2009.

Action Required:

Please contact your members of Congress and urge them to pass the IRA Rollover provision extension found in the tax extenders package.

An easy way to contact your members is by using the Vote for Philanthropy website here where you can send a pre-drafted letter to your Members of Congress with the push of a button.

You can also find your list of senators here.  You can find your House member here (just enter your zip code in the top left-hand corner of the webpage).


The IRA provision (Section 207 of the bill) would be retroactive back to Jan 1, 2008, when the provision expired. The provision would remain in its original form, applicable only to direct gifts of cash to charitable organizations (capped at $100,000 annually) from donors age 70½ or older.

AFP has already been in contact with key senators’ offices about moving the bill and the IRA Rollover provision forward. The association will also be working with the House of Representatives and the House Ways and Means Committee to identify an appropriate legislative vehicle to move the IRA Rollover forward in that body.

Other Charitable Giving Proposals

S. 2886 contains several other provisions related to charitable giving and fundraising, most of them extensions of measures that expired at the end of 2007:

  • Enhanced charitable deduction for donations of food
  • Extension of the charitable deduction for donations of books to include public schools
  • Basis adjustment to stock of S corporations contributing property
  • Increased deduction for certain contributions of land for conservation purposes

A full copy of the text of the bill can be found here. A summary of the bill can be found here.

IRS Seeks Comments on Draft Instructions for Redesigned Form 990


The Internal Revenue Service (IRS) is seeking public comments on the draft instructions to the 2008 Form 990, the annual return most tax-exempt organizations must use to report information about their operations.

The instructions are for the redesigned Form 990 that organizations will file for their 2008 tax year (returns filed in 2009), which was released in final form in December 2007 (IRS news release IR-2007-204).

Action Required:

AFP has been meeting with various IRS officials and discussing the instructions, and AFP plans to submit formal comments to the IRS. If you have any suggestions or comments that you would like AFP to consider, please send them to Jason Lee, director of government relations, at

To submit separate comments, you can email them to the IRS at
(*Instructions from the IRS: to facilitate posting on the IRS website, please email comments in a text [not picture] format. Comments on the instructions received via email will be posted on this website, after removing the submitter's email address).

Comments may also be mailed to:

Draft 2008 Form 990 Instructions, SE:T:EO
1111 Constitution Ave., N.W.
Washington, DC 20224


The IRS is seeking comments from the public on the 2008 Form 990 instructions in an effort to ensure the final instructions address the needs of the tax-exempt community. The comment period is open until June 1, 2008. Included with the instructions are special highlights lists indicating certain items in the instructions on which the IRS would especially like to receive public comments. As with comments received on the draft Form 990, the IRS plans to post comments on the instructions on its website.

The draft 2008 Form 990 instructions are organized according to a consistent format. There is a general overview of the form or schedule explaining its purpose, an explanation of who must file that particular schedule and then line-by-line instructions to aid in answering each question on the form or schedule.

The draft instructions also contain a number of new tools designed to make it easier for the organization to answer the questions and to promote more uniform reporting. These tools include a comprehensive glossary of terms, a sequencing list to help organizations determine the order in which to fill out parts of the form, a compensation table to help organizations determine how and where to report items of compensation, and many illustrative examples. These aids were developed in response to comments received last year in connection with the draft Form 990.

Canadian Members - Contact Your Member of Parliament to Pass the NPD Bill


Canada is on the verge of becoming the first country to enact a government-recognized National Philanthropy Day®, but your help is needed.

On April 29, 2008, Bill S-204, an act to recognize Nov. 15 permanent as National Philanthropy Day, was passed unanimously in the Senate.

On Wednesday, May 7, 2008, the bill was introduced in the House.

Action Required:

All Canadian AFP members are strongly urged to contact their Members of Parliament (MP) and encourage them to support the bill NOW! Because this is a sector-wide initiative, we also encourage you to outreach within your own communities and networks (both AFP members and non-members) and urge them to show their support of this bill by contacting their MP as well.

You can find your Member of Parliament here.

When you reach your MP's office, please use the following talking points:

  • Say that you are calling from the MP's province. Please tell him or her your hometown.
  • Mention that you are calling from [insert your organization's name], an organization that provides [insert services provided by your organization] services to [insert number of people served by your organization, if known] people.
  • Ask your MP to support Bill S-204 that would create the world's very first government-recognized National Philanthropy Day (also known as NPD).
  • Explain that NPD is a special day set aside on the 15th of November. The purpose of this day is:
    • To increase public awareness of NPD as a time to say "thank you" to those who give throughout the year.
    • To focus public attention on major accomplishments made possible through philanthropic contributions.
    • To honor key local individuals and organizations for their philanthropic endeavors.
  • A government-recognized NPD is needed now more than ever. In 2006, the number of donors shrank by 1.4 percent to 5.8 million, according to new research by Statistics Canada. 
  • At the same time, the demand for charities and the vital programs and services that they provide is exponentially growing. In essence, charities are being asked to do more with less. If the charitable sector cannot meet the needs of the Canadian public, the federal government will bear the burden of filling the gap.
  • Note that philanthropy is a broad concept that covers all ethnicities, cultures and walks of life. It is a misconception that only the very wealthy are philanthropists. People from all backgrounds and from different income levels, including children, can be philanthropic leaders.
  • Also, explain that philanthropy represents giving in a variety of ways—the giving of money, the giving of one's time and the giving of one's talents. In that sense, philanthropy is more inclusive than the notion of volunteering—the giving of one's time.
  • Thank the MP (or staff) for his or her time.

Please pass these talking points along to your colleagues in the charitable sector, including those who are not AFP members (your donors, board members, organizational leadership, etc.) and ask them to contact their MP as well. This landmark legislation affects the entire sector, not just those associated with AFP. It is imperative that Members of Parliament see that this bill has broad support across the country and across all types of organizations, as well as from donors, CEO's, volunteers and fundraisers.

A copy of Bill S-204 can be found here.

For more information about the bill or AFP’s work in pushing this legislation forward, contact Jason Lee, director, government relations, at

CRA Calls for Comments on Fundraising Cost Guidelines


The Canada Revenue Agency (CRA) has proposed new guidelines on how charities should report fundraising costs and whether expenses can be considered charitable or fundraising.

The new policy statement, Policy on Fundraising, outlines the CRA's position on how costs associated with fundraising activities, or activities undertaken for fundraising and one or more other purposes, should be reported on a registered charity's T3010A return. The policy statement also sets out guidance for registered charities on how the CRA assesses a charity's fundraising to determine if it is acceptable.

While AFP is supportive of parts of the policy statement, especially its consideration of the perils of percentage-based compensation, it has concerns over the agency’s use of percentages when considering fundraising costs.

Action Required:

AFP will submit comments to the CRA prior to the June 30, 2008, deadline. If you have comments, feedback or suggestions that you would like to forward to AFP for its submission, please contact Jason Lee, AFP’s director of government relations, at

Those wishing to comment separately can submit those comments to the address or fax below or email

The mailing address is:

Charities Directorate, CRA
Ottawa ON K1A 0L5
Fax: 613-948-1320


The courts have determined that fundraising (whether undertaken as a purpose or activity) is not in and of itself charitable. Consequently, the costs of fundraising cannot usually be reported as charitable expenditures on a charity's T3010A, Registered Charity Information Return (T3010A return), and fundraising activities are not normally treated as advancing the charitable purposes of a registered charity.

As a general rule, on their T3010A return, charities are to report as fundraising expenditures all costs related to any activity that includes a solicitation of support or is undertaken as part of the planning and preparation for future solicitations of support, unless it can be demonstrated that the activity would have been undertaken without the solicitation of support.

According to the CRA’s proposed guidelines, to demonstrate that the activity would have been undertaken without the solicitation of support, charities must demonstrate either A or B below:

A. Substantially all of the resources devoted to the activity advance an objective other than fundraising.


B. All of the following apply to the activity:

1. The main objective of the activity was not fundraising, based on the resources devoted to fundraising in the activity, the nature of the activity or the resources used to carry it out.

2. The activity does not include ongoing or repeated requests, emotive requests, gift incentives, donor premiums or other fundraising merchandise.

3. The audience was selected for reasons other than its ability to give.

4. Commission-based remuneration or compensation derived from the number or amount of donations is not being used.

Where the test in A is met, on the T3010A return, all costs for the activity may be allocated as non-fundraising expenditures. Where the tests in B are met, on the T3010A return, a portion of the costs for the activity may be allocated as non-fundraising expenditures and a portion as fundraising expenditures.

Evaluating Fundraising Activities

The CRA plans to use a ratio of fundraising costs to fundraising revenue to conduct its preliminary evaluations of charities. Charities will fall into five categories, ranging from acceptable to rarely acceptable, in the evaluation grid below. The grid is the initial tool used in assessing the acceptability of a charity's fundraising, and serves as a general guide to the CRA's expectations.

  • Rarely acceptable:
    more than 70 percent (charity nets less than 30 percent)
  • Generally not acceptable:
    50–70 percent (charity nets 30–50 percent)
  • Potentially not acceptable:
    35.1–49.9 percent (charity nets 50.1–64.9 percent)
  • Generally acceptable:
    20–35 percent (charity nets 65–80 percent)
  • Acceptable:
    less than 20 percent (charity nets more than 80 percent)

AFP is concerned about the use of fundraising cost percentages as a means for the CRA to choose which charities it will investigate further. These types of percentages are often overly simplistic and do not take into consideration any number of factors that could affect fundraising costs from year to year.

Before concluding that a charity's fundraising is not acceptable, the CRA will examine a charity's fundraising conduct based on the considerations set out below. The presence of sound practices, the absence of practices that increase the risk of unacceptable fundraising, as well as the recent trend in the charity's ratio of costs will be considered in making a final determination.

Evidence of certain types of conduct will help convince the CRA that a charity did not engage in unacceptable fundraising. These actions include:

  • Prudent planning processes
  • Appropriate procurement processes
  • Good staffing processes
  • Ongoing management and supervision of fundraising practice
  • Adequate evaluation processes
  • Use made of volunteer time and volunteered services or resources
  • Disclosure of fundraising costs, revenues and practice

Other factors will be considered as increasing the risk that a charity has engaged in unacceptable fundraising. These include:

  • Sole-sourced fundraising contracts without proof of fair market value
  • Non-arm's length fundraising contracts without proof of fair market value
  • Fundraising initiatives or arrangements that are not well-documented
  • Needless purchase, non-arm's length purchase or purchase not at fair market value, of fundraising merchandise
  • Activities where most of the gross revenues go to contracted non-charitable parties
  • Commission-based fundraiser remuneration or payment of fundraisers based on amount or number of donations
  • Fundraisers receiving disproportionate compensation relative to non-fundraisers
  • Total resources devoted to fundraising exceeding total resources devoted to program activities
  • Misrepresentations in fundraising solicitations or disclosures about fundraising or financial performance
  • Combined fundraising and charitable program activity, where contracted to a party that is not a registered charity or that is compensated based on fundraising performance

AFP is pleased to see that the CRA is taking into account the use of percentage-based compensation, as well as examining the impact of charities taking an appropriate long-term view of fundraising where initial investments are needed that will bear fruit in future years.

Other circumstances that the CRA might consider when looking at fundraising costs include:

  • Small charities or charities with limited appeal
  • Charities that are investing resources in donor acquisition or other types of fundraising in which the return will not be realized in the same year in which the investment is made
  • Charities whose main or major purpose is to make gifts to qualified donees, or to one or more registered charities, and as a result have a different cost structure than charities that carry on their own activities
  • Charities whose activities include lotteries or charitable gaming that is regulated provincially
  • Charities engaging in cause-related marketing initiatives
  • Charities with extraordinary spending, relative to their size, on infrastructure to ensure compliance with this fundraising policy

AFP currently is analyzing the proposed guidelines. AFP and Imagine Canada may partner to draft a joint submission to the CRA.

AFP and Imagine Canada Submit Joint Petition Regarding CRTC Telemarketing Rules


The Association of Fundraising Professionals (AFP) and Imagine Canada filed a petition to the Governor in Council on April 28, 2008, to seek relief for all registered charities from unfair fees proposed by the Canadian Radio-television and Telecommunications Commission (CRTC).

Action Required:

None at this time.


Responsible for the implementation of the national do-not-call list, the CRTC would require all charities to register and pay fees to support the list’s operation. However, Parliament specifically exempted charities from the do-not-call list, and even the CRTC acknowledges that calls made by or on behalf of charities are not subject to the list and its accompanying regulations.

In their joint submission, AFP and Imagine Canada point out that the proposed fees and registrations also place a regulatory burden which is double that imposed on for-profit telemarketers. Charities are already required to operate their own specific do-not-call lists—if a donor asks to not be contacted by a charity, then the charity must place the individual’s name on an organizational do-not-call list and never call that person again. For-profit organizations do not have such a requirement.

While asking the Governor in Council to intervene in a regulatory body’s decision making is an exceptional remedy, AFP and Imagine Canada believe such action is warranted given the substantial evidence against the CRTC’s proposal.

A copy of the petition to the Governor in Council is available here and as an attachment, below.

Canadian Budget Includes Provisions to Advance Charitable Giving


The federal government’s 2008 budget includes several provisions affecting charitable giving, including a slight expansion of the exemption for gifts of securities from the capital gains tax.

The two proposed changes for the capital gains tax exemption are somewhat technical in nature and limited in focus, but may have an effect on certain nonprofit organizations.

Action Required:



First, the 2008 budget proposes to allow gifts of “exchangeable stock”—in which a donor exchanges unlisted securities into publicly listed securities in order to make a donation—to be exempt from capital gains tax when contributed to a charity. Because in this case the capital gain occurs when the securities are exchanged and not on the actual gift, these donations were not included in the capital gains exemption the government created in 2006 and 2007 for gifts of securities. However, the 2008 budget would exempt “exchangeable stock” contributions from capital gains if they occur after Feb. 26, 2008.

Second, in 2007 the government introduced regulations that limited certain excess business holdings by private foundations out of concern that certain individuals, because of their shareholdings, might be able to exert undue influence over the foundation. However, some foundations expressed concern over the regulations because of certain holdings that had increased significantly through capital gains by the time the 2007 budget came into force. The new budget would exempt certain holdings of private equity from the excess corporate holdings regulations. These new changes will apply to taxation years that began on or after March 19, 2007.

Anti-Terrorism and Gifts of Medicine

The 2008 budget also contains provisions related to donations of medicine to charities and funding for the Canada Revenue Agency (CRA) to combat terrorist financing.

Last year’s budget allowed corporations to take a special tax incentive for donations of medicine to charities working in the developed world. The new budget keeps the deduction in place (equal to the lesser of half of the amount by which the fair market value of the contributed medicine exceeds its costs, or the costs of the donated medicine), but proscribes certain new conditions that the charity donee would have to meet in order for the corporation to take advantage of the incentive.

In addition, the 2008 budget would provide $10 million over the next two years to both the Canada Revenue Agency and the Canadian Security Intelligence. The CRA’s funds would be used to examine charities working internationally and ensure they were not financing terrorist operations.

More detailed information about these provisions can be found at the Charity Law Bulletin, a newsletter produced by Carters Professional Services, a law firm that works in the area of charity law.


Charity Law Bulletin


Joint Petition on CRTC rules — PDF Format, 99403KB

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