CCRA issues draft guidelines on value of gifts, split-receipting
WASHINGTON (AFP eWire - Jan. 23, 2003) - The Canada Customs and Revenue Agency (CCRA) has issued a series of draft guidelines related to split-receipting and how charitable contributions should be valued when donors receive gifts and/or other advantages from the charity in return.
The guidelines are fairly extensive and cover a number of different fundraising situations, including dinners, charity auctions, concerts, golf tournaments, membership fees and charitable annuities.
The CCRA has developed four key rules in its guidelines:
1) The gift to the charity must be voluntary and its value clearly ascertainable.
2) The value of any 'advantage' gained by the donor in response to the gift (that is, the charity giving a premium or anything else of value to the donor in exchange for the gift) must be clearly identified and ascertainable.
3) The amount of the 'advantages' that a donor receives cannot exceed 80 percent of the value of the gift given to the charity. In general, if donors receive advantages valued at more than 80 percent of their gift, then that gift cannot be counted as a charitable gift for tax purposes. (In a few exceptional cases where the amount of the advantage exceeds 80 percent, the gift may still qualify as charitable if the donor is 'able to establish to the satisfaction of the Minister that there was an intention to make a gift.')
4) The value of a charitable gift for tax purposes is the amount of the gift (or value of the gift) reduced by the value of any advantages received in exchange for the contribution. In addition, items give to a donor with a de minimis value - defined as the lesser of 10 percent of the contribution or $75 - will not be counted as advantages and their value is not subtracted from the gift.
For example, a charity sells tickets to a fundraising dinner at $200 per ticket. A comparable meal could be purchased for $100, excluding taxes and gratuities. In addition, each attendee at the dinner will receive several small trinkets with an aggregate value of $30.
For each ticket, a tax receipt can be issued for $70. In this case, the value of the meal ($100) is subtracted from the ticket cost: $200. In addition, because the value of the advantages ($30) exceed the lesser of $75 or $20 (that is, 10 percent of the gift; in this case, the ticket cost), it too must be subtracted from the eligible amount ($200 - $100 - $30 = $70).
The value of door prizes where everyone attending the event is automatically qualified to win (no additional purchase necessary) is determined by aggregating the value of all door prizes and dividing by the number of attendees. Therefore, if 100 people attended a dinner where three door prizes were offered at a total value $5,000, the value of the door prizes would be $50 ($5,000/100 = $50). Door prizes must constitute an 'advantage' depending whether their value exceeds the lesser of $75 or 10 percent of the donor's gift.
In its guidelines, the CCRA views lotteries, where individuals must pay to participate, as having few donative or charitable elements. No part of a cost of a lottery ticket can be receipted for income tax purposes.
Comments regarding the guidelines are due to the CCRA by March 31, 2003. The AFP Canadian Government Relations Committee will be reviewing the guidelines and submitting formal comments.
The full text of the guidelines can be found at http://www.ccra-adrc.gc.ca/E/pub/tp/itnews-26/itnews-26-e.pdf (Acrobat Reader required).