A technical interpretation published recently by the CRA
addresses the tax treatment of fundraising events organized by
individuals. While many of the factual details of the event
are redacted from the published document, the technical is
nonetheless revealing of certain issues that should be considered
when organizing individual fundraising events.
On the basis of the facts provided in the technical, an
individual appears to have organized a fundraising event in which
donations and pledges were collected to enter a team into the
event. The details of the event are not specified.
Proceeds collected from the event were used for at least two
purposes, one of which was to donate funds to a charitable
The taxpayer framed the question to the CRA as whether such a
fundraising activity can be carried out by a non-profit
organization (NPO) under paragraph 149(1)(l) of the Income Tax
Act. The CRA noted the requirements for NPO status,
which are (in summary):
the organization is not a charity;
the organization is organized and operated exclusively for
purposes other than profit; and
the organization does not distribute or otherwise make its
income available to any member, shareholder or proprietor.
The CRA confirmed, consistent with previous statements, that
fundraising is generally considered a profit activity, but that
certain fundraising activities carried on directly by an NPO will
not jeopardize its tax exempt status. The CRA states that
limited fundraising activities involving games of chance (e.g.,
lotteries, draws), or sales of donated or inexpensive goods (e.g.,
bake sales or plant sales, chocolate bar sales), generally do not
indicate that the organization as a whole is operating for a profit
purpose. It is important, however, that these
activities not be disproportionate relative to the other activities
of the organization, such that fundraising can be seen as an
independent purpose of the entity.
In the specific case addressed in the technical, the CRA stated
that the event would not meet the requirements for 149(1)(l)
status, because the event was not organized as a club, society or
organization. Rather, it was conducted by an individual.
The CRA then turned to consider the tax implications for the
individual conducting the event. It noted that fundraising
events conducted by an individual could be viewed as an adventure
in the nature of trade, which would constitute business income that
is taxable in the hands of the individual.
The CRA addressed when income will be considered a non-taxable
windfall, and enumerated several factors that will suggest this
(a) The taxpayer had no enforceable claim to the payment;
(b) The taxpayer made no organized effort to receive the
(c) The taxpayer neither sought after nor solicited the
(d) The taxpayer had no customary or specific expectation to
receive the payment;
(e) The taxpayer had no reason to expect the payment would
(f) The payment was from a source that is not a customary source
of income for the taxpayer;
(g) The payment was not in consideration for or in recognition
of property, services or anything else provided or to be provided
by the taxpayer; and
(h) The payment was not earned by the taxpayer as a result of
any activity or pursuit of gain carried on by the taxpayer and was
not earned in any other manner.
The CRA stated that on the basis of the facts of the individual
fundraising event in question, the income earned from the event
would not be considered a windfall but rather taxable income, on
the basis that the amounts received were not gifts but rather funds
received in exchange for participation in an event.
Without the full details of the specific event in question, it
is difficult to comment on whether the CRA's conclusion appears
accurate. However, the technical highlights the fact that
individuals conducting fundraising events on behalf of a charity or
NPO need to take care to structure the event so that they will not
incur an unexpected tax liability. If there is uncertainty,
advice should be obtained before engaging in such events.
Also, if the event is intended to encourage donations to a
registered charity that will be eligible for tax receipts, care
must be taken to ensure that the donations will be receiptable by
the charity donee.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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