Canada: Mandatory Requirements For Receiving Charitable Donation Tax Credit

Last Updated: October 20 2015
Article by Gillian Tuck Kutarna

In the recent decision of Bope v. The Queen, the Tax Court of Canada confirmed the requirements for a charitable donation tax credit, stating that entitlement to the credit depends on the donor proving, on the balance of probabilities, that:

(a) there was a gift; and

(b) there was a receipt to prove that the gift was a charitable donation.

The appellant in Bope claimed a tax credit for $3,800 on his 2009 income tax return for cash donations he had made to Revival Time Ministries International ("Revival").   However, Mr. Bope was unable to prove that he had made the gift or that a valid receipt had been issued, and therefore his appeal was dismissed and the tax credit disallowed.  A subsequent investigation by the Charities Directorate led to the revocation of Revival's status as a registered charity.

Proof of a Gift

Although Mr. Bope had only claimed $3,800 on his tax return, he stated in oral evidence that in the 2009 tax year he had gifted cash donations to Revival in excess of $10,000.  Mr. Bope earned approximately $40,000 that year, but testified that his wife also earned an income, allowing him to afford such donations.

The couple kept only one bank account, from which Mr. Bope claimed to have made the withdrawals for Revival; however, he had not kept track of dates and amounts, and was unable to produce any ATM withdrawal slips, donation envelopes, or other objective evidence of his cash donations.  Mr. Bope's bank statements indicated that he was consistently in overdraft, and owed money on his line of credit.  A review of Revival's records did not produce any evidence that cash donations had been received from the appellant.

The Court concluded that Mr. Bope had not met the evidentiary burden, and ruled that there was no proof of a gift.

Validity of Receipts

Income Tax Regulation 3501(1) (the "Regulation") lists the information that must be included in a receipt which has been submitted as proof of a gift (reproduced below).

The Court's comments in Bope regarding these prescribed requirements should be of particular interest to charitable organizations, as the Court considered whether it is necessary that a charitable donation receipt contain all of the information listed in the Regulation to be valid. 

The Regulation states that "[e]very official receipt...shall show clearly..." the information to be included on a donation receipt.  Following other recent decisions (see: Afovia v. The Queen, Mapish v. The Queen, Sowah v. The Queen), the Court interpreted this language as requiring that a receipt must include each of the prescribed items contained in the Regulation.

With respect to Mr. Bope's receipt, the Court specifically found that the location at which the receipt had been issued was unclear from the document, noting that it should not be presumed that a receipt has been issued from an organization's corporate address.  In this respect, Revival failed to comply with the requirements of the Regulation.

Interestingly, the Court pointed out that notwithstanding Mr. Bope's evidence that he had made several donations a month throughout the year, Revival had issued only one receipt at the end of the year for the entire $3,800.  The Court stated explicitly that Mr. Bope should have received a donation receipt in respect of each of his individual cash donations, or at the very least, one receipt that listed each of his cash donations and their respective dates.  In our view, this finding is erroneous.  The Regulation states that where the donation is a cash gift, a receipt may be issued bearing either the date of the gift or the year in which the gift was received.  CRA takes the view that it is within a charity's discretion to issue a receipt at the time of the gift or to issue one cumulative receipt for cash donations made by the individual in the year.  While there is no requirement that the cumulative receipt list all of the donations, donors must be able to provide evidence supporting the eligible amount of the receipt.

Importantly, charities must remember that the Court will not necessarily consider the knowledge, intent, fault, liability, negligence, or good faith of a charitable organization.  The legislation requires only that the Court inquire as to whether all of the mandatory information has been included on the face of the receipt.  Where any one of the required elements is missing, the receipt will be invalid and the donor will not be entitled to a charitable donation tax credit.

Conclusion

A taxpayer is entitled to a tax credit for gifts made to a registered charity, provided that he or she can prove on the balance of probabilities that a gift to the charitable organization has been made, and that the organization issued a receipt that contains all of the prescribed requirements of the Regulation.  In the absence of such proof, a charitable donation tax credit will be disallowed.

Income Tax Regulations, Section 3501(1)

Every official receipt issued by a registered organization shall contain a statement that it is an official receipt for income tax purposes and shall show clearly in a manner that cannot readily be altered,

(a) the name and address in Canada of the organization as recorded with the Minister;
(b) the registration number assigned by the Minister to the organization;
(c) the serial number of the receipt;
(d) the place or locality where the receipt was issued;
(e) where the gift is a cash gift, the date on which or the year during which the gift was received;

(e.1) where the gift is of property other than cash

(i) the date on which the gift was received,
(ii) a brief description of the property, and
(iii) the name and address of the appraiser of the property if an appraisal is done;

(f) the date on which the receipt was issued;
(g) the name and address of the donor including, in the case of an individual, the individual's first name and initial;
(h) the amount that is

(i) the amount of a cash gift, or
(ii) if the gift is of property other than cash, the amount that is the fair market value of the property at the time that the gift is made;

(h.1) a description of the advantage, if any, in respect of the gift and the amount of that advantage;
(h.2) the eligible amount of the gift;
(i) the signature, as provided in subsection (2) or (3), of a responsible individual who has been authorized by the organization to acknowledge gifts; and
(j) the name and Internet website of the Canada Revenue Agency.

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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Gillian Tuck Kutarna
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