No Obligation for Charity to issue a Receipt for a Gift
By Arthur Drache
We have made the point in articles gone by that there is no obligation on a charity to issue a receipt for a gift though of course a refusal to do so would raise serious questions in the minds of donors and serious issues about the credibility of any fundraising by the organization.
Interestingly enough, a recent ruling letter confirms our interpretation of the law.[1]
The individual in question posed two questions to the CRA.
First, would a transfer of a property would be considered voluntary if one had to go to Court to prove ownership of the property prior to the making of a gift and second, whether a registered charity could be held accountable for not providing a donation receipt.
The first question was pretty much straightforward.
“Whether a transfer of property has been made voluntarily is a question of fact. In order for a transfer to be considered as voluntary there must be no obligation to make such a transfer. In our view, the act of going to court to establish ownership of a property prior to making a gift would not generally, in and by itself, create an obligation to make a gift. Whether any other agreement or settlement decided in the court process could create an obligation to transfer a property is a question of fact which must be considered on a case by case basis.”
The answer to the second question was hemmed with a lot of general blather about receipts.[2]
“Subsection 118.1(2) of the Act requires a receipt issued in prescribed form in order for an individual to claim a donation tax credit. However there are no provisions in the Act requiring a qualified donee to issue a donation receipt. Section 3501 of the Income Tax Regulations provides that the official receipt in respect of a gift issued by a qualified donee must contain certain information which includes, for a gift of property other than cash, “the amount that is the fair market value of the property at the time that the gift was made”. Consequently, a qualified donee cannot issue a donation receipt where it cannot reasonably determine the value of the gift.” (Our emphasis.)
Perhaps the charity in this case refused to issue a receipt because its interpretation of the law was that the transfer was not a “gift” at law. But if this were the case, we would have thought that transfer would have been rejected or at least an explanation given before the transfer took place. If the transferor still insisted on making the transfer, the charity would then be understandably unwilling to issue a receipt.
But it seems to us that it stretches the imagination to think of a situation where the transfer would have taken place.
If the transfer were made and the charity had second thoughts about its legitimacy as a gift, the correct approach would have been to simply return the property.
There are times, of course, when the CRA letters are a little short on fact which would allow a third party to understand what actually occurred.
[1] 2012-0469971E5
[2] For a full description of the law, see our piece in the February 2013 issue of the NFPN at page 9.