Anonymous Gifts May Get Tax Relief
Arthur Drache, August 03, 2006
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| There is a tradition which goes at least as far back as Maimonides that a gift made anonymously is preferable to one given where the benefactor is known. In times where charity was often on a person to person basis, the anonymous gift was preferable because there would be no embarrassment to the recipient of charity. |
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| Of course, in Maimonides' time, the issue of getting tax relief for a charitable gift was not an issue. |
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| It is therefore interesting to note that Revenue Canada takes the position that generally speaking it is not possible to make a truly anonymous gift and still get tax relief. It has pointed out that in order to get tax relief, a valid receipt for tax purposes must be received by the donor. But under Regulation 3501, one of the items which must be included on a valid receipt is the name and address of the donor. If there is no name and address, the receipt would be invalid. |
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| Many years ago, Revenue took the position that you cannot meet the requirement by using the name and address of an agent or trustee, since the "true" donor's name is unknown and thus this person couldn't use the receipt personally. After all according to Revenue's thinking, if there is an agent's name of the receipt, the agent is in a position to pass the receipt to anybody, though presumably only with the consent of the person for whom he or she is acting. |
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| But in 2005, a somewhat different policy position was established. |
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| "As a general rule, a registered charity cannot issue an official donation receipt for anonymous gifts. However, the Canada Revenue Agency has accepted that a taxpayer can claim a tax credit or deduction for an anonymous donation, provided certain procedures are followed: |
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| . the donor establishes an agency or trust agreement for the making of the anonymous gift; |
| . the donor appoints an agent for the purpose of making a gift on behalf of the donor; |
| . the agent agrees to hold the funds in trust for the donor; |
| . the donor directs the agent to make a gift to a registered charity on the donor's behalf; |
| . the agent agrees to direct the registered charity to issue a receipt in the amount of the gift in the name of the agent in trust; |
| . the agent agrees to deliver the receipt to the donor for the purpose of establishing the details of the donation." |
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| We would stress that this is not to say that in terms of public awareness, the gift cannot be said to be "anonymous". The charity might well issue a valid receipt for a donation and then describe it as being an anonymous gift. This procedure is often followed where the donor does not want other organizations to know (for obvious or not so obvious reasons) that he or she has made the gift. |
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| While the issue is unlikely to arise often, it is a point of receipting policy which should be borne in mind. |
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