Contents of Charitable Receipts

By: Arthur Drache

One would expect that all registered charities (and other organizations which issue receipts for gifts) would be fully aware of the rules relating to what the receipt must contain. While the requirements seem to be just administrative, it must be borne in mind that the issuing of an improper receipt is grounds for revocation. [1]

And we have found that in certain audit situations, the issuing of "improper" receipts can be used as a threat by the CRA to revoke unless the charity complies.with the CRA's views even if the issues go beyond receipts.

One would assume that the question of contents of receipts and possible revocation would involves substantive falsehoods such as inflating the value of the gift received and reporting it on the receipt. But our experience is that the CRA auditors can play "hardball" even when the error is minor.

First, it is worth looking at Regulation 3501 under the Income Tax Act to see what the formal requirements are.and those who are actively involved with organizations should do a check to see whether their receipts are in compliance.

(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 such a manner that it 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 donation is a cash donation, the day on which or the year during which the donation was received;

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

    (i) the day on which the donation 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 day on which the receipt was issued where that day differs from the day referred to in paragraph (e) or (e.1);

(g) the name and address of the donor including, in the case of an individual, his first name and initial;

(h) the amount that is

    (i) the amount of a cash donation, or

    (ii) where the donation is 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;

(i) the signature, as provided in subsection (2) or (3), of a responsible individual who has been authorized by the organization to acknowledge donations; and

(j) the name and Internet website of the Canada Revenue Agency.

In one case which was brought to our attention earlier this year, a church had been issuing receipts in the same format for many years. But the auditor, on a routine check, found that there was no reference on the receipt to the CRA web site as required under paragraph (j). He initially took the position that the charity had issued improper receipts (for about ten years going back to when the requirement was added) and threatened revocation. He also said that all the donors were at risk because they had claimed tax credits based on improper receipts. He suggested that the charity re-issue the thousands of receipts.

In this case, saner heads prevailed and in the event, the charity was let off with a warning and undertook in future to ensure the receipts met the requirements.

A number of years ago we ran into another bizarre situation. The charity's registered office was that of its accountant. At some stage, the accountant moved offices, shifting from the third floor to the fifth floor. On a routine audit, the auditor took the position that the receipts issued by the charity were improper because they had the wrong address.

Once again, saner heads prevailed and a prospective change to the address for future receipts was accepted.

Note that Section 3501 (1)(a) provides for the content of official donation receipts issued by registered charities. Paragraph 3501(1)(a) refers to an address "as recorded with the Minister". What that means is that if the charity moves the receipt must be changed because a move requires that the Minister be informed.

The CRA has actually issued guidance on this subject.[2]

1.      "When applying for registration, many charities provide both a street address and post office box number. In some cases, the books and records of the charity change locations from year to year, essentially residing with the current treasurer of the charity and therefore affecting the actual street address of the charity for the Canada Revenue Agency's purposes. It is therefore more economical for the charity to have receipts printed showing a post office box rather than a street address.

2.      Certain charities, such as shelters for battered women, have an interest in not disclosing the location where they operate.

3.      Since the Canada Revenue Agency already has on file the physical location of the charity's books and records, the use of a post office box on a charity's official donation receipts is acceptable for income tax purposes."

The key point is that those who have the duty to issue receipts should familiarize themselves with the Regulations which have many other aspects than what we have reproduced here.including rules which touch on numbering, spoiled receipts and signing.

When dealing with the CRA auditors, take nothing for granted. When they feel the urge to exercise authority, any breach, however insignificant, can be used to exert pressure on a charity.