The CRA released a technical interpretation on May 23, 2012 (2010-0391511E5) concerning whether a donation receipt can be issued by a charity to an individual who has agreed to host a fundraising dinner on behalf of a charity and to the individuals who purchased the right to attend the fundraising dinner. In the hypothetical situation put before the CRA, an individual agreed to host a fundraising event in her home on behalf of a charity. The individual acquired catering services from a third party and donated a selection of fine wines for consumption by the dinner participants. The individual requested a donation receipt in respect of the wines and the catering expenses for the dinner.
The CRA stated that whether a registered charity can issue an official donation receipt to an individual who incurs expenses on behalf of the charity is a question of fact. The CRA confirmed that generally a charity can reimburse an individual for expenses incurred on behalf of the charity and later accept the return of the payment as a gift, if the amount is returned voluntarily. The CRA also noted that Policy Commentary CPC-012 states that provided a volunteer has a right to reimbursement for expenses incurred on behalf of a charity, the charity may treat the right to reimbursement as a gift and issue a receipt. Thus, in a case where expenses are incurred by an individual who hosts a fundraising dinner for the benefit of a charity, the host must have the right to be reimbursed under the terms of the arrangement with the charity. Where such is the case, the charity can issue a receipt to the host in lieu of reimbursing the expenses.
With respect to a gift-in-kind such as the gift of wines, a charity may issue a receipt; however, subsection 248(35) of the Income Tax Act may be applicable. That subsection provides that the fair market value of the gift of property is the lesser of the fair market value of the property otherwise determined and its cost to the donor. This subsection would be applicable where a taxpayer acquires the property that is gifted to the charity less than three years before the day that the gift is made, or less than ten years before the gift is made and it is reasonable to conclude that at the time that the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to charity.
The CRA also confirmed that the charity may issue receipts to individuals who purchase the right to attend such a fundraising dinner for the benefit of the charity. The charity must ensure that it complies with the proposed split receipting rules and only issue a receipt for the eligible amount of the gift. The CRA noted that Income Tax Technical News No. 26 provides guidelines concerning receipting issues with respect to fundraising dinners. Generally, the eligible amount of the gift in the fundraising dinner scenario will be equal to the fair market value of the amount paid to attend the dinner less the fair market value of dinner and beverages enjoyed by the donor. The charity must look at the value of a comparable meal provided by a comparable facility when determining the amount to be allocated to the fair market value of the dinner.
The CRA notes that it is the responsibility of the charity to substantiate amounts reported on its donation receipts, including ensuring that the fair market value of property donated is properly reflected. The charity is also responsible for determining the value of any advantage provided in respect to the gift. When advantage cannot reasonably be ascertained, the charity cannot issue a receipt.
This particular technical interpretation should provide guidance to charities that have supporters who host such events. However, charities must ensure that they are in compliance with the receipting rules as they apply in these scenarios. We would be pleased to provide charities with further guidance with respect to these issues.