In a previous note entitled Corona Virus/COVID-19 charity issues – cancelling events, refunds and the possibility of a charitable donation, we discussed how charities can try to turn the cancellation of an event into some donations.  But what if you were scheduled to have an event, people bought tickets and you had already issued the official donation receipts, but the event is now cancelled and people will not be receiving an advantage?

I asked my colleague Gary Huenemoeder, who works at Blumbergs and was previously team lead for charity audits for the CRA for 16 years in Ontario, and he suggested that the charity can cancel and re-issue the donation receipt as no advantage was received by the donor. Section 248(32) of the ITA states:

Amount of advantage

(32) The amount of the advantage in respect of a gift or monetary contribution by a taxpayer is the total of

  • (a)the total of all amounts, other than an amount referred to in paragraph (b), each of which is the value, at the time the gift or monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm’s length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy
    • (i)that is consideration for the gift or monetary contribution,
    • (ii)that is in gratitude for the gift or monetary contribution, or
    • (iii)that is in any other way related to the gift or monetary contribution, and
  • (b)the limited-recourse debt, determined under subsection 143.2(6.1), in respect of the gift or monetary contribution at the time the gift or monetary contribution is made.”

As the event was cancelled, the donor did not receive any benefit or enjoyment and will not be entitled to receive any benefit immediately or in the future.

By way of example, let us say that the price of a ticket to a gala dinner was $500, the advantage was calculated to be $200, and the eligible amount of the donation is $300.  There are a number of potential options if receipts were already issued:

  1. Charity keeps funds and leaves receipt.  If the charity gets to keep all the funds ($500) and leaves the receipt as it is (eligible amount of $300), donors are getting some tax benefit but not as much as they could.
  2. Charity refunds full amount and reports to CRA. If the charity refunds all the money, then it would need to cancel the receipts. Since the eligible amount of the donation is over $50, the charity would need to report this to CRA within 90 days. This is not a great option for the charity or the donor (many donors would probably not want this option if they realize that it would have to be reported to CRA compliance).  Here is more information.  In some cases, it would be questionable whether a charity can return the gift.
  3. Charity keeps funds and replaces receipt.  If the charity cancels the receipt and keeps all the funds, then it can issue a new receipt and doesn’t have to report to CRA. The charity would have to keep the cancelled and new receipts in its books and records.
  4. Other options.  There may be other options including returning the amount of the advantage.

This also highlights why it is typically better to issue receipts after an event when there is more certainty as to costs, etc.  In fact, for many charities, issuing receipts only once a year makes good sense.

We have recently prepared a 3-hour course on receipting if you are interested in the rules relating to receipting.  You can find it here.  With complicated receipting questions, it may be best to obtain legal advice from a charity lawyer who has experience dealing with charity compliance issues.