McMASTER UNIVERSITY
University Advancement
Advancement Services
DTC-125, ext. 24576
TO:McMaster Personnel Involved with Fundraising Events
FROM:Advancement Services - Donations ext. 24576
DATE:October 16, 2018
RE:Information on Events
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The attached information provides guidance to McMaster employees running McMaster initiated fundraising events, when the event admission price includes a charitable donation portion. The Canada Revenue Agency (CRA) restricts McMaster from issuing tax receipts for events controlled and operated by external persons or organizations. Blank forms are included to enable event organizers to obtain the required approvals for Prospect Clearance and the issuance of charitable tax receipts. Also, a sample log and a blank Donation Log are provided to users to simplify the cheque recording process.
Please reviewthis package as CRAdemandsa stricter adherence to existing regulations than in the past. Also, the University has formalized some of its procedures for granting approval of fundraising events.
The electronic Donations Log is an EXCEL spreadsheet, obtainableas an e-mail attachment from . When holding an approved event with a donation component, or whenever submitting several donations at one time, please complete the spreadsheet instead of creating any type of memo. Please don’t modify the log in any way, as it is part of an electronic data source that enables Advancement Services to automate the tax receipting process. All field columns must be filled in if applicable. All instructions in this packet comply with PCI standards for credit card handling, Internal Audit’s rule that cheques once opened,may not be re-routed through internal mail and McMaster’s UTS rule that it is bestnot to send critical personal data via email.
Tickets paid by credit card requirethat you hand-write their name, address, credit card number, expiry date,total ticket amountand ticket portion on a pledge card. (Not entered on a computer or on the cheque log). Cash should not be transported downtown. Therefore, all cash for both event and donation portion of tickets should be recorded on the log and deposited at the cashier’s office into account 0-71011-2130. When all data has been entered, total the 3 ticket/donation columns. Print and balance the log using the cheques and cashier receipts for cash. Save the file using the department’s name, event name and date (i.e. Athletics Football gala Dec. 30 2012). Copy the file to a flash drive, labelled with the dept name and address, so it can be returned when processed and wiped clean. In an envelope labelled “Advancement Services Donations – DTC 125” submit the printed log, flash drive, any credit card pledge cards, all cheques and cashier receipts. The envelope must be hand delivered to Gilmour Hall Cashier’s office with instructions to put it in the secure locked bag for delivery to the Downtown Centre – DTC-125. Avoid stockpiling payments, as the University’s Cash Control Policy requires frequent deposits to ensure the secure handling of university funds.
Concerns? A list of contacts is provided. If helpful, we can offer training sessions. Contact Carol Hochreiter at
For University Advancement staff, the logs can be found on the UA intranet as well as the I: drive at: Donations Log Sample and Donations Log Blank template on legal paper
Things to Know When Holding a Fund-raising Event if
Charitable Donation Receipts are Anticipated.
When holding an event, consider whether or not to offer participants or sponsors charitable tax receipts. Many corporations prefer a business receipt instead of a charitable receipt, as the former can have greater tax advantages. Business Receipts simply confirm that a university department has received either cash or a gift in kind from the corporation. Business receipts are generated by the department hosting the event on Departmental Letterhead and signed by the Chair or Director. The cash for the transaction is deposited into the department’s university FAS accountthat is to be the beneficiary of the fundraising efforts. Advancement Services does not have to become involved in this type of fundraising revenue.
Type of Qualifying Events
Fundraising dinners and/or dinners with auction, concerts, shows, sporting events and golf tournaments can sell tickets that offer “split receipting”. In this case, the ticket value has been set at a price that covers the costs of the event and adds a donation portion. For split receipting to be permitted several conditions must be met.
As of 2002 CRA changed its view on what types of activities qualify for split receipting. CRA calls this new approach, the interpretative approach. This approach considers that a gift has been made when there is “an outright transfer of property for no consideration” and that there is a “clear donative intent to make a gift.” (Technical news #26) To determine whether or not an outright transfer of property has been made witha clear donative intent to make thatgift, the transaction must meet four key criteria.
- The transfer must be voluntary, and the property must have a clearly ascertainable value. Cash has a clear value. However gifts in kind may have an intangible value. Meaning the price is undeterminable. Event tickets may have a very clear value as the event is offered to the public regularly at a standard price separate from any fundraising effort. But some events offer an advantage or benefit to the participant that cannot be valued. Such an example is a day of golf with a renowned professional golfer. When the value is not determinable, an appropriate deduction from the ticket price cannot be calculated; hence CRA interprets the value to the participant to be the entire ticket price, no matter how much the ticket costs.
- Any advantage received by the donor or a person not dealing with the donor at arm’s length with respect of the transfer must be clearly identifiable. That advantage must be identified on the charitable tax receipt and the charity must maintain satisfactory evidence of the value of the advantage. An independent valuation should be considered.
- There must be a clear donative intent to enrich the donee. CRA realizes proving that a donative intent exists is subjective, and difficult to establish in some cases, but it must be accomplished. A rule of thumb is that the donative portion must be no less that 20% of the total ticket price. Only some rare cases will meet the donative intent criteria when the donation portion is less than 20%.
- Charities sometimes provide donors with atoken of appreciation. So as not to be construed as an advantage, with the resulting reduced tax receipt amount, the token must be insignificant. Administratively, CRA is prepared to provide ade minimis threshold for tokens of insignificant value. To determine the de minimis threshold, the advantage received by the donor may not exceed 10% of the property transferred to a maximum of $75. If the token’s value is greater than the threshold, then an advantage has been received, so the tax receipt amount must be reduced.
Examples:
Event participants go to a football game using game tickets that cost the public $150 for two. The fundraising organizers sell event tickets for $300. Along with the $150 for two tickets, the participants receive a party atmosphere at the end zonetent where they are given tokens of the day. In scenario 1, the participants receive a hotdog, drink and team hat, valued at $15. In scenario 2 the participants receive the hotdog, drink, team hat and parking, valued at $25.
Scenario 1 – hotdog, drink, team hat
Event Ticket price$300
Football game ticket($150)
Property Transferred to donee$150
de minimis threshold 10% of property transferred$15.
The tokens are classified as insignificant so tax receipt =$150
Scenario 2 – hotdog, drink, team hat and parking
The tokens exceed the de minimis threshold so donors are deemed to have received an advantage, thus:
Event Ticket price$300
Football game ticket($150)
Event tokens, exceed threshold($ 25)
Property Transferred to donee and tax receipt =$125
Scenario 3 – event ticket price is $200 instead of $300, hotdog, drink, team hat and parking included:
Event Ticket price$200
Football game ticket($150)
Event tokens, exceed threshold($ 25)
Property Transferred to donee no tax receipt permitted$ 25
Criteria #3 requires a donative intent of at least 20% of the ticket price. 20% of $200 = $40. Scenario 3 with property transferred to donee at $25 would not reflect a donative intent. Thus no tax receipt could be issued for any portion of scenario 3.
Type of Non-Qualifying Activities
The purchase of a lottery or raffle ticket cannot have a donation portion. CRA views the price of the lottery or raffle ticket to be the full price a participant is willing to pay to win the big prize. Thus if event organizers want to incorporate a raffle into the event, tickets, separate from the event ticket. should be sold during the event, so as not to jeopardize the event’s split-receipting status.
Criteria to EvaluateParticipants’ Advantage
An event with a standard public ticket cost enables a quick calculation of the three possible scenarios above. However, events with multiple costs and activities all rolled into one event become more difficult to value. CRA requires that the charity calculate the event cost based on the concept of fair market value (FMV). In the case of an up-scale dinner and performance, what would be the FMV of any other such evening? The charity can base the advantage on the price local restaurants charge to holdsimilarevents. But for more multi-faceted events, it is wise to cross check your FMV estimate with a breakdown of each cost incurred when hosting such an event.
For a golf day of breakfast, golf, golf cart rental, cocktails, or wine costs, dinner plate charge, disc-jockey fee, advertising expenses, and depending on if the prize table is available to all participants, or requires a separate ticket, and if the total value of all the door prizes and golf prizes meets the de minimis threshold or not, it becomes more difficult to ascertain the FMV of the day. By adding up all of the expenses and comparing the total to the FMV method, organizers have a sound basis for the advantage calculation. Having this documentation offers organizers more assurance that CRA will not subsequently dispute the valuation of the participants’ advantage. This is important because CRA has the authority to disqualify the participants from using anyportion of a tax receipt if its value is questionable.
CRA has changed its view on the advantage of a “hole-in-one” prize being offered at a golf day. CRA concluded that many tournaments do not have a winner of the prize. The chances of making the hole in one are remote enough that for most golfers the possibility does not exist. So no longer does the inclusion of a hole-in-one prize disqualify a tournament ticket from split-receipting.
If an event’s cost structure is such that it does not qualify for split-receipting, a way of receiving donations at the event is to ask for separate donation cheques. As long as the donation is voluntary and participation at the event is not restricted or limited by the lack of a donation, then the event can have all the enticements that disqualify it from tax receipting. The organizers’ sense of whether participants wouldcontribute an additional, separate gift would beof prime consideration if this option is used.
Often event organizers seek corporate sponsorship to offset event costs. Sponsorships come in many forms. If a person or company offers such things as wine, food, decorations, door prizes or golf prizes for an event, this should be considered a business expense. The event coordinator should offer the company a business receipt for the merchandise, thus avoiding the limitations oftax receipting.
Some corporations purchase a complete table of tickets as a form of corporate sponsorship of the event. If the corporation is given the tickets or can direct their use, then the donation receipt must be the value of the donation portion excluding the value of the event. Frequently, corporations donate an amount equivalent to the price of a table and authorize the event-holders to offer the tickets to non-paying recipients, (individuals who may otherwise be financially unable to attend such an event). In this case, the corporation’s tax receipt still must equal the value of the donation portion excluding the event portion of the ticket price. (IT-110R3, Part I, sect. 15(a)) If corporations want tax receipts for the full value of the price of the table, then tickets may not be distributed to them or distributed in their name.
Another form of sponsorship is a golf-hole sponsor. If the advertising banners and publicity are more than nominal value, or undeterminable value, then the sponsorship does not qualify for a charitable receipt. CRA associates the use of corporate logos on the hole sponsor signs to be deemed advertising. As no clear valuation can be set for the intangible nature of the power of advertising, no tax receipt can be issued for logo bearing advertising.
Services-rendered are not tax-receiptable. As an example, if a graphic artist designs an event promotional piece, the value of those services cannot be donated and tax receipted. However, the artist can be paid and then the artist may subsequently donate an equivalent amount by cheque to the same purpose for which the event was raising funds.(IT-110R3, Part I, sect.15(d))
Similarly, “gift certificates” are often given to McMaster to be used as a door prize or an auction item. If the donor of the certificate purchased the certificate, then gives it to McMaster, that donor can be tax receipted for the value paidnoted on the purchase receipt. If however, a business offers a gift certificate to perform the services of the business, then no tax receipt is possible. In that case, no property has been transferred, only a future service is offered. But as in the previous example, the event organizers could purchase the gift certificate from the business, then the business could donate to the fund-raising cause to qualify for a tax receipt. (CRA Registered Charities Newsletter No. 10)
Confirmation that Tax Receipts will be issued by Advancement Services
If a campus group wants to fund-raise for a University supported project through an event, then support for the venture must first be obtained from the appropriate Dean or Vice-President. The event organizer should consult the relevant De-centralized Advancement Officer or the Associate Director of Annual Giving. The Prospect Clearance and Fund-Raising Approval form is to be completed including the signature of the Dean or Vice-President then sent to . Staff will circulate copies of the completed form to the Associate Director of Annual Giving and the Donations staff for their review. Their approval or concerns are forwarded to the Clearance Committee. The Clearance Committee will contact the event organizer whether the request for approval isgranted or denied.
To enable Donations staff to determine if the fee structure and activities of the event qualify the event as a split- receipting scenario, the event checklist form must be completed. The signed form will attest that the organizers have identified all possible benefitsto be received by participants. If any benefits are revealed, Donations staff may be able to suggest a revised event format that would satisfy CRA’s requirements. Otherwise, event participants will not be eligible to receive tax receipts.
Organizers must obtain Prospect Clearance approval prior to the printing, publishing or distributing any event literature. Income tax receipts cannot be issued for an event that has not been approved. Failure to disclose activities may invalidate a previously obtained approval, requiring the offer of tax receipts to be revoked. CRA insists that the validity of all deductions taken to reduce taxes payable is the responsibility of the taxpayer. Charitable tax receipts obtained or used inappropriately may result in penalties and interest to the taxpayer. Our diligence in regards to these matters stems from our aim to protect donors from the possibility of such financial aggravation.
Sometimes, an organization or group of individuals external to McMaster want to hold a fundraising event to provide revenues for McMaster. These efforts are welcomed and appreciated; nevertheless we must ensure that the events are conducted in accordance with all requirements previously mentioned. Registered Charities Newsletter No.10 states that in such a case, McMaster “should have a written agreement with the organization....[it] should spell out how any money earned by the event is to be handled and the procedures for issuing tax receipts.” The Fundraising Approval Form and the Event Checklist is our attempt to understand how each event is being operated. A university department must agree to manage such events, as Advancement Services limits its communication regarding donation processing of events to university personnel, usually a signing authority of the FAS account receiving the funds. Therefore, it is the department receiving the donations that needs to ensure that all information is available to Advancement Services.