Once your church registers for charitable status it is able to both
- receive gifts for on-going and new programs or ministries,
- issue official donation receipts to the donor for tax purposes.
Canada Revenue Agency (CRA) defines a gift or a donation to a charity, where such gift will qualify the donor for tax relief, as a voluntary transfer of property without consideration, to help the charity pursue its charitable purposes. In general, your church can issue official donation receipts for tax purposes when the gift meets all of the following conditions:
- there is a transfer of property to the church (usually money)
- the property is given voluntarily
- the donor receives no benefit in return for the gift
A gift given to your church that qualifies the donor for tax relief means that the gift must come under the exclusive control of your church.
GIFTS IN KIND
Gifts other than cash are referred to as "gifts-in-kind" and may be accepted by your church and an official donation receipt may be issued. This does not apply to items of little value and there are certain requirements when issuing a receipt for such a gift.
To establish the value of a gift-in-kind where the amount would be over $1000.00, the gift should be appraised by a professional appraiser who does not have a material interest in the property being given and who is not associated with the donor or the charity. The appraiser should give a written statement of the value of the property before an official receipt is issued.
When preparing an official donation receipt for a gift-in-kind, include the date on which the donation was received, a brief description of the donation and the name and address of the appraiser. (The written statement of the appraiser must be kept on file with the charity along with the copy of the donation receipt.)
Value of Services
Donating services such as time and effort is not a transfer of property. You cannot issue an official donation receipt for the value of services donated to a charity.
A church can pay for the service and accept the voluntary return of all or part of the payment as a donation. In such a case, the charity can issue an official donation receipt recognizing that the donor is returning such funds as a gift and has declared this amount as income when filing his income tax return.
Example: A painter has offered to paint your church. He estimates the cost would be $1500.00 and would like a official tax receipt. Your church should ask the painter for an invoice and pay the invoice. If the painter indeed wants to make a gift to your church, he can endorse the cheque and give it back to your church. There is now a transfer of property (a gift) and the painter is eligible for a official tax receipt.
GIFTS FOR SUPPORT OF INDIVIDUALS IN MINISTRY
Funds given to your church for the support of a particular individual in the ministry would be considered to be a gift to the charity if such individual is:
- employed or otherwise under the direction and control of your church;
- the duties of such individual are determined by the church in consultation with the individual;
- the church determines the maximum amount that is to be paid to the individual for personal living and ministry expense; and
- the donor is made aware that the amounts given to the church are to enable the church to meet its commitment to the individual.
The donor should also be advised that where the aggregate amount received for the support of a particular individual exceeds the church's commitment to such individual, any excess may be used by the church to meet its support commitment to other individuals carrying on a ministry which is similar to the ministry carried on by the designated individual.
Keeping in mind the official definition of "gift", gifts to special mission offerings, a building fund or specific ministries established by the church are acceptable if the church has already authorized participation in those areas.
Participation in the International Mission Offering (Lottie Moon Christmas Offering); the North American Mission Offering (Annie Armstrong Easter Offering); the Canadian Mission Offering; Acts 1:8 Offering; World Hunger or Baptist Global Response Canada are all part of who we are as Canadian National Baptists. The church is part of the denomination and funds designated to these offerings qualify as gifts.
Care should be taken when accepting gifts from individuals where conditions for its use are attached to the gift. When accepting gifts with donor designations, the church should accept them only where the donation is for charitable purposes that are within the corporate powers of the church and for programs or ministries that are board-authorized programs or ministries of the church. The donor cannot control the gift - the charity must control the gift.
Remember, once funds are accepted for a specific designation, they can only be used for that purpose or designation. Designated funds should be handled separately from the church's general funds. Your church should have policies in place for handling designated funds. Such policies will protect the church and help in situations where a gift is not appropriate, not helpful or not acceptable to the church.
The following are given as examples of policies in regards to designated gifts. They are provided to give your church an idea of some of the information you might want to have in place to protect your church's financial integrity and to provide to your donors.
- Funds must be for objects appropriate to our work and in harmony with the adopted policies of our church.
- Endowment funds and scholarship shall not be named for living individuals.
- The church reserves the right to accept, deny, or negotiate any proposed gift or memorial.
- the church reserves the right to re-designate any designated fund once the purpose for such a fund has been met. Each re-designation shall be reported to the church leadership.
- Funds received for specific missionary support will be disbursed only if the missionary has a direct relationship to the CNBC or to CNBC approved missions programs. If the missionary is not so related, then the funds are to be returned to the donor.