Here is a recent case from the Tax Court of Canada on receipts issued by three registered charities Leduc Society for Christian Education v. The King.
The case involves three different registered charities in Alberta which provide Christian education as an alternative to secular public schools. All three charities had agreements with their local school boards, making them public schools that provide an alternative Christian curriculum. Through these agreements, these charities were allowed to charge fees for all or part of the associated non-instructional costs of running these alternative programs. All three schools charged enrollment fees and issued receipts for those fees. CRA levied penalties against all three charities for these receipts as it was CRA’s view that the enrollment fees could not be considered a “gift”.
The Tax Court ruled in favour of CRA’s position, finding that the enrollment fees were not voluntary and that the parents did not have donative intent when they paid the fees. This case provides a good example of how CRA and the courts view what makes a gift voluntary and what is donative intent.
There is also a note of how this situation differs from IC 75-23:
[41] Information Circular 75-23 entitled
“Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools”creates an administrative exception with respect to privately supported schools teaching exclusively religion or providing a combined secular/religious education. In those instances, tuition fees paid may be considered charitable donations. I would say that this administrative exception ceased to apply to the appellants when they entered into the agreements with the respective school boards, resulting in their privately operated schools becoming public ones.
For a registered charity to issue an official donation receipt for income tax purposes, there must be a gift, which is a voluntary transfer of property with donative intent. In cases where a registered charity has issued a donation receipt when there is no gift, CRA may issue a penalty equal to 125% of the eligible amount stated on the receipt. When the penalty is over $25,000, CRA may also suspend the charity’s tax-receipting privileges for a year.
Most registered charities have some mistakes in their charitable receipts and it is very important to ensure that your registered charity has good receipting practices and controls in place. For more information, please see our Blumbergs’ Receipting Kit for Canadian registered charities – by Mark Blumberg and our online course Receipting for Canadian Registered Charities.