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Businesses and other commercial entities which wish to contribute or donate to the AEBC may do so, and there are tax benefits which may accrue in doing so. However, the rules are more complicated than for individual donations, especially when services or products from inventory are involved. What follows is a summary of our understanding of the situation.
- Where a business receives some sort of compensation or advantage for their donation (e.g. advertising), any tax receipt which is issued must be discounted by the fair market value of that advantage.
- Donations of cash (whether in cheque, credit card, or some other means) will be eligible for a tax receipt in the amount of the donation.
- Donations of inventory items will be eligible for a tax receipt in the fair market value of the item, but the business must also include that fair market value in their total income for the year.
- Donations of gift certificates by the issuer will generally not be eligible for a tax receipt.
- The donation of a third-party gift certificate (by someone other than the issuer) will generally be eligible for a tax receipt.
- One cannot receive tax receipts for the donation of 'services'. If AEBC pays for the service (e.g. web design), the vendor may subsequently donate the money back as cash. That cash donation would then be eligible for a tax receipt.
Disclaimer: We have prepared this summary to provide a general overview of the considerations involved in making a contribution from a business to a charitable organization such as the Alliance for Equality of Blind Canadians. This is not intended as tax or legal advice. We strongly encourage any donor who has questions about the tax implications of making a contribution to the AEBC to speak with an accountant, lawyer or other professional before doing so.
Monetary donations - that is, donations of cash, whether in "cash" form, by cheque, via credit card, or through some online means - are treated the same for a business as they would be for an individual donor. The business has the option of receiving an official charitable donation receipt, which they can use at year-end in the preparation of their income taxes.
A "donation" must, however, be just that - a donation. If the business receives some compensable advantage from the making of that donation, then it may or may not qualify for a donation receipt. For example, if a business donates $250 toward the Canadian Blind Monitor but a quarter-page advertisement for that business is put into the CBM, then the $250 would really be an "advertising expense" rather than a donation, and would not be eligible for a tax receipt.
If the advantage gained by the business is significantly less than the amount donated, a receipt for the difference may be issued. For example, a business that $10,000 in cash, in exchange for having their logo placed along the footer of the web site used to promote an AEBC event, may be eligible for a tax receipt. It is unlikely that the fair market value of that advertisement (given the traffic and exposure) would amount to $10,000, and so a tax receipt for the difference may be issued/
Donations of Inventory
When a business donates goods from inventory, they are entitled to a tax receipt for the fair market value of those goods. However, they are also obligated to report the fair market value of those goods as "income" on their tax return, notwithstanding the fact that the goods were not actually "sold". The business would still deduct the cost of procuring or producing the item from their income as per normal.
For more information and an example, please see CRA's Policy Commentary CPC-018 on "Whether gifts out of inventory qualify as charitable donation" for more information.
Generally speaking, the donation of gift certificates to AEBC does not qualify for an income tax receipt if they are donated by the issuer. There are some exemptions (for example, if the AEBC itself subsequently utilizes that receipt to purchase goods or property), but as a rule, a business cannot donate a "gift certificate" in exchange for a tax receipt, even if that gift certificate is ultimately transferred to a third party (such as at a silent auction).
If the gift certificate is donated by someone other than the issuer, a tax receipt for the amount of the certificate may be issued. For example, if Company A purchases a gift certificate from Company B, and then donates that certificate to AEBC, a tax receipt for the amount of the certificate may be issued to Company A.
For more information on the treatment of gift certificates, see CRA Policy Statement CPS-018 on "Donations of Gift Certificates".
The donation of "services" (such as bookkeeping services, website design and hosting services, or telephone service) does not constitute the wilful, voluntary transfer of property from one entity to the AEBC, and thus does not count as a "donation" for tax purposes.
The only way that a business can donate "services" to AEBC is through a two-way transaction. In such a transaction, the business would invoice AEBC for the value of the services rendered, AEBC would pay the invoice, and then the business would donate that money back to AEBC. There must be an exchange of cheques to establish the audit trail.
For more information on the treatment of services as gifts, see CRA Policy Commentary CPC-017.