Becoming a registered charity is an important way for a not-for-profit organization to raise funds and serve its mission. A registered charity can receive gifts from other registered charities and can also make gifts to other registered charities. Canadian donors can give to registered charities and receive a donation receipt, but donors can also give to a wider group of organizations called “qualified donees”.
This blog will explain about qualified donees and will focus on the process for a foreign university to become a qualified donee.
What is a Qualified Donee?
A qualified donee can issue official donation receipts for gifts that they receive from donors. The Income Tax Act (Canada) also allows registered charities to make gifts to them without the need to enter into an agreement of any sort. The registered charity that makes a gift to the qualified donee does not have to maintain direction and control over the activities of the qualified done.
Who is a Qualified Donee?
In addition to registered charities and registered national arts service organizations, qualified donees include:
- Registered Canadian amateur athletic associations
- Registered journalism organizations
- Registered municipalities
- Registered municipal or public bodies performing a function of government in Canada
- Registered universities outside Canada
- Registered foreign charities that have received a gift from His Majesty in right of Canada
- Registered low-cost housing corporations for the aged
- His Majesty in right of Canada, a province, or a territory, and the United Nations and its agencies
Benefits of Official Donation Receipts
Registered universities outside Canada are qualified donees and so they can issue official donation receipts and are eligible to receive gifts from registered Canadian charities. An official donation receipt allows donors with taxable income in Canada to claim a credit on their Canadian income tax and benefit return or a deduction on their Canadian corporation income tax return. Qualified donees are also the only entities that Canadian registered charities are allowed to make gifts to. A registered charity cannot make a gift to a not-for-profit that is not a qualified donee.
Publication of Status as a Registered University
A university outside Canada that is registered as a qualified donee will have its name, location, and registration status included on the CRA’s publicly available list of qualified donees. Publication of the university and its status can be an important tool for donors to know whether they can donate to their favorite university outside of Canada. Getting listed on this list is highly desirable for any foreign university. To see the list of registered universities outside of Canada that are qualified donees, go to the following site: canada.ca/charities-giving, and select “Other organizations that can issue donation receipts”, then select “Registered universities outside Canada” and see “list of registered universities outside Canada.”
To be eligible for qualified donee status as a university outside Canada, a foreign educational institution must do all of the following:
- maintain an academic entrance requirement of at least secondary school matriculation standing
- be organized for teaching, study, and research in the higher branches of learning
- ordinarily include Canadian students in its student body
- have the authority to grant degrees of at least the baccalaureate level (bachelor or equivalent) according to the academic standards and statutory definitions of the country the institution is located in.
To apply for qualified donee status as a university outside Canada, an application letter is sent to the CRA’s Charities Directorate. The letter should state that the institution is asking for qualified donee status and must include information and supporting documents required by the CRA. Mills & Mills LLP has acted as an authorized representative to successfully to obtain Registered University Qualified Donee Status.
Official Donation Receipts
Once a university outside Canada is registered as a qualified donee, it can issue official donation receipts for income tax purposes for gifts received. The information on an official donation receipt for cash gifts must be legible and shown in a way that cannot be easily altered and have the following:
- a statement that it is an official receipt for income tax purposes
- the name and address of the qualified donee
- a unique serial number
- the location where the receipt was issued (city, town, municipality)
- the date the gift was received
- the date the receipt was issued
- the full name, including middle initial, and address of the donor
- the amount of the gift
- the amount and description of any advantage received by the donor
- the eligible amount of the gift
- the signature of an individual authorized by the qualified donee to acknowledge gifts
- the name and website address of the CRA
Receipts for non-cash gifts must also include:
- a brief description of the gift received by the qualified donee
- the name and address of the appraiser (if the gift was appraised)
The amount of a non-cash gift must be its fair market value at the time the gift was made.
Maintaining Qualified Donee Status
To keep its qualified donee status, a registered university outside Canada must meet certain requirements under the Act. These include making sure it issues official donation receipts properly and keeping books and records supporting any official donation receipts it issues.
Books and Records
Adequate books and records will contain:
- information to allow the CRA to verify revenues for which donors can claim tax credits or deductions
- information to allow the CRA to confirm that they meet the requirements for qualified donee status under the Income Tax Act
- a duplicate of each receipt containing prescribed information for each donation received
Registered universities may keep their books and records in their own country, but must make them available in Canada at the CRA’s request.
Books and records include but are not limited to:
- financial statements supporting any donation receipts that are issued
- source documents such as cancelled cheques and bank deposit slips
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