Appendix “A”

Policy for issuance of official tax receipts for income tax purposes

1 POLICY

1.01 The Town may accept donations and provide “official tax receipts for income tax purposes” as prescribed by Revenue Canada. Therefore it is necessary to establish a policy for handling donations. The Town recognizes and will adhere to the guidelines set out in the Canadian Income Tax Act.

2 PURPOSE

2.01 To provide a corporate policy for receiving donations and the issuance of income tax receipts. This policy applies where an income tax receipt is requested for donations.

3 SCOPE

3.01 This policy applies to all employees of the Town of Markham, except those of the Markham Public Libraries. The Markham Public Libraries have separate policies approved by Library Board dealing with donations and issue their own official tax receipts.

3.02 All donations will be in keeping with the Town of Markham’s Vision and Mission and will not in any way reflect negatively on the Town’s public image. The Town of Markham reserves the right to reject any gift or donation in whole or in part.

4 RESPONSIBILITIES

4.01 It is the responsibility of all Town employees to ensure the requirements of this Policy are complied with.

4.02 It is the responsibility of the receiving department to ensure appropriate acknowledgement of any such donation is provided, and to ensure the Treasurer or designate is informed of all donations requiring official tax receipts and insurance.

4.03 Finance is responsible for assessing donations to ensure that appropriate receipts are issued for income tax purposes.

4.04 Finance is responsible for making the necessary insurance arrangements for all property as advised of.

4.05 Finance will monitor the regulatory changes to the Income Tax Act and the changing needs of the organization and update this policy as required.

5 DEFINITIONS

“Commissioner” means a person appointed by Council with administrative responsibilities for a group of departments;

“Council” means the Council of The Corporation of the Town of Markham;

“Designate” means the Town staff member who may be temporarily appointed to act on behalf of an authority named in this policy;

“Director” means a person holding a management position of Director within a Department and includes the Treasurer, Fire Chief, Town Solicitor, Town Clerk, Town Architect and/or General Manager;

“Donation” means a financial contribution, cash, property, or items such as art, furniture, equipment, materials of historical interest;

“Donor” means a person or organization that provides a donation to the Corporation of the Town of Markham;

“Fair Market Value” the price an item would bring on an open and free market between a willing buyer and a willing seller who are acting independently of each other.

“Gift” see donation, these terms are interchangeable;

“Gift in Kind” is a non-money donation;

“Money” includes bank notes, cheques, money orders, credit card or debit card transitions and currency/cash.

“Official Town Event” is an event approved by Council, organized by a Town Committee or Department where the event’s funding is provided by the Town’s budget and the Town controls the spending of the event’s funding;

“Relative” is defined as parent, sibling, child, grandparent, uncle, aunt, and parent in-law;

“Town” means The Corporation of the Town of Markham;

“Treasurer” means the Council appointed Treasurer of the Corporation of the Town of Markham;

6 SOLICITATION

No individual or organization shall solicit funds in the name of or on behalf of the Town without approval of the Chief Administrative Officer or Council or their approved designate unless they are doing so on behalf of an Official Town Event.

7 GENERAL RULES

7.01 Revenue Canada’s definition of a donation\gift is “a voluntary transfer of property owned by a donor to a donee, in return for which no benefit flows to the donor”

7.02 To have a valid donation\gift, there must be an intention to give, a delivery, and an acceptance. Because there must be an acceptance by the donee, a donation is not completed until it is accepted.

7.03 The transfer is made without the expectation of return.

7.04 No benefit of any kind may be provided to the donor or to anyone designated by the donor, except where the benefit is of nominal value. The benefit is considered nominal value where its fair market value does not exceed the lessor of $50.00 or 10% of the amount of the donation.

8 QUALIFYING DONATIONS

Donations that qualify for official tax receipts generally include:

(a) cash

(b) capital, real or depreciable property

(c) personal-use property, works of art, jewelry, rare book, stamp, or coin

(d) a leasehold interest or a residual interest in real property

(e) donations of life insurance policies

(f) donations under will

Special rules exist for donations of cultural property and donations of ecologically sensitive lands.

9 NON QUALIFYING DONATIONS

9.01 Contributions of skills or time through volunteer service do not qualify as donations.

9.02 The payment of a basic fee for admission to an event or to a program does not qualify as a donation that is eligible for the issuance of a tax receipt. An exception to this rule is available for the purchase of a ticket to a fund-raising dinner, ball, concert, and show or like event. In this case, the donation is valued as the difference between the fair market value of the food, entertainment, prizes and the purchase price of the ticket. As per the Revenue Canada guidelines, the Town will not issue a tax receipt if the total value of the food, entertainment & prizes received exceeds 80% of the purchase price of the ticket.

9.03 When a donor requests the donee to pay for a portion of the donation and the amount paid by the donee to the donor exceeds 80% of the total value of the donation, a tax receipt will not be issued. For example a piece of land valued at $100,000 is offered to the Town for $85,000 with the request that the Town issue a tax receipt for the difference, $15,000. Since the amount to be paid by the Town is in excess of 80% of the value of the land, the Town is unable to issue a tax receipt for the difference.

9.04 When the donor has directed the funds to a specific person or family, a tax receipt will not be issued.

9.05 Donations that have a direct benefit to the donor or any relative of the donor, a tax receipt will not be issued.

9.06 Donations made in exchange for consideration of a right, privilege, material benefit or advantage such as promotion or advertising for the donor's purposes do not qualify for income tax credits under the Income Tax Act, and no income tax receipt can be issued.

9.07 The Canada Customs Revenue Agency’s (CCRA) regulations on donations where the donor's company name and;

- company logo; or

- slogan; or

- address/phone numbers

is listed in promotional material, would not qualify for a tax receipt. The reason is that this is deemed as "significant advertising/promotion" for the donor (i.e. it is a form of advertising/promotion and sponsorship for the donor company).

10 ISSUANCE OF TAX RECEIPTS

10.01 Upon the Treasurer’s or designate confirmation that the donation is in compliance with this policy and the donation has been received, the Director of Financial and Client Services shall issue an “official tax receipt for income tax purposes” and the Finance Department shall arrange for the applicable insurance coverage, if required.

10.02 All requests for tax receipts must be accompanied by appropriate donor and donation information as detailed on the “Gift in Kind/Conditional Gift Receipt of Donation” form or “Money Donation Receipt Request” form.

10.03 Income tax receipts shall be issued for donations of $25.00 or more, unless specifically requested by the donor and approved by the Town.

10.04 The date of donation is the date the donation was received or the title to the asset transferred. Donations received after December 31 may not be included in the prior year’s donation unless the donation was post marked in the previous year.

10.05 Revenue Canada ultimately determines the value of the donation, which is permitted for income tax deduction.

11 ACCOUNTING FOR DONATION OF MONEY

11.01 For cash donations, the receipt must be made out to the person delivering the donation. All cash donations greater then two hundred and fifty dollars must be received at the Cash Management office. Cash donations of two hundred and fifty dollars or less can be received at the appropriate cultural office or the Cash Management office.

11.02 All cheque donations will be required to have been cleared by the Town’s financial institution. Upon successful completion of this waiting period, qualifying donors will receive a tax receipt for their donation. The official tax receipt must be made out to the same name and address appearing on the cheque or other form of payment.

11.03 Cheques, money orders and bank drafts should be made out to “The Corporation of the Town of Markham”, “Markham Theatre”, “Markham Museum”, or “Frederick Horman Varley Art Gallery”. No third party cheques will be accepted.

12 ACCOUNTING FOR DONATIONS OF GIFTS-IN-KIND

12.01 The Town of Markham will only issue official tax receipts for Gift in Kind donations where the donation provides a clear benefit to the Town of Markham.

12.02 The value placed on Gift-in-Kind items will be determined by the item’s Fair Market Value.

12.03 Valuation of Fair Market Value should be based on an arm's length sale and purchase of similar property at or near the same date. A minimum of two appraisals are required to be completed by a qualified dealer, appraiser or other knowledgeable individual who is familiar with the market for the object or property, whenever possible Art appraisers are to be members of ADAC (Art Dealers Association of Canada). The dealer, appraiser or other knowledgeable individual must not be associated with the donor. The appraisals shall be in the form and content acceptable to the Treasurer or designate. Any appraisal not sufficient in form and content may be rejected, and one or more additional satisfactory appraisals may be required to be produced before an official tax receipt is issued.

12.04 If the item is valued at $1,000 or less, an employee qualified to make the appraisal for such items may complete an appraisal of the item.

12.05 If the item is valued at more than $1,000 two outside appraisals are required, unless there is a ready market for the item from which the fair market value can be ascertained. Where two or more appraisals have been obtained, the average of these appraisals will be considered the fair market value as long as the appraisals are to the satisfaction of the Treasurer or designate.

12.06 The receipt shall be in the amount of the average appraised value. The receipt shall also indicate a description of the object and the name and address of the appraiser, and shall be dated the day on which the Town received the Donation. If the two appraisals received significantly differ in appraised values, a third appraisal may be requested in an effort to clarify the true value.

13 ACCOUNTING FOR DONATIONS OF CULTURAL PROPERTY

13.01 Cultural property are items that are deemed by the Canadian Cultural Property Export Review Board to have "outstanding significance and national importance" to Canada. Criteria in determining the “significance and importance” can include; the items close association with Canadian history or national life and/or its aesthetic qualities and/or its value in the study of the arts or sciences.

13.02 The donation of cultural property must be certified as such by the Canadian Cultural Property Export Review Board.

13.03 The receiving department shall be responsible to determine if a Cultural Property item is to be accepted and to formalize the transfer of ownership from the donor to the Town of Markham.

13.04 The receiving Department shall be responsible for making application to the Canadian Cultural Property Export Review Board for Certification of Cultural Property for Income Tax Purposes.

13.05 Income tax receipts will be issued by the Canadian Cultural Property Export Review Board (CCPERB) and fair market value is determined by the CCPERB on the date ownership is transferred to the Town.

14 ACCOUNTING FOR DONATIONS FOR SPECIFIC PURPOSES

14.01 Donations and requests for donations that are made for specific purposes will require Council approval. These requests may originate from individuals, organizations, or Council directly. Long-term programs, where cash inflows and expenditures may span many years are best handled through the establishment of a reserve fund. Examples include donations for specific capital projects, or donations to assist with specific ongoing operational needs, such as for the Museum, Theatre or the Frederick Horsman Varley Art Gallery. Any new programs would require that Council authorize the creation of a new reserve fund.

14.02 Requests to direct donations to a specific operation or for specific capital projects, such as to a community or cultural centre, which are generally short-term in nature (i.e. less than one year), are best handled by depositing to the revenue account of the appropriate capital account.

15 ACCOUNTING FOR DONATIONS TO SUPPORT ORGANIZATIONS INDEPENDENT OF THE TOWN

15.01 Organizations that offer programs of genuine benefit to the community may request that the Town receive donations on their behalf for the purpose of issuing income tax receipts. Under the Income Tax Act, the Town cannot issue income tax receipts for funds that it will not itself be responsible for spending. Such organizations should receive their donations directly, and register as a Charity with Revenue Canada if they wish to provide income tax receipts.

15.02 The Town may however accept these types of donations with the understanding that no official tax receipt will be issued.

16 ACCEPTANCE

The Treasurer or designate is the final level of acceptance for all donations requiring tax receipts to the Town of Markham. The Treasurer or designate may grant approval for official tax receipts for money donations made through a Council approved fund raising effort, i.e. the Markham Theatre Membership Drive.

17 ASSOCIATED COSTS

Unless otherwise agree upon by the Town, the donor will responsible for any of the following costs (where applicable):

1. transporting the item;

2. appraisal or evaluation by a certified agency;

3. photographs for inventory and insurance purposes;

4. conservation treatment, if required.

Where the Town agrees to incur any of the above costs, these costs will be expensed to the receiving Department.

18 FINANCIAL IMPLICATIONS

Financial implications of accepting a donation should be a consideration in the assessment of the donation acceptance. Some of Financial costs to consider are; cost of project implementation, installation of the work, restoration, and ongoing maintenance of the donation.

19 CONTROL OF RECEIPTS

All used & unused receipts will be securely stored in the Finance Department until needed. All used receipts will be retained for the period required by law in adherence to the “Income Tax Regulation 5800” or any successor legislation or regulation.

20 REFERENCES & RELATED STATEMENTS of POLICY & PROCEDURE

The Canadian Income Tax Act

Gifts and Official Donation Receipts IT-110R3 (Section within the Income Tax Act)

Canadian Taxation of Charities & Donations, Thomson Carswell

Gifts and Income Tax, Canada Revenue Agency, P113(E) Rev. 04

Reference to a collection policy for the Art Gallery and the Museum

http://www.culture.gov.on.ca/english/culdiv/heritage/munote3.htm

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