This morning, I heard a radio ad for a local fundraising event. The spot promised a day of free virtual golf at a centre that normally charges for this type of activity. The entry fee was $30 and it was mentioned that each participant would receive a "tax-deductible" receipt for their full $30.

This made me go "hmmm..." for two reasons:

1. My understanding is that under Canadian tax law, the value of any advantage to the donor must be subtracted from the value of the charitable receipt.

Unless the ordinary market value of the activity can be deemed to be of minimal value with respect to the gift amount, I'm not 100% sure that this organization should be issuing a receipt for the full contribution! I also question whether they should be providing tax information in a radio ad?



2. This is the third or fourth time in the past month that I've seen the wording "tax-deductible donation" used in fundraising marketing.

It's a fine hair to split, but for Canadian individuals, charitable donations trigger a "tax-creditable donation receipt." The difference may seem small, but it is important! 

Why?

A tax credit means that regardless of your income, you will receive a standardized percentage of your gift back as a credit on your income tax return.

If it were a "charitable deduction," the rate of reimbursement would be tied to a tax-payers marginal rate for income tax, which in many cases, is lower than the marginal rates for charitable tax credits.


CRA offers this nifty calculator that provides a great illustration of how it all works. 

Recognizing this seemly minute technical difference is also a recognition of Canada's generous and unique encouragement of charitable donations from members of the public.

A Solution?

A great term that I learned at one of the universities I worked with was "tax-smart giving." It gets to the point in your fundraising marketing materials without getting into sticky details. 


(Caveat: I speak as a lay-woman and not a financial or legal professional. Please remember to consult with your own professional advisors.)
 


01/06/2012 11:19

What exactly is the best wording a non-profit should use?

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01/08/2012 17:01

Hi Agnes, Thank you for your question.

In the US, yes, giving can generate a tax deduction - so tax-deductible is appropriate.

In Canada, however, individual giving creates a tax credit - so appropriate would be anything around "eligible for a tax credit", "tax smart", or "eligible for a donation receipt" (I'm speaking of cases where the individual is donating to a registered Canadian charity, of course).

I always try to stay close to language around "may be eligible for tax-savings" rather than promising or guaranteeing that in my marketing material.

The good news is that tax advantages are rated low on surveys of motivators for giving, so they shouldn't be the thrust of the message anyway! Just like to see it done correctly when I see that info included.

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08/28/2013 02:22

I admire your thoughts and your way of expressing and putting it in front of readers is really something that I have seen after a long time. keep it up.

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