Today is Yom Kippur, the holiest day of the Jewish calendar, in which
millions around the world congregate in synagogues and temples for a day of
fasting and prayer. Because many houses of worship are full to capacity, tickets
are required for admittance to the services. The price for tickets varies by
religious institution and is often linked to the ability to pay. Since the
religious institution is typically a registered charity, a charitable receipt is
generally issued for the price of the tickets.
Earlier this year, the federal government introduced draft tax legislation,
based on proposals announced nearly two years ago, that sets out new rules
governing "split-receipting" of charitable donations. Split-receipting allows a
charity to issue a receipt for a gift even if the donor receives some kind of
benefit in return, provided the value of the benefit is excluded from the amount
of the receipt. This wasn't always the case.
The new rules arose as a result of a review by the Canada Revenue Agency and
the Departments of Justice and Finance of what constitutes a "gift" for tax
purposes. The review was initiated as a result of various court decisions that
questioned whether the traditional meaning of gift under common law principles
The common law definition of gift is typically a voluntary transfer of
property for which the donor receives nothing of value in return for having made
the gift. This definition implies that a gift is not a gift if a donor receives
anything in return.
To illustrate, say Jack donates his $300,000 home to a charity. There is an
outstanding mortgage of $100,000 on the house that will be assumed by the
charity. This would not constitute a true gift since Jack is receiving something
in return -- the forgiveness of the $100,000 debt -- despite the fact that there
is both a gift component (his $200,000 equity interest) and an intention to
Under the new rules (expected to be passed later this year but would be
retroactive to December, 2002) as long as there is "donative intent," a charity
may issue a receipt for the amount of the donation less the value of any
"advantage" received by the donor in return. In the above example, these new
rules would allow a receipt of $200,000 to be issued to Jack.
So, is there an "advantage" received by the purchaser of synagogue tickets?
Similarly, can one measure the advantage experienced by parishioners who attend
church services each week who put offerings into the collection plate and
receive a tax receipt at the end of the year for their total contributions?
The draft legislation defines "advantage" as "the value...of any property,
service, compensation or other benefit that the taxpayer...has received,
obtained or enjoyed."
While worshippers may experience a spiritual advantage from their attendance
at religious services, Canadian tax policy would seem to suggest that for an
advantage to exist under the Tax Act, there must be some way of valuing this
advantage in tangible, monetary terms. As a result, the ability for religious
institutions to continue to issue donation receipts to worshippers should not be
a concern, even under the new rules.