Asking for Permission to accumulate funds

This article comes from the CRA website.

Permission to accumulate funds helps a registered charity to temporarily accumulate funds in order to make a major expenditure, such as buying a building or a costly piece of equipment, which cannot be financed out of its current revenue without the charity incurring a spending shortfall (not meeting its disbursement quota).

The amount approved for accumulation, and the income earned on the amount, is excluded from the charity’s annual spending requirement.

To ask for permission, send a letter with the following information:

  • The specific purpose for which the funds will be used;
  • the amount required;
  • the length of time needed to accumulate the funds (minimum 3 years and maximum 10 years);
  • the signature of a director/trustee or other authorized representative of the charity;
  • the name and the registration number of the charity; and
  • the effective date (starting date).

Mail or fax the letter to:

Charities Directorate

Canada Revenue Agency

Ottawa ON (Ontario) K1A 0L5

Fax 613-954-8037

Confirmation Letter (terms and conditions)

If approved, the charity will receive a letter confirming the amount that can be accumulated, the specific purpose for which the approval was granted, and the number of years for which the accumulation can continue.

The funds accumulated for a fiscal period, including any income earned on the accumulated amount, should be reported on line 5500 of the T3010 return. Accumulated funds spent for a fiscal period should be reported on line 5510.

Unused accumulated amount

If a charity fails to meet the terms and conditions of the permission to accumulate or if circumstances change and the accumulation must be abandoned, the unused accumulated amount and any income earned on the accumulated amount must be included in the calculation of the charity’s disbursement quota for that year. The unused accumulated amount must be included as property not currently used in charitable activities or administration to calculate the amount to report on line 5900.

If the charity needs more time to accumulate funds or wants to change the approved amount, it must apply in writing to the Charities Directorate.


David Holten

Church Resources Consultant

Returning a Gift to a Donor

This article comes from the CRA website.

Can a registered Charity return a gift to a donor?

In most cases, a registered charity cannot return a donor’s gift. At law, a gift transfers ownership of the money or other gifted property from the donor to the charity. Once the transfer is made, the charity is obliged to use the gift in carrying out its charitable purposes.

However, a charity may try to retain the goodwill of donors seeking the return of their gifts by offering to transfer the gifted property to another registered charity.

When a registered charity must return gifts to donors

A charity is occasionally obliged by law to return gifts to donors. This can happen, for instance, when a charity asks the public to contribute to a special project and later events make it impossible to carry out the project. Under certain laws, ownership of the gifted property can revert to the donors if the project becomes impossible to fulfill.

The return of gifts to donors fall more appropriately under trust law than the Income Tax Act and is ultimately a matter for a court to decide. A charity may wish to consult legal counsel in these instances. We strongly suggest that the charity, or its legal counsel see Guidance CG-016. Qualified  donees – Consequences of donated returning property if it appears that the charity may have to  return gits to donors.

How to avoid having to return gifts to donors

When a charity is seeking funds for a special project, we recommend that the charity clearly inform donors, and/or state in its fundraising material, before accepting any donations, what it will do with the money if the project cannot be carried out or if more money is collected than the project requires. The charity could state, for example, that it will apply any unused donations to its other programs.

Gifts of Services

Can charities issue donation receipts for gifts of services?

This article comes from the CRA website.

A charity cannot issue a receipt for a gift of service. At law, a gift is a voluntary transfer of property without consideration. Contributions of services (for example, time, skills, effort) are not property. Therefore, they do not qualify as gifts for the purposes of issuing official donation receipts.

Registered charities cannot issue official donation receipts for gifts of services. However, they can issue receipts under the following conditions:

If a charity pays a service provider for services rendered and the service provider then chooses to donate the money back, the charity can issue a receipt for the monetary donation (this a often referred to as a cheque exchange). In such circumstances, these two distinct transactions must take place:

1. a person provides a service to a charity and is paid for that service

2. that same person makes a voluntary gift of property to the charity

A charity should also make sure that it keeps a copy of the invoice issued by the service provider. The invoice and cheque exchange not only ensure that the charity is receipting a gift of property, but they also create an audit trail, as the donor must account for the taxable income that is realized either as remuneration or as business income.

A charity should not issue an official donation receipt to a service provider in exchange for an invoice marked “paid.” This procedure raises questions as to whether in fact any payment has been transferred from the charity to the service-provider and, in turn, whether any payment has been transferred back to the charity.

When should you take your Canada Pension Plan?

I often got asked, when is the best time to take the CPP? Many would say that they heard that at age 62 was the best time. I would respond that it would depend on when you know you will die.

Actuaries Lisa Bjornson and Fred Vettese wrote an article for the Financial Post this year saying that a decision to defer could save up to $72,000. Interested? Here it is.

-David Holten
Church Resources Consultant

Deferring your CPP could be worth $72,000, but few Canadians take advantage of it

What would you rather have: a bag of money with $20,000 in it or a bag with $25,000? It seems like a silly question but the debate about when to start CPP pension boils down to a question just like it. Is it better to start CPP at 60 or 65 or even 70? The usual answer from industry experts tends to be the highly unsatisfactory “it depends.” Fortunately, actuarial science gives us the tools to do better. This article may be the one and only time you will see a definitive answer to this question though we do admit it depends on one’s earnings history.

To wait or not to wait: this question makes sense, of course, only if you have a choice. If you retire at 60 with little money saved away, you will absolutely need to start your CPP payments immediately. What makes a choice possible is having a six-figure nest-egg to tide you over until you choose to start your CPP pension.

Few people appreciate how punitive it is to start CPP early, or how beneficial it can be to defer it beyond age 65. Data from government sources reveals a great propensity to begin CPP benefits as soon as one is eligible — which is at age 60. In 2015, 42 per cent of Canadians who began CPP benefits were 60 years old. A mere 6 per cent postponed the first payment beyond age 65.

The rules for computing CPP pensions are complicated, especially because of the dropout provisions, the combination rules for survivor pensions after 65 and changes in the average national wage. Rather than reciting these rules, let us consider an example.

Jacques is a pending retiree who just turned 60 years old. He is married and has made the maximum CPP contributions since he was 23. He has accumulated enough in his RRSPs that he doesn’t have to begin his CPP immediately. Instead, he can draw down his savings until age 70. Jacques is not troubled by this option since he is determined to start his CPP pension when it will give him the greatest overall value.

In 2017, Jacques’ CPP pension at 60 would be $713 month. This is calculated as the maximum pension less a reduction of 36 per cent. With inflation at 2.2 per cent a year, the monthly payments will gradually climb to $886 by the time he hits 70. If he holds off on collecting CPP until 70, the monthly pension at 70 will be about $2,056! (This assumes wage inflation beats price inflation by 1 per cent a year.) Comparing an indexed pension of $713 from age 60 to a pension of $2,056 from 70 is hard. It is a little bit like handicapping the race between the tortoise and the hare. Almost everyone roots for the hare (which means taking the $713 a month from age 60) but who wins in the long run?

Fortunately, actuarial science comes to the rescue. Actuaries try to take everything into account when assessing the present value of a pension: the probability of death on a year by year basis up to age 115, changes in the dropout provision as the starting age changes, survivor benefits, future inflation and most important, the appropriate discount rate. We used 1 per cent as the real discount rate (after inflation). This is a risk-free rate and though it sounds low, it is a little higher than the current yields on real-return bonds.

And the result? The actuarial present value of Jacques’ CPP benefit if he commenced it at age 60 is $205,000. The corresponding value if he starts CPP at 70 is $277,000. And no, we didn’t hand Warren Beatty the wrong card. Starting CPP at age 70 is the clear winner. By postponing his CPP to age 70 instead of 60, Jacques can increase the value of his benefit by 35 per cent.

Why are Canadians the beneficiaries of such government largesse? The answer lies in that all-important discount rate. From the government’s perspective, the choice between a starting age of 60 or 70 is more or less cost-neutral but that is because they use a real discount rate of 4 per cent to compare the options instead of 1 per cent. This doesn’t make 4 per cent the right choice for you though because you cannot earn 4 per cent after inflation without taking big risks.

Let us generalize the result to the extent we can. If Jacques were not married, the difference is almost as great — the value of his CPP benefit from age 70 would still be significantly greater than starting it at 60.

If Jacques started working at age 26, the CPP pension starting at 70 is still worth more, though the difference shrinks to 24 per cent. For the individual in this case, the true difference in value can be more than 24 per cent. That is because the CPP pension is virtually guaranteed; having more retirement income coming from a guaranteed source like CPP reduces both your investment and your longevity risk.

There are situations where the excess value at 70 is even smaller; for instance, if you have a spotty contributory record or a shorter than average life span. Most people though, benefit from deferral.

Lisa Bjornson is an actuarial associate in Morneau Shepell’s Retirement Solutions PracticeFred is the firm’s Chief Actuary.

What is a gift?

This article is adapted from the CRA

When a charitable gift is received, the recipient must consider the following questions to figure out if the donation can be considered a gift, per Canadian Revenue Agency standards. If the donation meets the criteria listed below, then a receipt can be issued to the donor. 

(In this article a “qualified donee” refers to a recipient qualified as a donee per the Canadian Revenue Agency such as a registered charity, a registered Canadian amateur athletic association or a registered municipality.)

  1. Was the gift made voluntarily?

A gift must be given freely. If a gift is made as a result of a contractual or other obligation (for example, a court order) a receipt cannot be issued.

  1. Was there a transfer of property?

A receipt can only be issued for a gift of property.

A gift of service is not a gift of property and a receipt cannot be issued. For more information, go to gifts of services.

A gift certificate donated by the issuer of the certificate is not considered property and a receipt can only be issued under specific circumstances. However, if someone buys a gift certificate and then donates it to a qualified donee, it is considered property and a receipt can be issued. For more information, see Guidance CG-007, Donation of gift certificates or gift cards.

A pledge or promise to make a gift is not in itself a gift. Therefore, a receipt cannot be issued. However, when the donor honors the pledge or promise by making a transfer of property, a receipt can be issued.

  1. Did the donor receive an advantage?

When a donor receives an advantage ( in return for a donation, all or part of the donation may no longer qualify as a gift. For more information, go to Split receipting. (

Examples of advantages include:

  • a ticket to an event
  • the use of property
  • a dinner or performance at a fundraising event
  1. Did the donor ask for the gift to be directed to a specific person, family, or other non-qualified donee?

A donor cannot choose a specific beneficiary for their gift or ask the qualified donee to give the gift to another non-qualified donee. However, a donor can ask that their gift be used in a particular program of the qualified donee as long as there is no benefit to the donor or anyone not at arm’s length to the donor. The qualified donee must be able to use the gift within the particular program as it sees fit. If the donor retains control, the donation is no longer considered a gift at law and a receipt cannot be issued.

  1. Was there a condition attached to the gift?

There are two types of conditions that can be attached to a gift: a condition precedent or a condition subsequent.

A condition precedent means that a certain condition must be met before the gift takes effect. For example, a donor gives $100,000 on the condition that the qualified donee also raises $100,000 within a certain period of time. Since a condition precedent is not a gift at law until after the condition is fulfilled, a qualified donee can issue a receipt only after the condition has been met.

condition subsequent means that a condition must be met after the gift is made. For example, a donor gives $200,000 to a qualified donee on the condition that the funds are used to operate a shelter for the homeless. If the condition is not met, the donor can ask the court that the $200,000 be returned. If the court orders that the gift be returned to the donor, the qualified donee must send a letter with this information to the Canada Revenue Agency. For more information, go to Returning a gift to a donor ( and see Guidance CG-016 Qualified donees – Consequences of returning donated property. (

What types of transactions generally do not qualify as gifts?

The following transactions do not qualify as gifts:

  • gifts of services (for example, donated time, labour)
  • gift certificates that the issuer donated (may qualify under specific circumstances as explained in Guidance CG-007)
  • a non-cash gift for which the fair market value cannot be determined
  • gifts provided in exchange for advertising or sponsorship
  • a gift that gives the donor an advantage whose fair market value is more than 80% of the value of the gift
  • a payment for a lottery ticket or other chance to win a prize
  • a court-ordered donation to a qualified donee
  • the admission fee to an event or program
  • membership fees that give the donor an advantage that is more than 80% of the value of the membership (for example, the right to attend events, receive literature, or services)
  • a payment to cover a child’s adoption fees
  • the purchase of goods or services from a qualified donee
  • pledges
  • a loan of property
  • the use of a timeshare
  • the lease of premises

Rules for Gifts-In-Kind

This article comes from the Canadian Council of Christian Charities September 2016 issue.

In-kind gifts are eligible for tax deductions and credits, but some rules apply as prescribed by the Tax Court of Canada. Most notably, official receipts are required, which contain the relevant information.

A registered charity that issues an official donation receipt with incorrect or incomplete information is liable to a penalty equal to 5% of the eligible amount stated on the receipt. This penalty increases to 10% for a repeat offence within five years.

In Hossein Shahbazi v Her Majesty the Queen, the TCC reaffirmed that failure to describe the property to which a tax receipt relates is a violation of receipting requirements, and is sufficient grounds to disallow a tax credit. This 2015 case concerned an appeal by Hossein Shahbazi about the disallowance of tax credits for gifts-in-kind that he made to two different charities.

The CRA took issue with the completeness of the tax receipts and not the valuation of the donations. In particular, CRA said the receipts were deficient in the following ways:

  • The date the donation was made and the date the receipt was issued were both missing.
  • The receipts did not contain a brief description of the property, as required for non-cash donations.
  • The receipts did not contain the name and address of the appraiser, which is required when the property is appraised.

What does this mean for Charities?

Charities should ensure that they comply with the proper receipting requirements. Charities must ensure that receipts provided foe gifts-in-kind, clearly shows that the gift was in property and not cash and include a description of the property. As such, charities should conform to the receipting requirements as closely as possible to avoid unhappy donors and costly penalties

Protecting Your Charity’s Investment

This article comes from the Canadian Council of Christian Charities September 2016 Issue.

Some churches decide to invest funds that are not immediately needed for operating purposes. The church’s Board is responsible for investing with a high level of care, to ensure applicable prudent investor principles are followed.

This article will discuss the scope of prudent investor principles, the importance of an investment committee, and some common issues related to investment best practices.

There are various types of funds a church may invest:

a) Prior years’ cash surpluses and not needed this year

b)Reserve funds

c)Restricted funds 

Any legal expectations can usually be found in your province or territory’s Trustee Act. The Canada Revenue Agency (CRA) also has general expectations set out in the Income Tax Act.

Who’s in charge of investing?

Generally, the church Board or any other group with board-like powers over church assets are responsible. These members can also be referred to as Trustees. Trustees are expected and required to invest the church assets with a high level of care, as though investing their own money.

Properly investing a church’s funds is a significant fiduciary responsibility. Trustees must consider the best interests of the church, self-comply with applicable laws, and protect themselves from personal liability.

Accordingly, before a church decides to invest funds, an investment policy should be formulated. A large amount of funds may require a qualified investment advisor or manager.

Prudent investor principles

Most legislation sets out some version of the following prudent investor principles. A Trustee will:

  • exercise the judgment and care that a person of prudence, discretion and intelligence would exercise in administering the property of others;
  • use the skill, diligence and judgment that a prudent investor would exercise in making investments; and
  • invest trust property in any form of property or security in which a reasonable and prudent investor would invest.

Specified investment criteria

Some provinces have some form of the following investment criteria that must be considered prior to making investment decisions:

  • General economic conditions
  • Possible effects of inflation or deflation
  • The role that each investment or course of action plays within the overall trust portfolio
  • The expected total return from income, and the appreciation of capital
  • Needs for liquidity, regularity of income, and preservation or appreciation of capital
  • An asset’s special relationship or special value, if any, to the purposes of the trust

The investment committee

To protect the Trustees and the church, the investment committee should consider the following best practices:

  • Appoint Board and staff members who are well versed in the church’s finances and investment needs.
  • Engage a qualified investment advisor knowledgeable in charity and trust law, to develop an investment policy.
  • Develop an investment policy that meets legal requirements, and addresses any alternative considerations. (See below)
  • Engage an investment manager to handle the investment activities and provide periodic portfolio reports.
  • An investment manager and investment advisor should not be related.

Common issues related to investment practices

1. Ethical investments can be based on theological, moral, or applying a particular worldview, because churches are set up to carry out some of these legally recognized charitable purposes:

a)Advancement of Religion

b)Relief of Poverty

c)Advancement of Education

d)Providing other benefits to the community, determined to be charitable by the courts

The number of these investments to choose from is lower and risk potentially maybe higher.

2. Community Investments—See CRA Guidance CG-014

3. Investing in Credit-Denied Groups—See Prudent Investor Principles

4. Guaranteed Investment Certificates (GICS)—short term GIC’s should be better

5. “Can’t Miss” Investments—See Prudent Investor Principles


It is a significant challenge for Trustees to meet the fiduciary care expectations od properly investing a church’s financial assets. An investment committee and a well-developed investment policy, actively administered with professional counsel, will go a long way in demonstrating your church’s compliance with the law’s prudent investor principles.

If you need an investment policy, please contact David Holton or Victor Ku in the CBWC office.