Are You a Fundraiser?
How The CCCC Community Trust Fund (CTF) Can Help You and Your Charity
If you are either a professional or volunteer fundraiser for your church or charity, you may come across generous donors who would like to make an in-kind gift of securities, as they aware of the enhanced tax relief provided for this type of gift.
Of course, if your charity does not have a brokerage account of its own to receive this in-kind donation, it could lead to a missed fundraising opportunity, or, the donor cashing out the securities to make a cash donation. That leads to higher-than-needed tax payable as the donor can no longer use the special provision in the Income Tax Act that none of the capital gains on the securities is taxed when securities are given in-kind.
However, not every charity can or wishes to deal with the administrative burden of setting up and maintaining a brokerage account. Unlike a personal brokerage account, that can be set up easily with a bank, to set one up for a charity requires board motions; board signature samples; identification copies (e.g., drivers license); and occasionally even personal financial assurances from board members. A lot of these steps then need to be repeated for even minor changes (e.g., replacing a signing officer).
Then there are the additional rules to follow for valuing these gifts; issuing separate gift-in-kind receipts; accounting intricacies; and other administrative matters. The cost of this needs to be weighed against the benefit of having a brokerage account, if these gifts may only occasionally occur, or you need it for a particular fundraising event (e.g., a capital campaign).
How, Exactly, Does the CTF Help You and Your Charity?
The CTF can receive in-kind gifts of securities and deal with all the administrative matters of valuation, receipting and accounting, for a modest facilitation fee taken from the proceeds of the sale of the securities (the donor receives full value of the gifted securities on their tax receipt).
Your charity simply receives the net cash amount, via cheque.
What’s Involved for You, as a Fundraiser?
The CTF has set out the process for donors to follow, including the facilitation fee schedule: here, under the tab "Q. What is CTF's facilitation fee?
To help you familiarize yourself with how your donors will be using our CTF system, kindly go through the Donors section to see what is involved. Additionally, if you wish, you can contact us at ctf@cccc.org to arrange setting up a test account for yourself.
Once you’re familiar with the Donors area or have tried the optional test account, your first step would be to direct donors to the Donors section of the CTF website. To aid in your communications with your donors, you can provide some additional information, as needed:
- For donors who have brokerage accounts, using the CTF online process to generate the needed forms should not be an issue. If certain donors are not comfortable with online systems, you can suggest they have their broker or financial advisor use our system on their behalf.
- You can assure donors the CTF system only generates the needed forms but does not actively create a transaction. That rests with the donor to get underway when they provide the transfer form to their broker. It’s their broker that makes the transaction happen by “pushing” their securities into the CTF account.
- Part of the form preparation is to enter your charity’s information as the Charity Beneficiary. If you provide your donor with your charity’s Business Number (BN), its saves them a look up step. When they use it when prompted, all the information needed about your charity will populate in the required fields, and match what is on record with the Canada Revenue Agency (CRA). This helps us provide accurate information on the donation receipt we will be issuing.
- The BN will be in the form of a 9-digit number, the capital letters RR, and suffix (e.g., 123456789RR0001)
- Not sure of your charity’s BN? Use this CRA resource to find out: List of Charities — advanced search
Do You Deal with Estate Planning, or Receive Testamentary Gifts?
At times, an estate will hold securities, but the will requires a specific cash amount be given to the named charity beneficiaries. This can force the estate to sell the securities to obtain the cash. Unfortunately, this leads to higher taxes for the estate, as it loses the enhanced tax relief of a 0% capital gains inclusion rate (i.e., 50% of the capital gains becomes taxable if sold and not gifted in-kind to a charity).
The CTF can receive an in-kind gift of securities from an estate. Working with the executor, the subsequent cash distribution by the CTF can honour the wording in existing wills to ensure the intended amount from the estate reaches the estate’s named charity beneficiaries.
When working with estate planning, the CTF could be named as the charity to receive the securities, in-kind, for distribution to both your charity and any others the estate wishes to bless.
Something to Share with Your Finance Colleagues
When your charity receives the cheque from CCCC, it represents revenue and needs to be reported in your charity’s T3010 filing as part of line 4510 “Total amount received from other registered charities” as CCCC has issued the official receipt to the donor.
