May 2, 2013

WHEN SHOULD A BUSINESS DONATE AND WHEN SHOUD IT SPONSOR?

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Charitable donation

– A corporation may deduct the eligible amount of a gift up to 75% of net income, plus 25% of certain taxable capital gains, and 25% of any capital cost recapture

– A charitable tax deduction can be carried forward for a period of five years

– Charitable receipt will no longer have any impact on disbursement quota calculation

Sponsorship fee

– A corporation may deduct 100% of a sponsorship fee as a business expense

– A sponsorship fee must usually be deducted within the fiscal year in which it was made

– No impact on disbursement quota calculation

It is also possible that the corporation receives some advantage which is not material in nature and the amount of the advantage received is below Canada Revenue Agency’s de minimis threshold of the lesser of $75 or 10% of the value of the donated property e.g. The recipient charity provides the corporate donor with a small appreciation gift or a simple one-line acknowledgement of the gift in its annual report along with all other donors – In either situation, the recipient charity would be able to issue a charitable receipt for 100% of the gift as the eligible amount.

However, if the corporation receives some advantage which is material in nature and greater than 10% of the value of the donated property, the corporation would be entitled to write off 100% of the contribution and claim a business expense for advertising, marketing or promotion.

For more information on this subject matter, please feel free to go to this article by Carters Professional Corporation entitled: http://www.imaginecanada.ca/files/www/en/partnershipforum/carter_en_june2011.pdf

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