16 same terms as donations made to Canadian organizations. There are, however, several other important conditions which must be met. Firstly, the commuter must live near the American border during the whole of the taxation year. Secondly, their U.S. employment or business income must represent the donor’s chief source of income for that year. Thirdly, the donor must be able to demonstrate that the gift was made to a religious, charitable, scientific, literary or educa- tional organization created or organized in or under the laws of the United States. Finally, they must be able to demonstrate that such a gift would be allowed as a deduction under the United States Internal Revenue Code. Where all those conditions are met, the donations in question are treated as donations made to a registered charity. VOLUNTEER SERVICES The ITA makes it very clear that only a gift to a charity is receiptable. A gift includes property or a right to property. Unfortunately, services do not qualify as property and, therefore, are not receipt- able. GIFT BY WILL One legal requirement of a gift is actual delivery of the gift to the recipient. However, where a gift is made by Will, such delivery is impossible until after the death of the person– sometimes well after. Under normal circumstances, the gift would not be complete until deliv- ery is made. However, the law allows that where a gift is made by Will, it will be considered to have been made by the deceased in the few seconds preceding death, assuming of course that delivery occurs at some point after the death. In this way, the tax credits that are generat- ed by the donation can be applied to the donor’s year of death. This is particularly useful as there is often a large tax bill owing on death. The law allows for certain differences from a strict calculation perspective. As previously discussed, a donor is general- ly only entitled to offset 75% of their taxable income using donation tax cred- its in a given year. However, in the year of death (i.e. from January 1st until the date of the donor’s death) the donor is entitled to offset up to 100% of their income, as filed by their executor. Any unused donation tax credits can be carried back one year, to the year preceding death, and be used to offset 100% of the tax debt owing in that year as well as the tax in the first three taxation years of the estate. One stipulation though is that the gift must be transferred (and accepted) by the qualified donee within three years of the death. Obviously, if the return for the year preceding death has already been filed, then it will be necessary to file an adjustment request to claim the dona- tion tax credits. APPLICATION OF AMT The Alternative Minimum Tax (the “AMT”) has been part of the income tax system in Canada since 1986, many people have not heard of it because it typically does not apply to people whose main source of income is salary. As the name implies, the idea is that if a Canadian taxpayer would pay less tax under the usual set of calculations than under those required by the AMT, then the individual would be required to pay the higher of the two tax rates. If someone is required to pay the AMT, they would only be entitled to 80% of the credits that they would otherwise be entitled. And, for donations of publicly listed shares, the individual would still be required to pay tax on 30% of any capital gain realized on the donation. DIRECTED DONATIONS A directed donation is one where a donor makes a contribution to a charity with the direction that it be used to sup- port a specific individual. For example, imagine a situation where a donor makes a condition that the money given goes to support a specific individual in need. That concept has been expanded so that a donation that is made with an implicit or explicit direction that the funds be given by way of gift to a non-qualified donee could result in the revocation of the receipting charities registration. So donations with a specific intention should be carefully considered by competent counsel. BOOKS AND RECORDS The Canadian income tax system is based upon the principle of honest self-reporting. Consequently, one of the most pervasive issues facing charities is the maintenance of proper books and records. The importance of the issue is underlined when it is understood that charities are usually in the process of proving their innocence rather than dis- proving their guilt. Without records, this is close to impossible. Indeed, if the charity were to appeal a decision of revocation of its status by the CRA, it would not even be entitled to give oral testimony. So, the importance of well-maintained records is paramount. What are books and records? There is no standard definition of books and records. Fundamentally, however, an organization must have sufficient evi- dence to show that it is in compliance with the Act. To be clear, destroying evi- dence that an organization is not in compliance will not help the organiza- tion, as the lack of documents, in and of itself, is an offence. (Although the docu- ments could be evidence of an offence with a more grievous penalty.) There is a difference between the two concepts of ‘books’ and ‘records.’ ‘Books’ is not a defined term in the Income Tax Act but is typically understood to be accounting records. A ‘record’ is defined and includes “an account, an agreement, a book, a charter table, a diagram, a form, an image, an invoice, a letter, a map, a memorandum, a plan, a return, a statement, a telegram, a voucher, and any other thing containing information whether written or in any other form.” No distinction is made in law between corporate and transactional records, but it is helpful to organize a charity by thinking in these terms. Corporate records are those documents required by law to define a corporation and its gov- ernance. They are often created with the co-operation of a government office and are required so that the corporation meets certain statutory requirements. Transactional records are those created by the organization to keep track of its
