BONNYVILLE – A brand new policy is on the books for the Town of Bonnyville when it comes to accepting donations and issuing donation receipts on behalf of third-party organizations that carry out work that benefits the community.
The Donations and Issuing Donations Receipts Policy was unanimously approved by Town council during a regular council meeting on June 13.
While it is relatively uncommon for organizations to seek the municipality’s help to provide income tax receipts for donors, it has come up before and may again, explained Renee Stoyles, the Town’s manager of corporate services.
Strict federal guidelines and changes to the Income Tax Act propelled the Town’s administration to develop an in-depth policy that outlines how the municipality would be able to issue a tax receipt for a third party, as well as a sample agreement between the two groups.
“In the past, the Town of Bonnyville has received requests from third-party organizations who are awaiting their charity status to collect donations from donors and send these funds to the organization,” said Stoyles, while introducing the new policy.
Under the Income Tax Act, the Town of Bonnyville, as a municipality, is considered a qualified donee. As such, it has the capacity to issue charitable tax receipts. However, due to changes in the Income Tax Act the Town cannot act as a funding conduit for non-profit or charitable organizations.
According to federal legislation, the municipality is not permitted to act as a flow through for donations and therefore cannot issue income tax receipts for funds that it will not itself be responsible for spending.
An exception to this rule is that the Town may issue tax receipts for funds collected and expended by a third party only when the municipality controls both the activities and has entered into a formal agreement.
The development of the new policy followed legal opinions sought by the municipality.
Feedback provided by Brownlee LLP suggested the municipality could collect donations and issue income tax receipts if “the programs of the organization are a component part of the program offering or support framework of the Town, both from a policy perspective and community engagement/investment perspective.”
The Donations and Issuing Donations Receipts Policy outlines the structure for accepting donations for municipal charitable purposes and includes a process relating to joint efforts by the Town and any third party, stating that the funding be project-specific and for the Town’s benefit.
“This agreement must specify the details of the project, the nature of the shared objectives/mandate between the municipality and the intermediary organization, and that the project is eligible to receive charitably donated funds pursuant to the Income Tax Act,” states the new Donations and Issuing Donations Receipts Policy.
Explaining the relationship between the two parties further, Stoyles continued, “The agreement will create an agent relationship between the Town and third party where the third party would conduct charitable activities on behalf of the Town and the Town would transfer funds specifically designated for the charitable activities to the third party.”
Prior to the policy being approved, Coun. Phil Kushnir inquired if the municipality could be held liable if it was later discovered that the third party was engaged in fraudulent operations.
In response, Stoyles stated that with any type of “flow through” model, the municipality could have faced consequences. “But, if we enter into an agreement where they are actually providing a service or a program that we as a Town would fund or could fund, and we have representation on their governing board and are overlooking their program – we'll be fine,” she said.
