Is your charity hosting a golf tournament to raise funds and do you plan to charge a registration fee and issue donation receipts?
Brad Sinclair, CPA, CA from Millards Chartered Professional Accountants in Brantford cautions that there are CRA rules you need to follow and some guidelines that will help you determine if you can issue a charitable receipt and the amount of the donation.
“There are three steps in determining if you can issue donation receipts and the amount to write on them.”
The first step is to decide on what the participants will receive with the registration fee.
“This is called the advantage to the donor. In the case of a golf tournament, the participants are considered donors.”
According to the Canadian Revenue Agency, an advantage can be any property that a donor receives in exchange for their donation. It can include any goods, services, payment or other benefit.
“At a golf tournament the most common advantages that participants receive are a round of golf, the use of a golf cart, a dinner in the clubhouse, open bar refreshments and items of small values such as golf shirts or hats and door prizes.”
Sinclair points out that there are exceptions that you need to be aware of.
“An advantage does not include an option to buy raffle tickets in additional to the registration fee. If raffle tickets are included in your registration fee, then you would need to include these raffle prizes in determining the amount of the advantage. Of course there are some exceptions. The chance to win a prize for a hole-in-one is so small that it is never considered an advantage and can simply be ignored.”
Once organizers have decided on what advantages are being provided, they need to determine the fair market value for each advantage. The fair market value is the amount someone could reasonably expect to pay for the goods in a free and open market.
After adding up the value of the advantages, you get the total value of all the advantages for each participant.
“The second step is to find out whether the participant intended to make a gift or donation. If the participant receives advantages that are worth no more than 80% of the registration fee, then the participant is considered to have made a donation and your charity can then give the participant a donation receipt.”
The third step is to determine the amount of the gift you can write on the receipt.
“Take the registration fee for each participant and subtract the total value of the advantages. The remaining amount is called the eligible amount of the donation and you can issue a donation receipt for that amount.”
Golf tournament organizers need to take other situations into consideration. If participants in the tournament are members of the golf club where the tournament is being held, their membership might include the use of a golf cart.
“In that situation you should not include that benefit when you calculate the advantage to the participant and the amount on the donation receipt for club members will be different from that of non-members.”
See the attached graphic from the CRA called “Hosting A Golf Tournament” or download the PDF here for your reference.
Do you have a question about calculating golf tournament tax receipts? Millards has 7 locations across Southern Ontario to serve it’s growing list of clients. Contact us today!
Whether on the ice or on the green, Brad Sinclair, CPA, CA from Millards Chartered Professional Accountants in Brantford likes healthy competition and the camaraderie of sport. His love of hockey and golf keeps him active and involved year round.
Brad is a competent accountant capable of a wide range of services but his focus includes income tax, tax planning and reorganization work. He has specialized skills around US tax and cross border issues as well as estate planning and succession arrangements.