More CRA guidance on cause-related marketing by Canadian registered charities

February 12, 2017 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, What's New from the Charities Directorate of CRA, Canadian Charity Law

The CRA has added a page on cause-related marketing page to the receipting part of their website.  The CRA seems largely concerned that in some cases no official donation receipt should be issued when there is a cause related marketing arrangement between a Canadian charity and a for-profit company.

CRA notes on this new page:

"Cause-related marketing is a fundraising activity where a registered charity (or other qualified donee) works with a for-profit partner to promote the sale of the for-profit partner’s items or services on the basis that part of the revenues will go to the registered charity.

The benefit the for-profit partner receives from this type of arrangement is considered an advantage. For the charity to issue a receipt for a donation made as a result of cause-related marketing, it must be able to calculate the value of any advantage the donor received. The value of the advantage is generally subtracted from the amount of the donation to calculate the eligible amount of the gift for the receipt. See Other factors to keep in mind for some exceptions.

It can be very difficult, and sometimes impossible, to calculate the value of an advantage with this type of donation."

The CRA has also dealt with cause-related marketing in their fundraising guidance although they do not link to it from this new page.  In the CRA fundraising guidance they note:

"Cause-related marketing or social marketing ventures are fundraising activities in which a charity partners or collaborates with a business or other non-charitable organization to promote a good or service of the non-charitable organization on the basis that a portion of the revenues will be paid to the charity."

"Cause-related marketing/social marketing ventures (collaboration with a non-charitable partner to sell goods and services)

106. Often, most of the expenses incurred related to a cause-related or social marketing venture are paid by the non-charitable partner, and the contribution of the charity is its logo or other form of intellectual property. The CRA considers this to be fundraising.

Example 1

A charity creates a page on its website to describe a partnership where a percentage of the sales of a restaurant on a certain day will be given to the charity and to tell people where and when they can participate. This is fundraising.

Example 2

A charity includes a complimentary page of advertising in its regular publication to its members offering an affinity credit card from a particular company as part of an arrangement where the company pays the charity a percentage fee on transactions where the card is used. This is fundraising."

The CRA also notes in their fundraising guidance:

"Cause-related or social marketing disclosure

160. Cause-related or social marketing ventures are not subject to the best practices relating to disclosure set out above, provided that:

more than 90% of the costs of the initiative are borne by a non-charitable partner
all costs and revenues of the charity are adequately disclosed

161. Use of the charity's intellectual property (for example, its logo) does not need to be included when calculating the contribution of the charity to a cause-related or social marketing venture, if the charity or the partner publicly discloses:

 before or during the initiative:

any requirement for costs to be paid by the charity
the terms for the payment of any revenues to the charity

 during or after the initiative:

the amount of any costs paid by the charity
the amount of any revenues received by the charity, provided either as a total amount or as an amount or percentage from the sale of a good or service"

The CRA also discuss cause-related marketing in their fundraising guidance and how it is reflected on the T3010 Registered Charity Information return:

"Q.8 My charity is involved in a cause-related marketing campaign. Are the proceeds that my charity receives from the campaign considered fundraising revenue?

A.8 Yes. Revenues from cause-related marketing should be reported on line 4630 of Form T3010, Registered Charity Information Return."

Do you require legal advice with respect to Canadian or Ontario non-profits or charities?

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Charity Lawyer Mark Blumberg

Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

mark@blumbergs.ca
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