CRA Provides View on Funds Raised Through Crowdfunding
August 2022 Charity & NFP Law Update
Published on August 25, 2022

By Lynne Westerhof
   
 

Do individuals who set up crowdfunding pages owe tax on the amounts they receive? According to the CRA in CRA View 2020-0838061E5 (the “Letter”), the answer to this question will depend on the particular facts of the situation, though the CRA may consider whether the funds received are a windfall or a gift.

In the Letter, the taxpayer had asked the CRA whether the $22,085 that was raised through a Go Fund Me page was taxable income or if it could be regarded as a gift and not subject to tax. The money had been raised to provide treatment for the taxpayer’s dependent step-daughter who had a rare type of cancer.

The CRA’s response states that it does not consider there to be a difference for tax purposes between funds received directly from a contributor versus funds received online through a crowdfunding platform. Instead, what matters are the facts and circumstances in which the funds were given. For example, where a particular payment has the characteristics of a gift as set out in paragraphs 1.2 through 1.4 of Income Tax Folio S3-F9-C1, the amount may not be taxable.

In the particular circumstances of the Letter, where funds were intended to help a girl recover from cancer, the CRA concluded that the funds would likely be considered to be a gift. The circumstances showed that all of the factors for a gift as set out in paragraph 1.3 of Income Tax Folio S3-F9-C1 were met: there was a voluntary transfer of property, the contributors freely disposed of their property to the taxpayer, and the taxpayer was not conferring any rights, privileges, material benefits or advantages to the contributors.

The Letter from the CRA serves as helpful information for anyone who engages with crowdfunding platforms, whether they be a charity, non-profit organization, or family member wishing to support a loved one. While the CRA was clear that the tax treatment of funds received through crowdfunding platforms will depend on the facts, its reference to the characterization of gifts and windfalls in Income Tax Folio S3-F9-C1 may help taxpayers determine whether funds raised through fundraising are subject to tax or not.

   
 

Read the August 2022 Charity & NFP Law Update