Background
The Municipality (which is a qualified donee) passed a resolution supporting a cause, and has been given full party status with respect to the hearing dealing with the appeal in a particular matter. The Fund was established by two not-for-profit corporations (ACO and BCO) as a collaborative effort to pay for the legal expenses incurred in the defence in [the appeal] respecting the County. Donations to the Fund have been accepted by ACO and BCO. The donations were not tax deductible.
Proposed transactions
The Municipality, ACO and BCO will enter into an agreement to establish the Municipal Fund. The agreement will provide, among other things, that all donations to the Municipal Fund will be deposited to the Municipal Fund bank account set up by the Municipality, the responsibility of ACO and BCO will be to work with a lawyer in facilitating a cost effective process for defending the action, and they may also provide fundraising efforts for the Municipal Fund, the Municipality will at its sole and absolute discretion reimburse expenditures relating to legal expenses and disbursements incurred in defending the action, and when all expenditures are complete any remaining funds in the Municipal Fund will be made available to support activities that in the sole discretion of the Municipality are beneficial to the County’s XX.
The Municipality will use the bank account to reimburse, at its sole discretion, legal invoices and other related expenses to the action and will maintain full control and ownership of the funds as required under the Policy. The lawyer will be retained by ACO and BCO and will not be directly engaged by the Municipality. Both ACO and BCO will submit the legal invoices to the Municipality for reimbursement, at which time the Municipality will have full authority and discretion to reimburse these organizations.
An Individual will donate $XX to the Municipal Fund controlled by the Municipality in respect of which donation the Municipality proposes to issue an official receipt for an eligible amount of $XX. The Individual and persons or partnerships not dealing at arm’s length with the Individual will not receive any benefit or advantage (as defined under s. 248(32)) in respect of the donation to the Fund.
Purpose of proposed transactions
The purpose of the Municipality entering into an agreement to maintain and control the Municipal Fund as a project of community interest is to allow for donations to the Municipal Fund to be eligible as gifts under “total charitable gifts” as defined under subsection 118.1(1).
The purpose of the Individual’s proposed donation is to contribute to the Municipal Fund in order to help offset the legal expenses.
Ruling
Subject to the limitations in s. 118.1 and provided that an official receipt is filed as required under s. 118.1(2), the cash donation made by the Individual to the Municipal Fund will qualify as a gift to the Municipality for purposes of the definition of “total charitable gifts” in s. 118.1(1), and the eligible amount of the gift will be $XX less the amount of the advantage, if any, in respect of the gift as defined in s. 248(32).