Canadian tax deduction for Kiva support

[Guest]

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[NRF]

Under Canadian rules, a loan made through Kiva is not tax deductible, either as a charitable gift or as a business expense.  However, many lenders probably consider themselves donors.  They do not aim to recover the money at anytime; just see it recycled to other borrowers.

It might be possible to set up a Canadian charity to which taxpayers of this country could donate funds.  The charity’s purpose would be international poverty relief and it would distribute funds through Kiva.  If the tax department approved, donors would receive an official receipt for tax purposes but they could not ever personally recover this money.  They must donate without expectation of financial return or benefit.

There are details to work out.  For example, we would follow tax department rules about charity spending and particular guidelines for efforts outside Canada.  However, tax deductibility is important to some.  That encourages and enables people to put more money into the charitable purposes.

To determine if organizing a Canadian charity to support Kiva's lending is desirable and possible, we need to complete some research, discuss the proposals with Canada Revenue Agency and talk to the people operating Kiva.

If any Canadians would like to help examine the possibility in detail, please send me a message.  My aim is to do planning and organization with volunteer services, avoiding all overhead costs.

You can email me at interact@telus.net if you have skills, knowledge or experience that would be helpful.

Norm Farrell
North Vancouver BC  Canada

[cpbailey]

Norm,

I seem to remember there being an organization from Canada which loaned through Kiva for a period of 3 or 5 years.  Because the loans leave Canada, it could only do so for a limited time and then invest in local non-profits.  I tried to find the organization on the list of them, but I didn't hit it.  I do seem to remember there being a LOT of loans made through the organization.  Sorry I cannot get the name, but if this met the needs of some...it might be easier than setting up a new system.  If it didn't, then someone might be able to advise of Canadian rules and laws.

Anyone else remember the organization???

Colette

[eliztravels]

I'm no expert in Canadian tax law but I believe the following to be true.

-in order to be eligible for Canadian charitable status, and therefore able to issue a tax receipt, an organization must have a board of directors in Canada.  It can of course be a Canadian branch of an international organization (think Red Cross or WWF).  It would be great if Kiva could move in this direction, but I don't see it as being one of their priorities as they have  more than enough lenders, and more than enough growing pains,  under the current system. 


-there are other regulations regarding how a charity is defined, but clearly the money can be used internationally and still be considered a Canadian charity. 

-loaned money is not a charitable donation. 

-money loaned at no interest, and therefore no expectation of profit, can not be considered a business.  Therefore business expenses  and capital losses (defaulted loans) can not be deducted from taxable income.  If Kiva starts paying interest at some point, this could change. 
 
This is how I am handling the situation: I am structuring my loans so a a good portion of them come due  at the end of the year.  I will then withdraw the money and donate to the causes that matter to me.  This not only gives me a tax deduction but also, in the case of certain international aid organizations, triggers matching funds from the federal government.  Then come January I can start Kiva loaning all over again. 

Too bad we can't get a tax deduction for the donations we make to Kiva, but I have a strategy for that, too.  There is a good chance that when I cash in the US dollar will be higher than the Canadian, so I can contribute the extra value to Kiva and not feel any pain.   

I'm curious about the organization you refer to, Collette, and will be interested to see if further information is forthcoming. 

[cpbailey]

Eliz,

It is Agent of Change, but I don't see it listed in the organization list on KF.  Must need more sleep.  Here is a web address, though: 

http://kivanews.blogspot.com/2007/05/san-francisco-kiva-lenders-save-date-to.html

I have NOT checked into the authenticity, just read what they claim.

Colette

[Sherri]

I emailed my accountant recently and she said that she 'thinks' that Canadians can get a tax discount when donating to American 501(3)(c) charities. But that didn't sound like 100% sure response.

Many US charities who want to issue Canadians with tax receipts have an 'agent' in Canada who acts as the Canadian board to qualify for Canadian tax status. I know that for myself, I don't care much about my revolving money that's in loans, but I would be happy to get a tax deduction on large donations to Kiva's operating expenses.

[Agent001]

Hey all,

Agents of Change is it indeed. Charitable number, researchable with Canadian Revenue Agency:

850680380RR0001 (actually listed as Global Agents For Change)

www.agentsofchange.ca

www.kiva.org/lender/agentsofchange

Some of our fundraising at the moment - www.givemeaning.com/project/breakthecycle2008

I tend to think we're pretty cool, but I may be biased having worked full time as a volunteer to build it for the last year or so...

We do not only accept donations for Kiva lending, but use our lending account as an education tool for youth (who have total control as to what we do with it), and run several other engagement programs (although the website is having trouble keeping up with our growth).

Our charitable status is based more on these programs than on the lending, as comments above are correct in terms of lending programs not being eligible for tax receipting. As a Canadian charity we also must "disburse" a certain amount of our funds raised every year to remain eligible, and Kiva lending doesn't count as we could technically get it back. Its more like where we keep our bank account money as far as reporting is concerned. "Cash", "accounts receivable", etc. That said, we're building a $1,000,000 as our goals state now, and expect it to be in the $150,000 range this year ($40,000 now).

Canadians are not eligible for donations to US non-profits, although there are arrangements with locally registered segments of larger organizations etc in other cases. If some Canadian is REALLY excited about spreading the word of Kiva and engaging in their work and wants a receipt, well we could certainly use the support to

All of that said, if anyone would like to work with us on building this out into a sustainable solution as we wander our way through the Canadian tax regulatory system we have a well established/know/respected legal team on board helping with the registrations and reporting. We formed an org chart as part of a planning exercise the other day...there are 67 of us directly involved, including a chapter in London (UK) and members across the continent (and Sweden).

We speak with Kiva regularly.

Shawn
Agents of Change