February 2002

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Building Endowments
Education Foundation is Open
to Variety of Donation Strategies

President, The APEGGA Education Foundation

The APEGGA Education Foundation, like all registered charities, must submit an annual return to the Income Tax Department of the Canadian Customs and Revenue Agency. In appearance, it is quite a bit different than your personal return, but still we report our revenues and disbursements.

This is intended to keep charities honest. For example, 80 per cent of tax receipted donations each year must go to the objects of the charity -- in our case, scholarships. This will be of some comfort to you, knowing that whenever you give to a registered charity, most of your money must be going to the right place.

There is a complication to this requirement, however. Each year APEGGA donates about $40,000, which is not tax receipted because APEGGA itself is a non-profit association and therefore pays no income tax. APEGGA also collects an assessment on our behalf made on Summit Award® tickets, which totals about $38,000 and is tax receipted by us.

In addition, we get voluntary contributions, mostly from members of APEGGA such as you, which are expected to exceed $30,000 in 2001. So $68,000 of our donations are tax receipted and that means $54,400 (80 per cent of $68,000) must go to scholarships.

In the year 2000, we awarded $56,000 in scholarships. We are getting close to having to give out more money. More seriously, the importance of the 80 per cent is that only the remaining 20 per cent, together with some special funding, is available to add to our endowment funds, and then only after we pay our other expenses.

Direct-to-Endowment Donations
There are ways to make donations that can go directly to endowments without invoking the 80 per cent rule. These seem to be a closely guarded secret of the income tax department; it has taken me a year to get a lead on them.

One is donations that come from another charity or an organization such as APEGGA. Another is through donated life insurance policies, either whole life or term.

The donated policy has to be absolutely assigned to the Foundation, which must become the registered beneficiary. The donors get a tax credit benefit in the amount of the cash surrender value of the policy at the time, and can continue to get credits if they keep paying premiums. NAIT has used this effectively where members of its staff have given policies taken out when they are relatively young and their premiums are low. Of course, the benefit to the charity comes much later.

Most insurance agents know the details, but you may wish to inform yourself better by asking the Canadian Customs and Revenue Agency to send you Interpretation Bulletin IT-244R3.

The other type of gifts for endowments are called 10-year gifts. These are obscure, but are mentioned in Section 149.1(1) of the Income Tax Act. The donor must identify them as 10-year gifts, and the charity is prohibited from using anything but the income from them for 10 years, although they are permitted to change the investment vehicle.

This could be valuable for those of you who can make a substantial gift. But you should get professional advice, first. If you are in the position to give a 10-year gift, contact us and we can point you in the right direction. The revenue agency used to have Information Circular 80-10 covering this, but it is out of print and no substitute document is named.

Bequests Also Help Us
Every member should have a will and in it you can make provision for monies to go to our Foundation. One member I spoke to, who is in mid-career, said she already had us in her will. We are named in the event that there are no other surviving family members.

This is an unlikely circumstance, but we never know how our lives will unfold. This is a provision everyone of us could have in a will. It ensures your money will be put to your intended uses and not left to some arbitrary decision by an executor.

A Human Face
In another matter, the APEGGA Education Foundation Board wants to put a human face to its work. I have not yet been successful in this. The scholarship recipients are not members-in-training at the time of the award, so are not entered in APEGGA's database. Some may move away, change address and even name, or not register.

So tracking these human faces is difficult. I'm sure there are interesting stories to be told about how their scholarship aided their career. I can only hope that some of these people will come forward so we can get their stories in The PEGG.



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