Sponsorship versus Donation

About six weeks ago, the Calgary Public Library and Chinese state-owned oil and gas giant CNOOC (see-knock) announced a $1.5 million dollar gift! Obviously, CNOOC wanted it referred to as a gift and I am sure the library did as well. But it wasn’t a gift! It was not a donation. It was a sponsorship. CNOOC, as The Calgary Herald reported it (you would think they’d know the difference between a donation and a sponsorship as they deal with both every day, or at least some part-time editor or copy room person would have known the difference) made a “$1.5 million donation” whereby “CNOOC will become the title sponsor for a high-tech ‘learning commons.'” Shame on The Calgary Herald for reporting this as a donation. At least Calgary Public Library Foundation Executive Director Paul McIntyre Royston noted that the “library system will set clear rules for donor and sponsors.” Why everyone called this a donation is beyond me.
 
The Calgary Public Library is not the only one to make this mistake. Many others do not clearly differentiate between donors and sponsors. The Canada Revenue Agency clearly defines the difference. When companies give money with no expectation of anything in return (publicity, tickets, or other items of value), it is a donation and they are entitled to a charitable tax receipt. When a company expects or receives something in return, such as a naming right, logo, banner, tickets, etc., it is considered a sponsorship-not a donation. A marketing or business tax receipt can be issued for the value of the assets or exposure received, but not a charitable tax receipt. TD Waterhouse learned about this law the hard way through its naming of the former J. W. Little Stadium at the University of Western Ontario as did Talisman Energy through its naming of the former Lindsay Park!
 
An organization such as the library and all other properties need to have an accredited sponsorship agency such as the Partnership Group – Sponsorship Specialists™ or any one of a dozen others value their assets so that CNOOC knows how much the naming right is worth from a sponsorship marketing perspective and how much is a charitable contribution, if any. If it is a 25-year naming right, that means the annual naming rights fee is $60,000, which probably leaves some room in that $60,000 per year as a charitable gift, but the question is “how much”? Recently, as reported in the Partnership Group’s Breaking News blog, Potash Corporation of Saskatchewan announced a contribution of $7.5 million toward the refurbishment of what will be called the Potash Corporation Playground at Kinsmen Park in Saskatoon. In conjunction with the City of Saskatoon, Potash Corporation engaged the Partnership Group to determine the sponsorship marketing value of the naming right, so that when Potash files its tax returns, both the charitable tax receipt and sponsorship marketing portions of the $7.5 million are known. This is the correct way to ensure that both the sponsor and the property are transparent and satisfy CRA regulations. Perhaps that is the next step for CNOOC, the Calgary Public Library Foundation, and so many others. Organizations such as the old Centennial Arena (now Flames Community Arenas); Devonian Gardens; City of Edmonton; City of Kelowna; Gallagher Multiplex in Yorkton, Saskatchewan; Regina Palliative Care Inc. Bereavement Centre; The Calgary Zoo; Pumphouse Theatre Society; Vertigo Theatre; Canadian Red Cross; and many others did it right when they set out at the beginning to have a full sponsorship audit and valuation conducted by a professional sponsorship agency to ensure, as they signed deals with companies, they could be upfront and know both the sponsorship and philanthropic (if any) values of a contribution. Philanthropic consulting firms can assist in the valuation of a donation, but only a professional sponsorship agency can assess the sponsorship valuation based on industry standards and procedures.
 
These are just one person’s thoughts. Yours are welcomed as well. Please add your thoughts or comments below. Thank you for reading and your feedback.

3 Comments

  1. Great article; very informative. If big companies like TD Waterhouse and Talisman Energy can make this mistake, it’s easy to make for those not in the industry. I learned something new and important. Thanks Brent.

    Reply
    • Thanks Dee Ann. What was interesting was that the Calgary Public Library responded that it was just semantics! Yikes.

      Reply
  2. Informative article ! I am thankful for the points – Does anyone know where my business might be able to locate a blank FL Local Business Tax Receipt Application Form – Miami-Dade County copy to type on ?

    Reply

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