Written on February 15, 2013 – 6:00 am | by Malcolm Burrows
Over the last year, the all-party Standing Committee on Finance in Ottawa has been studying tax incentives for charitable giving. The report, Tax Incentives for Charitable Giving in Canada, was released this week after eight public hearings with 41 witnesses. The 12 recommendations include six on tax incentives, four on public awareness, one on “red-tape” reduction, and one on transparency.
The report is a good indicator of what MPs perceive the role of the federal government in charitable giving and charity regulation should be. It is perhaps just as interesting for the recommendations it ignors – for example extending the donation deadline and increasing the basic federal tax credit – as for the measures it promotes. And it is as much about regulation as it is about incentives.
Topping the tax incentive list are two front-runners:
1. the elimination of capital gains on gifts of taxable real estate and private company shares if there is a monetization mechanism;
2. Imagine Canada’s stretch tax credit to encourage Canadians to increase their annual giving level.
These two incentives – disclosure: I have been involved in developing and promoting both – address different donors and gifts. The first measure targets the two largest classes of capital property that don’t currently benefit from reduced capital gains when donated. The result would be large, exceptional gifts from business and property owners – and should be have an impact on estate planning. The Stretch Tax Credit is an incentive that caps at $10,000 annual giving and is targeted at the donors making ordinary donations. Together they are complementary and both are designed to unlock new donations.
The recommendations are made with a sizable caveat. They are “subject to the government’s stated intention to balance the budget in the medium term”, which suggests we are unlikely to see them in the upcoming Federal Budget. Nonetheless the study and resulting report will help define our discussion of charitable incentives and charity regulation in Canada for the immediate future.