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Gifts of Securities Have Significant Effect on Canadian Charities

(July 9, 2008) The number and total value of donations of securities increased significantly from 2005 to 2006 after the Canadian government removed the capital gains tax on such contributions, according to research by Imagine Canada.

A survey of 245 charitable organizations, some of them AFP-represented organizations, was conducted by Imagine Canada in February and March 2007 to explore the impact of the elimination of the capital gains tax on gifts of securities that occurred at the beginning of 2006. AFP advocated for this policy change for many years.

While the percentage of organizations receiving gifts of donations of securities increased only from 43 percent in 2005 to 49 percent in 2006, the number of stock donations doubled. More importantly, the value of those donations more than doubled. In addition, the average value of donations of securities, expressed as a percentage of organizational revenues, almost doubled as well, pointing to the increasing importance of these gifts for many organizations.

Larger charities were over-represented in the sample of organizations, and charities with annual revenues of $10 million or more consistently received approximately 90 percent of the total value of donations of securities. Nevertheless, from 2005 to 2006, the percentage of the total value of donations of securities going to the smallest organizations increased markedly.

“One of the critical reasons we pushed for this policy change was that it would affect all kinds of charities,” said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. “We knew it would have tremendous impact across the sector, and we’re very pleased to see that all kinds of organizations are benefitting. We’re grateful to Imagine Canada for this important research that I think will spur greater awareness of activity around fundraising for gifts of securities.”

More Gifts to Come

Survey participants believe that the 2006 policy change is important to the point that a majority believe that this type of tax-incentive legislation is essential to the future of their organizations and their fundraising. Eighty-five percent believe that the importance of gifts of securities will increase in the future.

Charities are marketing these donations to a broad audience and are making specific mention of the 2006 policy change:

  • Over half of charities responding to the survey said that they had marketed donations of securities to potential donors.
  • Among those marketing these donations, three-quarters said they aimed this marketing at donors in general rather than focusing on major donors, and almost nine in 10 mentioned the 2006 policy change in this marketing.

The report concludes that gifts of securities are becoming mainstream and organizations need to be prepared to accept additional gifts of securities, especially smaller charities that may not have the knowledge of experience in soliciting, receiving and accounting for such gifts. The report also notes that little is known about the donors who make these contributions and that more research is needed to better understand their values, attitudes and perceptions.

The complete copy of the report is available in the Attachments section below.

Attachments

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