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Senate Banking Committee Endorses AFP's Recommendations To Increase Charitable Giving

(December 16, 2004) In its interim report, released today, on ways to encourage charitable giving, the Senate Banking Committee endorsed several proposals recommended by AFP.

The report, titled The Public Good and Private Funds: The Federal Tax Treatment of Charitable Giving by Individuals and Corporations, (for the French version) is part of a comprehensive effort by the Committee to better understand the charitable sector. This interim report focused solely on tax measures affecting charities, but the Committee plans to issue a final report covering broader issues affecting charities on March 31, 2005 .

In the report, the Committee agrees with and endorses two key proposals that AFP recommended during a hearing last month:

  • Elimination of the capital gains tax on contributions of securities to charities, including private foundations; and
  • Elimination of the capital gains tax on contributions of land to charities, including private foundations.

'Canadians are accumulating significant wealth in the form of securities and land,' said Tad Brown, finance and development counsel for the University of Toronto and chair of AFP's Government Relations Committee, who represented the association before the Committee at the hearing in December. 'Many donors want to give this type of wealth away, but current laws don't make it very easy or attractive for them to do so. If enacted, these proposals would create significant incentives for donors to make these types of gifts.'

AFP also testified that giving incentives of this kind are crucial at a time when government funding for charities has decreased. In addition, many foundation and corporate grants are often so focused on programming that charities have little money to use on basic overhead and infrastructure costs. Therefore, new policies to encourage giving are needed, especially gifts such as donations, registered securities, and land, that can have a dramatic impact on charities.

'People give because they want to give - they feel a connection with the organization,' said Andrea McManus , CFRE, principal of The Development Group and vice-chair of external relations for AFP. 'However, there is much research to indicate that as gifts become larger, tax incentives do play a role in the decision-making process. Because gifts of stock and land are generally larger gifts, government tax incentives are critical.'

Capital Gains Recommendations

The Committee advised the federal government to take the following actions in the upcoming federal budget regarding capital gains taxes:

  • eliminate the capital gains tax on donations of listed securities and ecologically sensitive lands to registered public charities;
  • eliminate the capital gains tax on donations of real property to registered public charities (as long as mechanisms are developed to ensure that proper valuations occur); and
  • eliminate the capital gains tax on donations of listed securities, ecologically sensitive lands or real property to private foundations temporarily for five years (provided that appropriate governance and monitoring systems are in place to ensure that private foundations are clearly operating in the public interest and that self-dealing will not occur), with a review after that time to determine whether the provision should be made permanent.

It is our hope that AFP will be given the opportunity to help the Committee develop the mechanisms to 'ensure proper valuations' of real property and the 'appropriate governance and monitoring systems' for private foundations.

Other Incentives and Proposals

In addition to these recommendations, the Committee proposed allowing donors to make charitable contributions for 60 days beyond the end of the calendar year for inclusion in that year's income tax return and allowing donors to carry back unused charitable receipts for three years and carry forward unused charitable receipts indefinitely.

The Committee also implemented less burdensome provisions such as eliminating the requirement for charities to issue charitable receipts for donations of less than $250 (unless specifically requested by the donor) and eliminating the requirement for taxpayers to file charitable receipts if the charitable donations they are claiming do not exceed $250.

Additionally, AFP recommended that the government create a nationally-sponsored day--National Philanthropy Day--to recognize philanthropy and encourage citizens to give and volunteer. Because the interim report focused solely on tax incentives, that proposal will be considered in the Committee's final report.

Overall, the Standing Senate Committee on Banking, Trade and Commerce was favourable to the charitable sector and even stated in its interim report that 'well-designed federal tax measures to support charitable giving must be - and must be seen to be - a priority of the government in the upcoming federal budget.' AFP is very encouraged by this position and by the Committee's decision to include many of its recommendations in the report.

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