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Parliament Urges Reduction in Capital Gains Tax for Gifts of Stock, Land

(Jan. 18, 2005) The Canadian Parliament's Standing Committee on Finance has urged the federal government to reduce the capital gains tax on charitable gifts of stock and real estate, including ecologically sensitive land.

In late December, the committee released its final recommendations regarding its most recent round of pre-budget consultations, where the committee seeks the input of organizations around the country on a variety of tax issues. Tad Brown, chair of AFP's Canadian Government Relations Committee, represented the association before the committee on Nov. 2, 2004.

The committee's recommendations for the capital gains tax were broader this year in that they included, for the first time, gifts of land and real estate. Reducing the capital gains tax on such gifts was one of AFP's key points in its written and oral testimony to the committee.

Recommendations Weaker Than in Past Years

However, overall, the recommendations were not as positive for fundraising and the charitable sector than those of past years. The report made no mention of an overall elimination of capital gains, as it has in the past. In its recommendations, the committee noted that '[w]hile we have, in the past, supported the elimination of the capital gains inclusion rate on donations of publicly traded securities and ecologically sensitive lands to public charities, we feel that we are unable to do so this year.' In addition, the recommendations did not reference private foundations at all.

Perhaps most disappointing was the committee linking any further reduction in capital gains tax for charitable giving to a broader federal government review of the tax treatment of capital gains. The committee recommended such a study to ensure that the tax treatment of capital gains in Canada remains competitive with that of the rest of the world, particularly the United States. Such a study could take a long time to complete and could set back much of the work that AFP has done in educating Parliament about the need to reduce the capital gains tax on appreciated gifts to charities.

The Finance Committee report is available on the Parliament website. Recommendations 10 and 16 refer directly to charities and fundraising.

As it has for the past three years, AFP urged the committee to recommend a complete elimination of the capital gains tax on gifts of securities to charities, including private foundations. However, this year, AFP expanded the proposal to include all appreciated assets, including real estate. AFP also encouraged committee members to support the idea of a government-sponsored day to recognize philanthropy and honor those involved in the philanthropic process.

AFP will be closely monitoring how the federal government responds to these recommendations and will seek additional opportunities to advocate its recommendations regarding the capital gains tax and National Philanthropy Day.

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