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AFP Calls on Parliament to Eliminate Capital Gains Tax on Gifts of Securities

(May 1, 2006) In mid-April, AFP testified during the Standing Committee on Finance’s Pre-Budget Consultations and called for the complete elimination of the capital gains tax on gifts of appreciated securities to charity.

Susan Mullin, CFRE, director of development at York University Foundation in Toronto, Ontario, and chair of the AFP Canadian Government Relations Committee, represented the association during the consultations.

“Overall, I thought our presentation was very well received,” said Mullin. “The members of the committee were all very familiar with the issue, which speaks to our education efforts over the last several years. I was asked a number of questions regarding figures, statistics, how the elimination of the tax would affect giving, if it would help all organizations and the like. They were very interested in the proposal.”

Mullin also noted that the committee seemed to understand the urgency of the issue and that donors were waiting to make gifts until they knew what the tax implications would be. “What really seemed to strike them, though,” she said, “was the impact that this proposal might have on current and outstanding pledges.”

Strong Committee Support, But No Budget (Yet)

For the past several years, the Standing Committee on Finance has included AFP’s recommendation to eliminate the capital gains tax on gifts of appreciated securities into its final report. However, despite continued signs of support from leadership, the proposal has yet to be included in the federal budget.

Both the Conservative and Liberal Parties mentioned the proposal during their campaigning earlier this year before the national elections. “We’ll certainly be watching closely to make sure they keep their promises to donors and the people who depend upon charitable services,” said Mullin.

AFP estimates that completely eliminating the capital gains tax on gifts of appreciated securities could increase giving by billions of dollars annually. In 1997, the capital gains tax was lowered by 50 percent, and a subsequent study showed marked increase in giving to many different kinds of organizations. Over a five-year period, gifts of securities went from being a de minimis factor for most organizations to accounting for, on average, 10 percent of a charity’s receipted donations.  Due to its success, the provision was made permanent.

Other Proposals

AFP also included in its recommendations to the committee that the government create a national day to honor and recognize the contributions that philanthropy has made to Canada.

In addition, during the consultation, Mullin was asked what would be the next logical step if the government moved to eliminate the capital gains tax for gifts of appreciated securities. She mentioned extending the proposal to gifts of real property and ecologically-sensitive land.

“I thought it was a great question and clearly underscores how much consideration they are giving to this issue,” said Mullin. “We’ve made a strong case and have the support of the nonprofit sector behind us. I hope we’ll hear some good news very soon.”

The federal government is expected to release its budget on May 2, and AFP will report to members if the proposal is included.

A copy of AFP’s written comments to the Standing Committee on Finance can be found below in the Attachments section.


2006 AFP Pre-Budget Consultations — PDF Format, 138145KB

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