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AFP/Globe and Mail: Incentives for Taking Canadian Giving to the Next Level

Resource Center - Foundation

(This article originally appeared in the Spring 2016 AFP/Globe and Mail “Philanthropy in Canada” special supplement. The entire supplement can be read here.)

Every day, Canadians help one another and our communities in a variety of ways, from volunteering and mentoring to recycling and public service. But by far the most effective way and efficient way—and something millions of Canadians do every year—is giving to and supporting our charitable organizations across the country.

Canada’s charitable sector is uniquely positioned to address social needs: based in the community and supported by Canadians, charities can respond far more quickly and effectively than government to problems while being efficient with resources.

But our charitable sector faces a crucial challenge. Research from both the Association of Fundraising Professionals (AFP) and Statistics Canada show that slightly fewer Canadians are now giving to charity. We need to find innovative ways to inspire new and old donors alike, and get more resources into the hands of Canada’s charities.

There are three important proposals that have widespread support across the sector where Parliament can take action. These proposals include: the removal of the capital gains tax on gifts of private company stock to charity; the extension of the First-Time Donor’s Super Credit; and the introduction of Stretch Tax Credit for Charitable Giving.

Ten years ago, the federal government removed the capital gains tax on gifts of publicly listed securities, and the impact has been phenomenal. Canada’s charities are estimated to have received more than $1 billion gifts of stock every year since the policy was enacted.

AFP and others in the charitable sector are now asking the federal government to remove the capital gains tax for gifts of private-company shares and real estate. This complementary change is expected to generate another $200 million in charitable gifts a year and has the support of several political parties. While the provision was included in the 2015 budget, it was removed from the 2016 budget. AFP and others are proposing that it be reinstated.

Another incentive has been the First-Time Donor’s Super Credit, which effectively adds 25 percent to the value of a donor’s charitable donation tax credit. This can only be claimed once between the 2013 and 2017 taxation years and early evidence indicates the credit is having the desired intent of engaging new donors in philanthropy. AFP and others are proposing that it be extended past 2017.

The charitable sector is also encouraging the adoption of a Stretch Tax Credit, which would apply when donors give more than their highest previous years.  It is a simple and powerful way to would encourage donations from those who have not given in the past, particularly younger families and those just starting their careers, and would help those who already give to contribute more.  Analysis from Imagine Canada estimates that the proposal could generate more than $230 million in additional giving per year while costing just $40 million annually.

Tax credits such as these are just one aspect of increasing philanthropy. They can be effective incentives for encouraging people to give—and give more—though they are rarely the main reason people contribute.  AFP is encouraging Members of Parliament to discuss the positive impact of these provisions with local charities to understand how they will increase charitable programs in their ridings and around the country.

These proposals need the support of all Canadians, including the federal government, and will increase giving at a time when we need more participation and engagement in philanthropy—and more resources for charitable programs that support our communities.

Daniel Brunette is the chair of the Association of Fundraising Professional’s Canadian Government Relations Committee and works at the Community Foundation of Ottawa.

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