Conservative Government Comes Through for Charities
Adam Aptowitzer, May 02, 2006
|
| The Conservative government has come through in a big way for public charities and those that depend on them. In fulfilling their campaign promise to eliminate the capital gains tax on donations of publicly listed shares to public charities, the government has increased the benefit of the donation to the donor by 25% of the applicable tax rate in each province. Perhaps the best news is that this change is effective immediately, addressing a concern held by many in the industry that there has been a chill in the donation of publicly listed shares in the first part of this year as donors awaited the government's announcement, and the immediacy of this change should significantly thaw the chill. |
| |
| It should be noted that this benefit has not been extended to private foundations. The Government will consult with private foundations and other interested parties in the coming months with a view to developing appropriate self-dealing rules. If appropriate rules can be devised, the Government would be prepared to bring them before Parliament within the next year, and extend the capital gains exemption for listed securities to donations to private foundations at the same time. |
| |
| To illustrate the significance of this change consider the following situation. On May 1, 2006, Bobbi (who lives in Toronto) donated publicly listed shares worth $100,000. If by the end of the year she earned $150,000 in employment income she would pay tax of $36,539. If Bobbi made the donation on May 3, 2006 she would pay tax of $29,289. Of course, once the other income tax changes are enacted on July 1 of this year, the exact numbers will change but the principle remains the same. Those who realize capital gains by disposing of publicly listed shares to registered charities will not pay tax on those amounts. Obviously, those who donate more, save more. |
| |
| The other significant announcement of relevance to some charities is the elimination of capital gains tax on the donation of environmentally sensitive land. Until yesterday, from the donor's tax perspective, qualified charitable land donations have been treated the same as donations of other capital assets. Now, by virtue of the new budget, donations of qualified properties will be treated in the same manner as donations of publicly listed shares described above. In principle this should elevate the number and size of donations made to registered charities and increase the opportunities for individuals to make an impact on their communities while saving on their tax bill. |
| |
| |
|