The Liberals' capital gains tax on charitable donations of private company shares and real estate would only be exempt if the donor sold the asset to an arm’s-length party and donated all or a portion of the cash proceeds to a registered charity within 30 days of the sale.CARLOS OSORIO/Reuters
Investment industry veteran, volunteer board member and philanthropist.
During the election campaign, the leaders of all parties focused on several key issues including the pandemic, affordable housing, child care, climate change, the economic recovery and job creation. However, there was no discussion about the serious fiscal challenges that our health care organizations, social service agencies, arts and cultural, educational, and religious organizations are facing because of the pandemic.
Funding each of the key promises in the Liberal Party’s election platform will be a challenge, as not only do they require billions of dollars, these costs are over and above the current deficit and the rising government debt. In addition, the minority government will have to obtain the opposition parties’ support, so implementing these promises will also take a considerable amount of time.
Including a measure in the 2022 budget to remove the capital gains tax on charitable donations of private company shares and real estate would enable charities to receive an estimated $200-million more per year, every year going forward, at a nominal cost to the government. This amendment would trigger donations of private company shares and real estate to more than 85,000 registered charities serving millions of Canadians.
This measure would also capitalize on the success of the removal of the capital gains tax on gifts of listed securities. Since 2006, when the remaining capital gains tax was removed from gifts of listed securities, charities received more than $1-billion in donations of listed securities virtually every year. As Canada is poised for an economic recovery, it is important to ensure that the country’s charities are part of that recovery. Having additional instruments that encourage Canadians to be generous will be essential to enabling the charitable sector to bridge the gap from the current time of significant stress to one where they can move to a more sustainable, healthy position.
Implementing this measure would address the existing inequity in the current Income Tax Act between entrepreneurs who take their company public and donate shares to a charity, and entrepreneurs who keep their company private. Furthermore, it would level the fundraising playing field between our charities and their U.S. counterparts. In the United States, gifts of appreciated capital property are exempt from capital gains taxes, including listed securities, private company shares and real estate. In Canada, the exemption is only allowed for donations of listed securities.
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Any concern about valuation abuse was addressed in the 2015 budget (even though the plan itself ultimately was not adopted). The capital gains tax on charitable donations of private company shares and real estate would only be exempt if the donor sold the asset to an arm’s-length party and donated all or a portion of the cash proceeds to a registered charity within 30 days of the sale.
Finally, this plan also helps address the inequality in our society. By making a gift, these donors are voluntarily giving away their assets, which decreases their wealth, redistributing it among Canadians. If there is any doubt about whether these gifts will help Canadians most in need, just ask the charities that serve them: There is unanimous support from all charities across Canada to remove the capital gains tax. These charities know that removing this tax will increase donations, allowing them to better support disadvantaged Canadians.
Our advocacy campaign to request the government to remove the capital gains tax from donations of listed securities began in 1995 and was completed in 2006, 11 years later. We began a new campaign to request that the government remove the capital gains tax on charitable donations of private company shares and real estate in 2010, the same tax treatment as donations of listed securities. Here we are, 11 years later, so the timing would be excellent if this measure was implemented in the 2022 budget.
If you support this measure, it is vital that you communicate your support to your local member of Parliament and urge them to table and support our measure in caucus meetings. Including this measure in the upcoming Speech from the Throne, and including it in the 2022 budget, would provide an opportunity for the government, and all opposition parties, to create a great legacy.
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