Several years after hearings into charitable donation incentives were first proposed by Member of Parliament Peter Braid, we finally have the report of the Parliamentary Finance Committee. Unfortunately, it seems that the after years of anticipation the final report is neutered of any real effect because it lacks analysis. Fundamentally, the report is a review of the submissions made by the various witnesses followed by a qualified set of recommendations and even at that is a light read.
As we predicted in our previous article discussing our thoughts for 2013 (the article is available here) the report was rather expansive in its list of recommendations including most, but not all, of the proposals made to the Committee. Notable by its absence was the idea we proposed that served as the basis for Bill C-458 – namely that the deadline for the use of charitable receipts be moved from December 31 to March 1st (to read more about Bill C-458 click here). This exclusion makes sense, given that the Finance Committee will have a chance to examine the Bill in detail if, and when, it passes second reading. Recommending the idea at this point would likely have had the effect of both prejudging the Bill and binding the members of the Committee to a positive vote on the Bill if it gets to third reading.
As a matter of process, the government will now respond to the Bill and may, or may not, actually consider the suggestions of the Committee. From a practical perspective the real response will be in whether any legislation is proposed based on the recommendations of the Committee. The first opportunity for this may be Budget 2013. While we would hope that the government will give serious consideration to the recommendations one has to wonder whether or not they even can, given that the recommendations lack any analytical foundation by the Committee. It may be that the government will have no choice but to rely on the submissions made by the various witnesses to the Committee and then conduct their own research. If this is true then it is unlikely Budget 2013 will leave enough time for the budget to adopt these ideas.
But, for the benefit of our readers we close with the list of the recommendations, it will be interesting five years hence, to look back at these recommendations and see what has become of them.
- Subject to the government’s stated intention to balance the budget in the medium term, that the federal government explore the feasibility and cost of eliminating or lowering the capital gains tax on charitable donations of real or immovable property or the shares of private corporations to charities, provided that the proceeds of disposition are donated to a charity within a fixed period.
- Subject to the government’s stated intention to balance the budget in the medium term, that the federal government explore the feasibility and cost of adopting a stretch tax credit.
- Subject to the government’s stated intention to balance the budget in the medium term, that the federal government examine the feasibility and cost of extending the carry-forward period for claiming a charitable donation, including gifts of ecologically sensitive lands or gifts of certified cultural property.
- Subject to the government’s stated intention to balance the budget in the medium term, that the federal government explore ways to increase charitable giving in the corporate sector – including through a review of the current donation contribution limit – and the cost of such potential initiatives.
- Subject to the government’s stated intention to balance the budget in the medium term, that the federal government explore the feasibility and cost of the promotion of bequests to charitable organizations and transfers of property to a charity as a result of a will.
- That the federal government undertake a technical review of the Income Tax Act as it relates to charities, including the definitions of the terms “charity”, “charitable donation”, and “gift”, to ensure greater simplicity and reduced administrative compliance costs for charities.
Public awareness recommendations
- That the federal government continue to monitor charitable giving trends and characteristics, and make such data available.
- That the federal government further promote charitable giving by reminding and educating Canadians of existing tax incentives for charitable donations and their benefits.
- That the federal government work with the charitable sector to promote the use of “mobile giving”, educating Canadians on the advantages and convenience when making charitable donations using new technology.
- That the federal government continue to explore social finance instruments as a way to further encourage the development of government-community partnerships.
Reducing the”Red Tape Burden” recommendations
- That the federal government continue to explore ways to reduce the administrative burden or “red tape burden” on charitable organizations, including – but not limited to – a review of the possibility of streamlining the excess corporate holdings provisions for private foundations, duplicative requirements, and the possibility of introducing administrative reporting on a sliding-scale basis, proportional to the size of the charitable organization.
- That the federal government continue to recognize that promoting increased transparency and accountability in the charitable sector will support greater confidence among Canadians and their willingness to donate more generously. As such, the federal government should explore options to continue to improve accountability and transparency in the charitable sector, such as potentially giving the Canada Revenue Agency (CRA) a greater ability to disclose serious non-compliance by qualified donees and to disclose the annual returns of such donees, establishing a requirement for charities to demonstrate annually their “public benefit”, adopting measures as proposed in Bill C-458 as passed at third reading in the 40th Parliament, and allowing the CRA the ability to disclose some or all information contained on the Non-Profit Organization Information Return.
Drache Aptowitzer LLP