Andréa Agnoloni
The Tax Side of Donating to Charities
T
he act of donating money or property has been a practice since the ancient times of the Greeks and the Romans. In those days the Romans used the term magnum facere, doing something great, although the act of giving was not targeted at the needs of the poor but was meant to benefit the public as a whole. The people donating their money for the benefit of the public would receive recognition in the form of political loyalty. In our days, the purpose of charitable giving is to support causes, principle, and values in which the donors believe. In recognition of the impact these donations make to the community, governments provide income tax credits to encourage giving by taxpayers. If a gift of money or other property is made to certain organizations, the gift may qualify for a federal and provincial tax credit. The gift must meet certain criteria to qualify for the income tax credits. • There must be a voluntary transfer of property with no expectation of benefit or consideration. • The property must vest with the recipient. • The transfer must be irrevocable. • The recipient must receive full ownership and possession of the property transferred.
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• If the gift meets all the criteria listed, the recipient will issue a charitable tax receipt and the individual donor will receive a nonrefundable federal and provincial tax credit of 20.06% on the first $200 and 45.80% on the balance. The tax consequences of the gift depend on the type of property gifted and who is the recipient.
In our days, the purpose of charitable giving is to support causes, principle, and values in which the donors believe. 1. Gifts to Registered Charities and Other Qualified Donees Qualified donees include registered Canadian amateur athletic associations, national arts service organizations, municipalities, housing corporations, United Nations and its agencies, and some universities outside Canada. • In a single year, the maximum amount of charitable donations the donor can claim cannot be higher than 75% of the net income, but any unclaimed amounts can be carried forward for up to 5 years.
2. Gifts of Ecologically Sensitive Land The Minister of Environment and Climate Change Canada (ECCC) has to certify that the land is important to the preservation of Canada’s environmental heritage and will determine the market value of the gift. The claim for a gift The Society of Notaries Public of British Columbia
of ecologically sensitive land is not limited to a percentage of net income; any unclaimed amounts can be carried forward for up to 10 years.
3. Gifts of Certified Cultural Property Cultural property that is of outstanding significance and national importance can be donated to Canadian institutions and public authorities that have been designated by the Minister of Canadian Heritage. The market value of the property is determined by the Canadian Cultural Property Export Review Board. The claim for a gift of certified cultural property is not limited to a percentage of net income. No tax is payable if a gain is realized on the transfer of the property to a designated institution or a public authority.
4. Gifts of a Share, Debt Obligation Listed on a Designated Stock Exchange, Shares or Units of Mutual Fund Corporation, and Mutual Fund Trust If those properties are donated to a registered charity and have realized a capital gain on the transfer, the donor will not be subject to tax on the capital gain. It is more attractive and more tax efficient to gift shares directly instead of the cash from the sale of the shares. The market value of the securities donated is the value of the charitable donation. For example, shares with a cost of $10,000 and a market value of $100,000 will realize a capital gain of $90,000 and an eligible donation of $100,000. Volume 27 Number 4 Winter 2018
