Arts and Business - Maecenas Initiative
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Estate Taxes – Currently, the top estate tax rate in the U.S. is 48%, and will decrease by 1% per year to 45% in 2009. For 2004, the unified credit is $555,800 toward an applicable lifetime exclusion of $1,500,000. However, the federal estate tax is scheduled to be phased out entirely by 2010, to the concern of many charities that fear it may eliminate a primary driver of planned giving.
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Gift Taxes – The gift tax applies to the transfer by gift of any property. Individuals make a gift when giving property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. Individuals may make tax-free gifts to other persons of up to $11,000 per annum; gifts larger than $11,000 are taxable, and count against the lifetime gift exemption of $1 million for federal estate tax purposes. Gifts to spouses, political organisations, charities, and tuition or medical expenses paid on behalf of another, are exempt from gift taxes.
In Canada, the charitable sector has also sustained significant reduction in government funding in recent years, and in 1996 and 1997 the Canadian government enacted changes designed to encourage more gifts to charities from individuals and corporations by increasing tax incentives for donations. The most significant reform was the reduction of capital gains taxes on charitable gifts of publicly traded securities by half, from 75% to 37.5%). This move has been seen by many as the greatest incentive undertaken in recent history by the Canadian government to promote charitable giving. This measure was introduced on a five-year experimental basis, and was reviewed and endorsed in 2000. However, under present rules, these reductions apply only to donations to a public foundation or charitable organisation, but not to donations to private foundations. Furthermore, the preferential treatment of capital gains on publicly-traded securities has not been applied yet to other types of assets, such as real estate. The Canadian Centre on Philanthropy is one organisation that has lobbied for extending tax reform in these two critical areas, among others.15
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Canadian Centre for Philanthropy, “Pre-Budget Submission to the House of Commons Standing Committee on Finance,” September 8, 2003, http://www.ccp.ca/Files/lettersubmission/federal_budget_2004.pdf.
AEA Consulting October 2004
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