New federal tax change is good news for donors and local charities

The Ottawa Citizen
May 31, 2006
Leave a Legacy and Estate Planning Supplement

By Louise Rachlis

It didn't take long for donors to respond to new provisions that have them paying no capital gains tax on the growth of shares they donate to their local community foundation.

"It's a really significant change in our tax laws," says Barbara McInnes, President and CEO of the Community Foundation of Ottawa.

The Community Foundation of Ottawa had been anticipating the new legislation.
"A number of donors were waiting to make their gifts," says Ms. McInnes. "In our case it was $800,000 that was transferred over as soon as the tax provision was implemented."

She recommends that people talk to their financial advisors about the best way to proceed.

"If donors are considering making a charitable donation, they should look at their portfolio for shares that have appreciated in value," she says. "They can get considerable tax relief by donating those shares. Prospective donors might want to consider making a gift now instead of next year, or after their lifetime."

She calls it fantastic news for donors who want to make a difference in their community and are looking for ways to reduce their tax bill at the same time. "Community foundations saw a dramatic increase in donations when the capital gains tax on shares was reduced. Eliminating the tax on gifts of stock is an incredible incentive to give."

In 1997, the federal government reduced capital gains tax on donations of stock by 50 per cent. The result was a three-fold increase in gifts of publicly traded securities to charities - from $69.1 million to $200.3 million between 1997 and 2000. The percentage of stock donations jumped from 1.6% to 3.9% of all donations.

A recent TD Economics report shows that Canadians hold $1.3 trillion in stocks - almost half of which are unrealized capital gains.

"This change could translate into hundreds of millions dollars in new donations," said Monica Patten, President and CEO of Community Foundations of Canada.

In 2000, during the high-tech boom, more than 60 per cent of community foundation donations came in the form of securities. The Community Foundation of Ottawa saw its assets triple in six months over that period.
Last year, community foundations received more than $40 million in gifts of appreciated securities.

The Community Foundation of Ottawa is a public, non-profit organization created by and for the people of Ottawa. It attracts and manages a growing endowment, the invested earnings of which provide grants to charitable organizations.

The Foundation's role is as neutral broker in support of all charitable causes that contribute to the community's quality of life.

© Ottawa Citizen 2006