OPINION
A Tax-Effective Stimulus for our
Not-for-Profit Sector
Donald K. Johnson, C.M.
Senior Advisor, BMO Capital Markets
Our hospitals, universities, social
service agencies, arts and cultural
organizations and community
foundations are facing two major
challenges:
expand the capital gains tax exemption
profit sector also desperately needs
to include gifts of private company
measures that will stimulate
shares and real estate. These assets have
charitable giving, both in the short
not yet been tapped for charitable
term, as well as over the long term.
donations because their owners would
• Unlike direct government spending,
• First, the dramatic decline in the
have to pay a capital gains tax if they
these measures will unlock
stock market has had an impact on
donated these assets to a charity. In the
significant sources of private wealth
both the number and the amount of
U.S., these gifts are exempt from capital
for public good. There is no tax
donations of publicly traded
gains taxes. The time has come to “level
revenue cost to the federal and
securities. Gifts of stock of public
the playing the field” between Canada
provincial governments unless the
and the United States and enable our
companies have been a major source
private sector increases its giving as
of large donations in recent years.
charities to have access to these
a result of these measures. It is, in
significantly untapped potential sources
• Second, the asset value of
of charitable donations.
essence, a public/private sector
endowment funds and community
partnership.
foundations has also declined
Their potential is substantial:
• The complete capital gains
significantly. This decline has • The total value of all publicly listed
exemption for gifts of listed securities
resulted in a reduction in annual
shares in Canada is approximately
had the unanimous support of all
disbursements from these funds,
which are a vital source of funding
for charities across Canada,
$1 trillion. The total value of all
Canadian private company shares is
significantly greater.
four parties – the Conservatives, the
Liberals, the NDP and the Bloc
Quebecois. Logically, all four parties
including support for professors,
• Real estate represents approximately
should support the expansion of this
doctors, researchers and students.
Our charities desperately need
access to additional, untapped sources
40% of the personal net worth of all
Canadians. However, because
principal residences are exempt
capital gains exemption to include
gifts of private company shares and
real estate.
of charitable giving to help them through
from capital gains taxes, their value • Six former Prime Ministers have
the current difficulties. I have had
discussions with a number of not-for-
profit organizations, including their
volunteer board members and
professional fundraisers, as well as
would need to be deducted from
this total to arrive at the value of real
estate
on
which
these
recommendations would have an
impact.
each communicated to me their
support, in principle. These include
three Conservatives - the Right
Honourable Brian Mulroney, Joe
Clark and Kim Campbell, and three
philanthropists and tax experts, in both • The
compelling
case
for
Liberals – the Right Honourable
Canada and the U.S. Two specific
implementing these measures in the
Paul Martin, Jean Chrétien, and
proposals emerged from these
next federal budget is summarized
John Turner. They would not have
discussions.
as follows:
endorsed these proposals if they did
These proposals capitalize on our • In its January, 2009 budget, the
not believe they were good public
success in convincing the government
government has already provided a
policy.
to eliminate the capital gains tax on gifts
substantial fiscal stimulus for our
of listed securities. We recommend they
economy. However, our not-for-
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