The Standing Committee on Finance released its Pre-Budget Consultations 2009 and it is located at The Report, tabled in the House on Wednesday, December 9, 2009. Below are excerpts relating to charities. For the full text see below.
V. CHARITIES, VOLUNTEERISM AND FOREIGN AID
Charities and volunteers make an invaluable contribution to our country, providing
assistance to those in need as an alternative or supplement to government services.
According to a recent report by Statistics Canada, in the 12-month period covered by a
2007 survey, 84% of the Canadian population aged 15 and over—about 23 million
people—made a monetary donation to a charitable or other not-for-profit organization.
Canadians donated $10 billion in 2007, with religious organizations being the largest
beneficiaries, followed by health organizations and social services organizations.
Moreover, about 12.5 million Canadians—46% of the population aged 15 and
over—volunteered during that same 12-month period, with almost 2.1 billion volunteer
hours in 2007, often in order to organize or supervise events, raise funds, sit on
committees or boards, and teach, educate or mentor. Finally, in 2008, Canada contributed
US$4.73 billion in Official Development Assistance.
The Committee’s witnesses commented on a variety of issues related to charities,
volunteerism and foreign aid, including the important role that charities play and measures
that are needed for them to continue their work, initiatives that could lead to more
charitable giving and to more volunteerism, and to the role that Canada plays in providing
foreign aid to needy nations.
A. The Role of Charities and Not-for-Profit Organizations
In speaking about the role that charities and not-for-profit organizations play in
society and about their potential as engines of economic growth, particularly during times
such as these, a number of the Committee’s witnesses advocated federal policies and
programs that provide not-for-profit organizations, social enterprises and co-operatives
with a greater role in economic development. Suggestions involved the development of
mechanisms to include social enterprises and social economy organizations in all
industrial development strategies, and recognition that communities may be best
positioned to identify needs at the local level.
Witnesses also argued for the adoption of a federal procurement strategy that
would give an advantage to community-based businesses, including a legislative initiative
to facilitate purchasing from social enterprises and a communications strategy to increase
awareness of the benefits of such procurement.
B. Tax Incentives for Giving
A number of witnesses spoke about donations of publicly listed securities to
charities, in respect of which comments were made about a possible enhanced charitable
tax credit that would include a 42% rate on the adjusted cost base of the security and the
existing 29% rate on the capital gain.
In the view of some witnesses, charitable giving would be enhanced if the current
tax treatment for donations of publicly listed securities were to be extended to donations of
real estate and land as well as to donations of private company shares. Regarding real
estate donations, the Committee was told that real estate could include vacation,
industrial, commercial and residential investment properties; principal residences, which
are already tax-exempt, would not be covered. Two measures for charities to receive
donated land were presented: the qualified donnee would receive all or part of the cash
proceeds from the sale of the property and the donor would be exempt from capital gains
tax on that portion of the real estate sale which he or she donated to the charity, or the
donor could make an in-kind real estate donation that would enable the qualified donnee
to retain the property for use within its mission.
In an effort to attract new donors and to increase the level of donations by existing
donors, a number of the Committee’s witnesses supported the creation of a “stretch tax
credit.” The proposed credit would have a higher rate than that currently legislated, would
be applied to incremental donations from year to year, and would have $200 and $10,000
of giving as relevant thresholds; charitable giving in 2008 would be used as a baseline.
Witnesses believed that the government should proactively publicize the proposed credit
in collaboration with charities, and undertake a five-year review to ensure that the
proposed measure’s stated goals were being met. A more general request for an increase
in the tax credit in respect of charitable donations was also made, as was a specific
request for an increase for donations of cash over the current $200 threshold.
Finally, the Committee was told that the effectiveness of tax incentives for individual
charitable giving would be enhanced if complemented by other initiatives to increase
access to investment capital.
C. Access to Financing and Funding
Witnesses indicated that access to capital is a particular problem for charities,
social enterprises and similar organizations, since they are unable to access investment
capital through traditional stock offerings and need fiscal or other measures—such as
capital development funds with federal seed money—to access “patient,” or long-term,
capital and financing. Also advocated was federal/provincial/territorial/municipal/donor
cooperation in establishing community investment capital funds for patient capital, as well
as the creation of a registered retirement savings plan-eligible tax credit for Canadians
who wish to invest in community economic development investment funds operated by
local not-for-profit organizations.
The Committee was informed that while debt capital is available from commercial
financial institutions, smaller organizations with multiple and unpredictable revenue
sources cannot access it easily, which results in a need for unsecured debt in smaller
amounts for operating and growth. It was suggested that the government should develop a
regulatory framework that would encourage the growth of investment vehicles for social
investors and should review the regulatory framework for charities. The provision of grants
to support charities was also identified as a means of support.
Charitable foundations were also mentioned by witnesses, who urged the
government to review the current regulatory framework with a view to developing options
that would enable foundations to use their assets in the service of donors, charitable
organizations and communities. In their view, consideration should be given to the manner
in which income tax and regulatory frameworks can be made more accessible and flexible
for foundations without compromising the trust relationship between donors and
Witnesses also highlighted the need to extend the Business Development Bank of
Canada’s loan guarantee program to co-operatives and not-for-profit organizations, as well
as to review existing programs for small and medium-sized businesses to ensure that they
are accessible to co-operatives and not-for-profit social enterprises.
A number of the Committee’s witnesses urged full and expedited implementation of
the recommendations made by the Blue Ribbon Panel on Grants and Contributions,
particularly those related to multi-year funding, full-cost recovery, and reduced
administrative burden when applying for, and accounting for, grants and contributions.
Moreover, the government was encouraged to enhance support for grants and
contributions programs that are best-positioned to help Canadians during the economic
Witnesses highlighted the need for government departments to develop
coordinated approaches in order to ensure access to sustained government funding and to
initiate proactive measures that would significantly increase capital investment in the
not-for-profit sector. As well, they proposed the expansion of investments in place-based
poverty reduction initiatives operated by not-for-profit organizations.
Finally, the government was urged to create an economic recovery fund to provide
short-term support for public and private not-for-profit agencies and organizations, to be
cost-shared with the other levels of government. According to this proposal, funding for a
recession relief fund would prevent spending cuts to agencies serving vulnerable people,
and increase assistance for settlement programs and the Homelessness Partnership
D. The Disbursement Rule
In arguing that the disbursement rule for charities is confusing, requires an
“inordinate” amount of time to understand and implement, is unduly complex, makes
arbitrary and excessive capital disbursement demands that ignore the realities of the
investment market, and imposes a costly administrative burden on charities, particularly
those that are small or rural, some witnesses urged elimination of the rule. In their view,
following elimination, consultations with charities would then occur with a view to
developing a new regulatory approach that would strike a better balance between public
accountability for tax expenditures and flexibility for donors and charities to advance their
charitable work effectively. Witnesses also supported a review of the regime in order to
simplify it and make it more flexible. Moreover, the Committee was told that the rule should
be eliminated for charitable organizations but retained for foundations. The problematic
nature of the disbursement rule was mentioned by witnesses, both generally and in the
context of the ability of land trusts to build land stewardship accounts.
E. Other Charitable Issues
Particular comments were made to the Committee about: the need for government
assistance to facilitate the development of a strong, national network/partnership of
disability organizations that can set collective national goals; difficulties associated with a
requirement for the not-for-profit or voluntary sector to provide matching funds in order to
access federal funds; the need to amend the Income Tax Act in order to clarify the
situation of donations to Charitable Remainder Trusts; the barrier faced by US residents
when donating ecologically sensitive lands or conservation agreements; the benefits of
extending the carry-forward provision for ecological gifts in Canada to ten years; and the
need for bridge financing, as well as employment and training programs funded through
departments, to recognize the contributions of not-for-profit and charitable entities as well
as their employees.
Witnesses provided the Committee with a range of ideas to increase volunteerism.
Suggestions included providing post-secondary education tuition relief in return for
volunteerism, increasing opportunities in the education system to demonstrate the value of
volunteering and encouraging innovative leadership for new forms of volunteering.
Furthermore, it was suggested that individual tax credits should be created for coaches
and officials in order to offset a portion of the costs incurred for their training and
Also, the need for knowledge transfer and capacity building to recruit and retain
volunteers was acknowledged, with a suggestion that the government invest in a
Canadian volunteer support system for training, knowledge sharing, innovation and basic
volunteer management resources for those at the grassroots level. Finally, a national goal
of increasing the rate of volunteerism by a specified percentage over time was supported.
G. Foreign Aid
Witnesses brought a number of foreign aid-related issues to the attention of the
Committee. Some identified the requirement for federal spending in order that Canada can
meet the goal of 0.7% of gross national income allocated to Official Development
Assistance by 2015; an interim goal of 0.5% by 2010 was suggested. To reduce global
poverty, witnesses recommended that Canada take the lead in promoting the creation of a
tax on international financial transactions. Mention was made of the Official Development
Assistance Accountability Act and its requirement that development assistance be
transparent, rights-based and poverty-focused. As well, witnesses noted the need for debt
cancellation and “more just” trade rules, and urged Canadian leadership in the
Organization for Economic Co-operation and Development (OECD) Development
Assistance Committee in promoting a greater role for civil society in delivering
Other witnesses urged the government to use its role as president of the G8 in
2010 in order to take concerted and coordinated actions in respect of reproductive,
maternal, newborn and child health. Specific mention was made of the need for increased
funding for, and an expanded scope of, the Initiative to Save a Million Lives. Witnesses
also proposed that increased and sustained government funding occur for the Global Fund
to Fight AIDS, Tuberculosis and Malaria.
Finally, elimination of maternal mortality and morbidity worldwide was also identified
as a goal, as was the creation of a Canadian international centre of excellence for
women’s leadership in order to develop the skills needed for women to assume leadership
positions in poverty-eradication initiatives in developing countries.
The Committee believes that the country’s not-for-profit organizations and
volunteers are valuable, both for individuals who need assistance and for people who are
seeking to support their communities. We know that the need for charitable assistance is
particularly high during times of crisis, and believe that the federal government has a role
to play in encouraging charitable giving and in supporting charitable organizations. In our
view, this support is needed in order to position charities and volunteers for the future role
that they can play in society and the contribution that they can make. Thus, the Committee
The federal government examine incentives that would have the effect
of increasing the level of charitable giving by businesses and
individuals. In particular, the government should consider:
• an increase in the charitable tax credit rate to 39% for
incremental annual increases in giving, provided that annual
giving is more than $200 and less than $10,000;
• the creation of a corporate structure for not-for-profit
organizations that would allow the issuance of share capital
and other securities; and
• the elimination of the capital gains tax on donations of real
estate and land to public charities.
Additionally, the Committee is cognizant that, from the perspective of many in other
parts of the world, Canada is considered to be a wealthy nation. For moral reasons, if no
others, we believe that we have an obligation to help those in other parts of the world who
are in need. Recognizing the suggestions made by such organizations as Results
Canada, the Committee recommends that:
The federal government make a commitment to providing increased
and sustained funding for the Global Fund to Fight AIDS, Tuberculosis
and Malaria. The government should also provide significant
assistance to developing countries, with a view to achieving the
Millennium Development Goal of 0.7% of gross national income
devoted to Official Development Assistance.
Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit http://www.canadiancharitylaw.ca or http://www.globalphilanthropy.ca Mark can be contacted at or at 416-361-1982.
This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.