Why we like the stretch tax credit for charitable giving

Feb. 06, 2012

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Mary Littlejohn, Manager of Family Philanthropy

London Community Foundation as part of Community Foundations of Canada, a national network of 180 community foundations, supports the Stretch Tax Credit for Charitable Giving proposal to the House of Commons Standing Committee on Finance as led by Imagine Canada, an umbrella organization for Canada’s non-profit sector.

Ian Bird, CEO of Community Foundations of Canada, has been asked to appear before the Standing Committee on Finance on February 14th regarding its discussion of tax incentives for charities. The proceedings start at 3:30 ET.

Ian will be on the witness list with Suzuki Foundation, Big Brothers Big Sisters and 3 Christian charities. CFC has been working closely with a collaborative group, convened by Imagine Canada, to understand the direction the Committee is taking and to craft a community-centered message in response. Tune in here: http://parlvu.parl.gc.ca/parlvu/ContentEntityDetailView.aspx?ContentEntityId=8473

The Stretch Tax Credit for Charitable Giving, if adopted, will put charitable giving on the radar—or back on the radar—for many Canadians. Canadians who have not made charitable donations in the past will see the Stretch Tax Credit as an incentive to shift future giving patterns. And then, for those Canadians who have given donations, this tax credit will reinforce their already established pattern of behavior, and in the best scenario, encourage them to increase the level at which they donate. 

The Stretch Tax Credit presents us with an excellent opportunity to stimulate charitable giving through socially responsible tax policy. In light of recent data which indicate a significant drop in the number of tax-filers claiming charitable tax credits (close to 30% in 1990 as compared to 23.4% in 2010) this is vital to the charitable sector. 

Ideally, a system of tax credit incentives will make charitable giving a feasible option to a broader socioeconomic spectrum of Canadians. 

I am sharing this letter, written by Community Foundations of Canada to the Standing Committee on Finance:

Mr. Peter Braid, MP Kitchener-Waterloo 

House of Commons 
Room 911 Justice Building 
Ottawa, Ontario K1A 0A6 

Dear Mr. Braid, 

We are writing on behalf of Canada's national Community Foundation network to share some of our thinking on policies to encourage charitable giving during the hearings of the Standing Committee on Finance, as well as to thank you for creating this opportunity for Canadians to engage in a critical discussion about philanthropy. Community Foundations of Canada (CFC) mobilizes the collective efforts of the 180 community foundations across Canada. Our network is one of Canada's biggest investors in community, working with Canadians to contribute more than $149 million to thousands of local charities last year. 

As a Member of Parliament you are aware of the great strengths of Canadian communities, as well as the challenges they face. We also know you are also familiar with the significant role the charitable sector plays in leveraging local assets and in meeting important community needs. Your motion, before the Standing Committee on Finance (C-470), has created a significant national opportunity to consider the potential impact of innovative vehicles like the Stretch Tax Credit proposal that could put more resources into the hands of communities, by encouraging Canadians to be more generous. 

CFC's network is a strong supporter of the Stretch Tax Credit, led by Imagine Canada. We believe it will persuade Canadians to take a second look at their charitable giving. The Stretch Tax Credit is just one of the many ideas that have received added attention and interest as a result of the motion before you. Over the years charities across the country have felt the positive impact of tax incentives like the elimination of capital gains tax on gifts of appreciated securities. Community Foundations have seen increased giving at the local level as a result and we expect the incentives currently being suggested would see a similar result. Moreover, suggestions to improve the regulatory environment as identified by our partners, Philanthropic Foundations of Canada, are key initiatives that we endorse. 

We will be watching the Committee hearings with great interest and will be working closely with Imagine Canada and others to ensure the voices of communities we serve are part the process. The discussions may include much more than charitable tax incentives, but that is all part of the important role these committees play – and a cornerstone of our democratic process. Indeed, the role of foundations, charities and civil society actors in the public policy process is a fundamental part of Canada's history and democratic values. 

We would welcome the opportunity to meet with you at some time during the new Parliamentary session. Community Foundations of Canada has an office in your riding and we would be happy to meet with you in your constituency, or in Ottawa, for what we know would be a rich discussion about our communities and about the charitable sector. 

Sincerely yours, 

Terry Jackson, Chair 
Ian Bird, President and CEO 

Stretch Tax Credit

I may not completely understand this concept......but it would appear that if someone were to INCREASE his/her contribution in a given year, the increase would qualify for an extra 10% FEDERAL tax credit. In other words......I give $100 in 2010 and get the "normal" 15% FEDERAL tax credit. In 2011, I give $200..........and so my extra $100 would attract an additional 10% FEDERAL - a total of 25%. I'm not sure if that is right but I believe it is.

So what happens in 2012 when I give the SAME $200. Does the tax credit go back to "normal" and give me a 15% FEDERAL tax credit?

Assuming that is correct - we're missing the boat and treating the lower & middle class investors who struggle to contribute somewhat unfairly.

I have written to all London MP's - as well as Peter Braid - arguing that all donations should receive the same 29% Federal tax credit. Why shouldn't we consider making the tax credit identical for all donations? Why is the first $200 treated so shabbily? In my view it's another example of the rapidly growing 99%/1% discussion that is in the news these days whereby those at the upper end of the income (and donation) scale receive a far greater benefit than those at the lower end!

Further - I have argued that charity begins at home. When I contribute to a charity that uses its funds in Canada, there is an economic impact and a multiplier effect that provides revenue to the Government 9which helps fund the tax credits). Accordingly, it is my contention that donations to any charity that spends at least 90% of its donations within Canada should receive an overall (Federal plus Provincial) tax credit of 50%. Conversely, donations to charities that spend less than 90% of their funds in Canada would attract only a 33% (Federal plus Provincial) tax credit in recognition of the fact that the net cost to Government is considerably higher since the funds, when expended, to not generate the same kind of economic activity and multiplier effect within Canada.

In summary - ALL donations to charities that spend 90%+ of it in Canada would attract an overall 50% tax credit; and ALL donations to charities that DO NOT spend 90%+ of it in Canada would attract an overall 33% tax credit. It would incentivize donating to Canadian charities as we continue to struggle through this long-lasting and potentially worsening economic crisis; and it would level the playing field whereby presently, small donors are treated shabbily inequitably.

But alas.....I'm sure they won't be listening to me!

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