SoVote

Decentralized Democracy

House Hansard - 80

44th Parl. 1st Sess.
June 2, 2022 10:00AM
Context: House Hansard - 80 - Jun/2/22
Mr. Jake Stewart (Miramichi—Grand Lake, CPC)
Mr. Speaker, it is a pleasure to be here today to speak on this important bill from my great colleague. The COVID-19 pandemic has hit Canadian charities extremely hard. Today I am happy to stand in the House and discuss a measure that would see the potential for a new revenue stream for our struggling charities across the country. Amending the Income Tax Act to provide an exemption from capital gains tax in respect of certain arm's-length dispositions of either real estate or private corporation shares to charities is an extremely important measure to see implemented. The bill would see to it that the proceeds of any arm's-length sale would qualify for exemption if donated within 30 days of disposition. The value is, of course, determined in the market by the sale and is not determined by the seller. Each of us in the House has a charity, or in fact several, that would be near and dear to our own hearts. About 10 years ago, I created a not-for-profit organization called The Josie Foundation. That is one that is very near and dear to my heart, along with so many others. It is important that we understand just how difficult it was for charities to raise funds as they normally would because of the pandemic and the strain that it put on charitable organizations. The importance of charitable organizations in Canada is without question, and we want to remind all people of the importance of volunteerism. Many hard-working Canadians volunteer their time. They get on the charities that are near and dear to their hearts and whatever charity they are working on benefits our country in a great way. All members of the House and every political party in Canada inside these walls would agree that we must do anything we can to help charities. This bill would increase the amount of charitable giving by incentivizing donations through this tax measure. Again, Canadian charities need all the help they can get right now. I will note that this measure was proposed in the 2015 budget by the Stephen Harper government, but in the 2016 budget, it was confirmed that the Liberal government did not intend to proceed with this measure. With this bill, we are trying to address the downturn in charitable giving that has been a trend for a while and was exacerbated during the pandemic. COVID-19 has had a massive impact on the charitable sector with the inability to raise funds at events, as well as donors being less likely to donate because they were personally struggling financially. When we add the concept of inflation to the mess and the problems charities are having raising funds, there is a really poor situation for the charities in this country. With inflation running rampant, the financial struggles to Canadians are rising. In turn, this is putting more pressure on household disposable income, which is driving down available donation revenue. It should be noted that the charitable sector represents $151 billion, or 8.1% of Canada's GDP. Currently, the Income Tax Act allows for this tax treatment for the proceeds of the sale of publicly traded shares. This bill would provide similar tax treatment for the sale of private shares and real estate. The Special Senate Committee on the Charitable Sector recommended the government implement this measure as a pilot project in June 2019 in its “Catalyst for Change” report, recommendation 34. People at home and potentially people in the chamber are wondering whether the bill seems to disproportionately favour those who are high-income earners. The answer is that it is important to note that not a single donated dollar remains in the hands of the donor. Each dollar benefits the charity that receives it. This bill would make these donations more affordable for donors, no matter what their income level is. It is very good for charitable organizations. Many small business people are not necessarily high-income earners, but would be incentivized to make donations if they did not have to pay the capital gains tax associated with the sale of their businesses. As to whether the nature of the tax is regressive, this is something that could be ascertained through expert testimony at the finance committee if the bill were ever to pass. We know we have to pass this bill. If this bill does not pass, the people in every charitable organization in the country are going to feel sad, but they are also going to feel ashamed. Government members and parliamentarians know that this is the type of bill that each of us can represent. It transcends partisanship. We can look at this bill and each of us can understand how important it is for us to help this sector. Another question that people might have is how the benefit flows from the tax incentive to the charity. When business owners decide that they wish to sell shares in their businesses, under this bill, proceeds from the sale of those privately held shares would qualify for a capital gains tax exemption if donated to a charity by the donor within 30 days of the close of the transaction. It is great news for charitable organizations. For the purpose of clarity, the shares of the donor's company could not be donated, but rather the proceeds derived from the sale of those shares could be donated. This mechanism helps avoid any valuation ambiguity, as the sale must be an arm's-length sale for the purpose of value. Some may wonder how often people gift shares and how often people gift real estate, in particular outside of a will. The bill would not incentivize gifting private company shares or real estate. Rather, it would incentivize the donation of the sale proceeds derived from the sale of private company shares or real estate. One example is important as it pertains to real estate. Someone who invested in a small apartment building or a duplex several years ago is now retiring and decides to sell the place. Currently, when they sell, they will be required to pay capital gains tax, which would be roughly the equivalent of 25% of the increase in value of the property during the period of time it was owned. Under Bill C-240, those proceeds could be donated, in their entirety or in part, to a charity of the donor's choice and the donor would receive an exemption from the tax. In the end, we would incentivize somebody to be more charitable in our country, which would benefit charitable organizations. Some might ask about the benefit to cost that is associated with this legislation. Someone correctly pointed out that a Library of Parliament report references two different types of tax costs. The first is the tax cost related to the forgone capital gains taxes. As I mentioned earlier, this equates to roughly 25% of the actual gain. The second cost is the cost due to behavioural change, as the goal of the bill is to increase charitable giving. Additional charitable tax receipts would also be issued. This is a win-win all day for charitable organizations, for the people who benefit from the great work of charitable organizations and for our great country when we put forth legislation such as this that would actually make a real difference in our society. The federal tax costs related to the issuance of tax receipts may vary based on the amount of the contribution and individual income, but my understanding is that the cost is roughly 25% to 30% of the contribution. This, too, could be clarified by testimony. I want to thank you again, Mr. Speaker, for allowing me to bring forth this insightful commentary. I would be happy to meet with any members of the House, but I want to say again that Bill C-240, sponsored by my great friend from Winnipeg, is the type of bill that every political party can be proud of and that every member of the House can support. They are not supporting a political party here. They are supporting every charitable organization in this country, and we will proudly take all of their support. We need it. This is good for Canadians.
1388 words
All Topics
  • Hear!
  • Rabble!
  • star_border