An Act to amend the Income Tax Act (donations involving private corporation shares or real estate)

Sponsor

Marty Morantz  Conservative

Introduced as a private member’s bill. (These don’t often become law.)

Status

Defeated, as of June 8, 2022

Subscribe to a feed (what's a feed?) of speeches and votes in the House related to Bill C-240.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment amends the Income Tax Act to provide an exemption from capital gains tax in respect of certain arm's length dispositions resulting from the donation of real estate or private corporation shares to charities.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Votes

June 8, 2022 Failed 2nd reading of Bill C-240, An Act to amend the Income Tax Act (donations involving private corporation shares or real estate)

An Act to Change the Name of the Electoral District of Châteauguay—LacollePrivate Members' Business

June 21st, 2022 / 6:10 p.m.
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Conservative

Arnold Viersen Conservative Peace River—Westlock, AB

Mr. Speaker, the member behind me says that the centre of Canada is Provencher. I can be certain that it is not, because I think that from Provencher someone could spit and hit the American border. Given the fact that my riding, Peace River—Westlock, is in northern Alberta and the centre of Alberta is a seven-hour drive from the American border, I can assure colleagues that the geographical centre of Canada is definitely not in Provencher.

That said, I have very much enjoyed speaking about the promised land, Peace River—Westlock, as I like to call it, but there are a host of other things that we could be discussing in this place as well.

The member for Edmonton West did speak about some of these things already, but I wanted to highlight some of the other private member's bills that have come forward from folks in our caucus, particularly Bill C-228, from the member for Sarnia—Lambton, which amends the Bankruptcy and Insolvency Act to ensure that folks are able to collect their pension funds over time. I want to reference Bill C-240, from the member for Charleswood—St. James—Assiniboia—Headingley, which amends the Income Tax Act to ensure that capital gains exemptions are granted to those whose estate goes to a charity. The member for Essex also has an amendment to the Income Tax Act to allow trades persons to deduct amounts for travelling.

That is some of the amazing work that our caucus is doing and I just wanted to highlight some of that.

Income Tax ActPrivate Members' Business

June 8th, 2022 / 3:35 p.m.
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Liberal

The Speaker Liberal Anthony Rota

Pursuant to order made on Thursday, November 25, 2021, the House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-240 under Private Members' Business.

The House resumed from June 2 consideration of the motion that Bill C-240, An Act to amend the Income Tax Act (donations involving private corporation shares or real estate), be read the second time and referred to a committee.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 6:20 p.m.
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Conservative

Jake Stewart Conservative Miramichi—Grand Lake, NB

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.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 6:10 p.m.
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Bloc

Sébastien Lemire Bloc Abitibi—Témiscamingue, QC

Mr. Speaker, I am pleased to rise to participate in this debate on Bill C-240. This bill will affect an important industry in Quebec, specifically non-profit organizations, or NPOs, and charities that we have all worked with as citizens and in our work as members.

We are all well aware of the important contribution they make to our communities. I commend the enormous amount of work that these organisations do every day in conditions that are not always easy. I thank them for it. I want to take a moment to commend the leadership of the team at Le Passage de l'Aurore hospice. It is important for every RCM in our region to have this kind of end-of-life facility.

Charities receive significant support, totalling nearly $4 billion annually, through the tax system. Canada's tax incentives for charities are among the most generous in the world. Can we do even more in this area to help that sector thrive? I believe we can.

I also believe that piecemeal measures, which are often simplistic solutions, are no substitute for serious policy reform. In any case, it is high time that we prioritized the problems faced by NPOs and charities.

Tonight we will essentially debate a measure to exempt donations involving private shares and real estate from capital gains tax.

Let us review the history of this tax measure. Since 2006, the government has introduced a number of measures to boost charitable giving and cut red tape for the charitable sector. The House of Commons Standing Committee on Finance also studied the taxation of charities and NPOs, and this measure was among the recommendations in its February 11, 2013, report. This would benefit charities of all types, from hospitals, universities and cultural groups to the vast network of United Way–funded social service agencies across Quebec.

The measure was first introduced by the government in the 2015 budget. At that time, it was described as a way to unlock more private wealth for the public good. However, the exemption of donations involving private shares and real estate from capital gains tax was never implemented, as the Liberal members opposed it.

In 2019, the Special Senate Committee on the Charitable Sector concluded that the measure proposed in Bill C‑240 was positive overall and recommended that it be adopted. Did the pandemic finally manage to convince us that this sector of our economy is fragile and that action is urgently required?

There continues to be an urgent need to increase the financial resources of charities and NPOs. It is vital that we examine the real needs of charitable organizations and NPOs.

My criticism of this bill is that it once again avoids finding a comprehensive solution that would provide these organizations with greater predictability in the longer term. It does not address all the problems to identify potential solutions.

At first glance, I do not see any serious problems with this new provision. However, I want to stress that better social policies and an adequate response to the problems of an aging population must be implemented in conjunction with the modernization of our tax system for charities.

Social inequalities exist, and the government's declining contribution to health care has a lot to do with that. The Bloc Québécois wants the government to increase the main provincial transfer so the provinces can make long-term plans for providing services to their people. This is just basic respect for the Canada Health Act.

Let us look at the changes proposed in the bill. Simply put, it would change the Income Tax Act to provide the same tax treatment as for donations of shares. Like other members of the House who commented on the consequences, I think we can look to the Parliamentary Budget Officer's numbers. That should not be far from the truth.

We have a report here from the PBO stating that donations of real estate and private corporation shares could rise from $2.9 billion to $3.9 billion, an increase of $981 million.

I encourage my colleagues to look at part two of the Department of Finance's 2021 report on federal tax expenditures, and more specifically the table on page 33, which shows how much it costs the government for each of its existing measures for charities and non-profits.

I have a lot of questions that the finance committee could look into when studying the bill. The Parliamentary Budget Officer's budget model does not give any indication of how effective this measure is.

Are these new donations? Will this measure encourage more people to donate private corporation shares or real property? Would this simply add a benefit for donations that the organization would have received either way?

From a tax fairness perspective, tax credits for charitable donations are meant to recognize the public value of charities and to encourage donations. These tax credits are designed to encourage more donations, not to financially incentivize certain taxpayers to structure their affairs in a manner that minimizes their tax liability.

I think it is particularly important to ensure that this does not become an excuse for the government to shirk its social responsibilities.

We must not lose sight of technological change. That is hard for someone to do when they cannot afford it. My colleague from Joliette gave us his perspective on what we have heard from charities, as he has met with representatives from that sector of the economy.

As part of my role in the Bloc Québécois, what I have been hearing in my meetings is that the resources for organizations are limited, and that this is hindering the adoption of digital technologies, including software, hardware and data. As well, organizations are not always able to hire or train the required staff.

However, not‑for‑profit organizations are key partners in the delivery of services to ensure the health and well‑being of our community. Without access to critical technology such as computers, teleconferencing platforms, or a stable broadband connection, the ability of organizations to reach and serve their communities remains limited.

This reality was laid bare by the pandemic and restrictions on the ability to deliver programs in person. When it comes to the day-to-day needs of charities, they will need to be able to gain access to new technologies to help them with their work and to keep up with the demands that come with the digital age.

In closing, with the COVID‑19 pandemic, I would say that charities, especially those providing vital services to vulnerable individuals and communities, began expressing more directly what they needed from governments to survive and continue their work. Non-profit organizations have played a critical role during the COVID‑19 pandemic, but many are experiencing financial losses and facing increased demand for services. They need help to be able to continue providing critical programs and services.

Once again, we too often see the government disengaging from its mandates. In many cases, when we talk about people's needs, especially in the charitable sector, it should be the government's responsibility to provide the services that people need. Instead, they have to turn to a sector that often has fewer resources. In the end, it is the people in the various communities who suffer. I therefore encourage everyone to be generous, because that is a win-win for everyone in our society.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 6 p.m.
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Cambridge Ontario

Liberal

Bryan May LiberalParliamentary Secretary to the Minister of National Defence

Mr. Speaker, I appreciate the opportunity to take part in today's second reading debate on private member's bill, Bill C-240. As we know, the bill would provide an exemption from capital gains tax in respect of donations to charities resulting from certain arm's-length dispositions of real estate or private corporation shares.

At the onset, I would like to make it clear that I support the intent of the bill, which is to say that I support and encourage the making of charitable donations. However, the bill is problematic in how it aims to achieve this.

First and foremost among my concerns is that the proposed measure in the bill is regressive. This means that it would primarily benefit a particularly small class of high-income individuals rather than encouraging charitable giving by the broader public. More specifically, it would disproportionately benefit those who are holding private corporation shares or real estate other than a principal residence, which is to say, higher-income Canadians. That makes the bill unfair and puts it at odds with our government's goal of cutting taxes for the middle class while raising them on the top 1%.

For example, we have increased support for families and low-income workers through programs such as the Canada child benefit and the Canada workers benefit, which have helped lift over one million Canadians out of poverty since 2015, including 435,000 children. We have also increased the guaranteed income supplement top-up benefit for low-income single seniors and enhanced the GIS earnings exemption, and we are increasing old age security for Canadians aged 75 and older in July 2022.

We will continue to examine ways to improve the tax and benefit system to ensure that it is well targeted and fair. However, providing a tax break that disproportionately benefits the wealthy is not in keeping with this approach. What is more, the measure is poorly targeted at achieving the bill's goal of supporting charitable donations. The proposed measure could in fact result in a windfall gain to donors without actually increasing the amount of their charitable giving to charities. That is because donors could simply substitute their existing cash donations to charities with donations of private corporation shares and real estate in order to receive greater tax benefits.

Considering the significant flaws in this proposed legislation, it is important to bear in mind that the Government of Canada's tax support for charitable donations is already recognized as being among the most generous in the world. The primary mechanisms for delivering this tax support are the charitable donation tax credit for individuals and the charitable donation tax deduction for corporations.

For the 2019 tax year, individuals are estimated to have claimed over $11 billion in such donations through this provision, with federal tax assistance on these donations amounting to approximately $3 billion. At the same time, corporations are estimated to have donated $3.1 billion through this provision, with federal tax assistance of approximately $655 million.

In terms of the charitable donation tax credit for individuals, the tax assistance received through the CDTC more than offsets any paid tax on the income used to finance the donation for the vast majority of individuals who donate more than $200 a year. The CDTC provides a 15% credit on the first $200 of annual donations, and for most donors, the CDTC provides tax assistance at 29% on the portion of donations over $200. What is more, donors with incomes subject to the 33% marginal rate can also claim a 33% credit on the portion of donations exceeding $200 made from this income.

In addition to this federal tax assistance, all provinces and territories have charitable donation tax credits, with the average provincial credit being approximately 17%. In fact, total combined federal-provincial tax assistance averaged out to be around 46% on donations above $200 in 2019. For donors with taxable income in excess of the highest rate, tax assistance on donations would be around 50% in most provinces and as high as 54% in Nova Scotia and Alberta.

Moreover, the government already offers special incentives to encourage donations of important assets such as publicly listed securities, ecologically sensitive land and certified cultural property through an exemption from capital gains tax for most such donations.

When the exemption from a capital gains tax is included, the total tax relief provided on such donations can be as high as 81% when provincial incentives are added. The charitable donation tax credit can generally be claimed up to 75% of the donor's net income in a year. Unused donations can be carried forward for up to five years, or up to 10 years in the case of ecologically sensitive land.

Unfortunately, Bill C-240 may actually undermine the effectiveness of the tax incentives provided under the ecological gift program. That is because currently the only type of real estate donation that is eligible for the full capital gains exemption is ecologically sensitive land that has been certified as such by Environment Canada and donated to certain qualified recipients to ensure conservation.

Under the proposed measure, this targeting of support to donations of ecologically sensitive land would be blown wide open. That is because under this proposal, donations of the proceeds of the disposition of real estate to any charity would receive the same tax assistance, and this could introduce a perverse incentive for potential donors to simply sell their land to a third party, like a real estate developer, and donate the proceeds to any charity thus avoiding the ecogift certification and valuation process. In short, it could result in a donor getting the same tax benefit from turning ecologically sensitive land into a parking lot as they would get from donating it to an entity that would preserve and protect it.

The measure is also expected to be costly. In February 2021, the Parliamentary Budget Officer estimated that the cost of this measure to the federal government would be approximately $778 million over five years. That is a lot of money to dedicate largely to wealthy Canadians at a time when we are working to rebuild from the impact of the COVID-19 pandemic.

Supporting Bill C-240 would almost certainly increase the pressure on government to also provide special exemptions for donations of other types of property, such as virtual currency or cash gifts made after tax income.

Such tax changes would ideally be undertaken through the budget process, which enables the government to fully consider trade offs, balance priorities and undertake new fiscal commitments only to the extent that they are affordable. A private member's bill like Bill C-240 does not afford us that scope.

These serious shortcomings must be weighed against the generous and effective incentives for charitable giving that are already in place to encourage people to donate more to charities across Canada by reducing the after-tax cost of giving. Having done so, our government simply cannot lend its support to this private member's bill.

I am thankful for the opportunity to make that and my position clear on this issue.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 5:55 p.m.
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Conservative

Dan Mazier Conservative Dauphin—Swan River—Neepawa, MB

Mr. Speaker, I am pleased to rise today to speak to Bill C-240, an act to amend the Income Tax Act.

I would like to first commend my colleague from Charleswood—St. James—Assiniboia—Headingley for introducing this important bill in Parliament. I know my fellow Manitoban has done some tremendous work over his personal and professional life to improve his country. Bill C-240 is an addition to his great work. It is for those reasons that I am proud to call him my colleague and seatmate in the House of Commons.

Charities contribute immensely to the social, cultural and economic well-being of Canada. There are over 85,000 registered charities in Canada that collectively employ 2.4 million Canadians and contribute 8.4% of our nation’s GDP. However, the reality is that charities have experienced some of the most devastating impacts from the COVID-19 pandemic. When charities are hurting, so are Canadians.

In a previous debate, my colleague noted that Canadian charities lost $10 billion during the pandemic alone. That is $10 billion less for the community foundations that improve the towns and cities we call home. It is $10 billion less for the education charities that grow young minds and provide hope for a better future. It is $10 billion less for the wildlife charities that lead critical research and deliver habitat conservation. It is $10 billion less for the arts and cultural charities that fuel vibrant communities. It is $10 billion less for the food banks that so many Canadians now depend on.

Now with a cost-of-living crisis sweeping across our country, I fear that charities will continue to suffer from the reduced disposable income available to Canadians. It was just yesterday when the Bank of Canada significantly raised interest rates in an attempt to control record inflation. When Canadians are paying significantly more in debt payments, they cannot afford to donate to local charities at the end of the day.

Canadian charities have filled many gaps in our society that government could not fill. I think of the Community Foundation of Swan Valley, which recently contributed to early learning centres in Swan River. I think of the Touchwood Park Association in Neepawa, which contributed immensely to providing opportunities for individuals with disabilities. I also think of the Dauphin & District Community Foundation, which continues to support recreational services in the parkland region. I could speak endlessly to the thousands of projects and initiatives that charities are responsible for in my constituency alone, but now is the time for the government to step up and support Canadian charities.

Bill C-240 would significantly help Canadian charities through a simple change to the Income Tax Act. Bill C-240 would amend the Income Tax Act to waive the capital gains tax on the proceeds from the arm’s-length sale of privately owned shares or real estate when those proceeds are donated to a charity. This change would directly fuel a significant amount of new donations to Canadian charities year after year.

Imagine a local business owner, an accountant, for example. An accountant owns a practice in their local community, and after years of hard work, the accountant decides to retire and sell the business. The owner sells the business for a $100,000 in profit and chooses to donate a portion of the sale to a favourite local charity.

Under the current Canadian legislation, the accountant would be subject to a significant tax on the profit of the sale. In this case, the accountant would have to pay a capital gains tax of $25,000, assuming the absence of an exemption. This means the business owner would have $25,000 less to donate to a local charity, and the government would have $25,000 more to spend on who knows what.

Bill C-240 would eliminate this tax bill if the accountant decided to donate the proceeds to a Canadian charity. The accountant would then have a choice between sending the money to the government or donating the money to a Canadian charity. I hope we can all agree that money is better spent when it is used in our local communities, as opposed to being sucked away in the black hole of government.

The private sector can play a key role in supporting the work of charitable organizations, and Bill C-240 would enable it to do this. Too often, governments believe they have the answers to all of our problems, when in reality the citizens of our country are more than capable of addressing the needs of society.

The independent Parliamentary Budget Officer has reported that Bill C-240 would increase charitable donations by nearly $1 billion over a period of five years. That is a significant number. Members of the House have an opportunity before them to forever increase donations to Canadian charities. I see no reason why they would oppose such a piece of legislation.

Thankfully, this concept is not a new one. Previous Liberal and Conservative governments have initiated great work on this idea. The capital gains tax on gifts of publicly traded securities to Canadian charities no longer exists because of government action. Bill C-240 attempts to further this initiative with the exemption for shares of private companies. I can assure members of the House that there are many business owners who would rather give their money to charity as opposed to the government if they had the choice to do that.

This bill would not incur any new government spending. It is simply taking the tax money that was on its way to the government’s coffers and putting it into Canadian charities. As the PBO report showed, for every one dollar the government forgoes under Bill C-240, approximately $1.26 goes to charity. This is a very noteworthy benefit.

As an MP who proudly represents a rural region, I would be remiss not to mention the particular importance of charities in rural Canada. Charities are the foundation to the well-being of small and rural communities. It is very common for Canadians living in small towns to contribute to multiple charitable organizations. The limited services available in rural and remote communities emphasize the important role that charities have in supporting the people within them.

Philanthropy is alive and well in rural Canada. Rural Canadians step up to help their neighbours and communities when needed. Charities turn this mentality into results. It is for reasons like this that I have no doubt Bill C-240 would have an amplified impact in rural Canada.

In conclusion, Bill C-240 would directly support more than 85,000 registered charities in Canada at a time when they need support the most. It would incentivize more Canadians to increase support for the charities of their choice.

There is a reason that so many high-profile charities and non-profit organizations have supported Bill C-240. I encourage members of the House to speak directly with charities in their local ridings to hear what this bill means to them. If they do so, they will hear the stark realities that Canadian charities are facing and the importance of creating an environment that incentivizes more giving.

Once again, I would like to thank my colleague from Manitoba for introducing this important piece of legislation. I was proud to jointly second Bill C-240 and can assure him that I will be in voting in favour of this legislation. I encourage every other member of the House to do the same and send this bill to committee, where it can be further studied. As parliamentarians, I believe we should hear expert testimony on this legislation to better understand the positive impact it would have.

Canadian charities have supported so many of us in so many ways. It is time for us to support them. Bill C-240 would enable us to do that.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 5:50 p.m.
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NDP

Rachel Blaney NDP North Island—Powell River, BC

Mr. Speaker, as was said earlier, we are here today to debate a private member's bill, Bill C-240, that really focuses on exempting real estate and private corporation shares from capital gains tax when the proceeds are donated to charities.

I have worked in charities for a good part of my life. I really appreciate and respect the profound work that these organizations do in our communities. Whether it be helping newcomers to Canada, which was the charity I was a part of for eight years of my life, whether it be helping people who are looking for opportunities in terms of employment, or whether it be organizations that support people who are struggling in ways so profound that we cannot imagine in this place, they do profound and important work. When I look at Bill C-240, I am a little disappointed. There is so much that could be done to support charities, but the bill would do such a small portion, and it would really allow the wealthy of this country more control of where their tax dollars end up while requiring other Canadians to make up the difference of that tax bill. I think that is something we need to reflect on.

We know that, across the country, the ultrarich are not paying their fair share. The top 1% earners across the country are not paying their fair share, and everybody else is. Everyday folks such as those across my riding of North Island—Powell River are paying their fair share.

In my riding, for example, I think of the Comox Valley Ukrainian Cultural Society. Its members are working so hard, because their family members across the sea are suffering profoundly. One of the things they are doing is having regular rallies. People are donating to the cause, and they are helping out in every way they can. Not too long ago, I was at an event. One of those incredible volunteers stood up and talked about their plan to cook perogies and some traditional food that they would sell to raise funds, because they wanted to make sure that they did all that they could.

I think of the Hardy Bay Senior Citizens' Society, whose members really do a lot of work. They work with over 200 people in the community, and they have a huge membership. They also support many people, such as by serving food to the elderly, especially during COVID. These folks were out there making sure that people who had any mobility issues got the supports they needed. They took food to their homes and supported them in every way they could.

I think of the North Island Seniors Housing Foundation. This organization is one that I am profoundly proud of and am actually a member of. What I know is true is that this federal government does not support housing for seniors, and rural and remote communities across this country are really struggling to keep seniors in their communities. Seniors are coming out and saying, “We need housing that will let us stay in our community where we have our social infrastructure, and where we have all the people we know here in the community who will help us.” They do not want to be sent away, which is what is happening right now. We are seeing elderly people who, as they age, instead of staying in the warm companionship of their community, are being forced far away because that is where the accessible housing is. They lose all of those connections.

I think of the Campbellton Neighbourhood Association in my neighbourhood of Campbell River. It is doing profound work to make the community and that area more recognizable, acknowledging the history of it in our community and really showcasing the spectacular opportunities that are there. I also think of PRISMA in Port Hardy, which does amazing work in bringing international musicians to our region and really celebrating the beauty of music in our community.

When I look at the bill before us, it would not do what I would like it to. It really focuses on making sure that the ultrarich get another tax break. I do not know how many they need. I cannot believe that we are spending our time trying to find easier ways for them when we know how many people are suffering, especially with inflation. We know that people are looking for help. They are living paycheque to paycheque and are not able to get ahead. Even now, it is getting harder and harder for them. They are going to the places where there are food banks and where there are opportunities. We need to find ways to support those organizations.

The bill is a small one, and would not actually address those areas of concern across the country. Again, it would allow the very wealthy, who are able to give away a substantial amount, to decide what charities are valuable instead of really looking at what is happening across our country and making sure that the supports go where they are desperately needed. We know that half of the top 10 billionaires have foundations in their family name. That comes from Canadians for Tax Fairness.

Although charitable organizations perform valuable work, they are a poor replacement for adequately taxing the rich and can reduce tax revenues by more than they distribute. We need to look at this critically.

I will not be supporting this bill, and I hope we will have more meaningful discussions about how the people in this country and the charities that serve us so well get the supports they need to do the work they must do to support everyday Canadians.

Income Tax ActPrivate Members' Business

June 2nd, 2022 / 5:40 p.m.
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Bloc

Gabriel Ste-Marie Bloc Joliette, QC

Mr. Speaker, it is an honour to rise to speak to Bill C‑240, which was introduced by the member for Charleswood—St. James—Assiniboia—Headingley.

I had the opportunity to sit with him on the Standing Committee on Finance. All of his interventions were a testament to his commitment, diligence and thoroughness. This bill is no different.

Bill C‑240 is the latest version of Bill C‑256, which was introduced during the previous Parliament and was, itself, a newer version of a measure that the Harper government had presented in its last budget in the spring of 2015. This measure unfortunately never took effect because the Liberals withdrew it when they came to power.

Bill C‑240 would amend the Income Tax Act to provide an exemption from capital gains tax in respect of certain arm's length dispositions resulting from the donation of real estate or private corporation shares to charity. Bill C‑240 would apply to gifts of real property if the donation is made to a qualified donee within 30 days of the disposition of the property to an arm's length third party.

We at the Bloc Québécois naturally support the principle of Bill C‑240. I first heard about this principle from the former leader of our party, Gilles Duceppe, who put me in touch with Mr. Johnson, who is sort of the driving force behind this bill. I had a chance to discuss the principle with him on a few occasions. I also had the opportunity to talk with the member for Charleswood—St. James—Assiniboia—Headingley about all of Mr. Johnson's work and his commitment to this issue.

Coming back to the principle of Bill C‑240, right now, when a taxpayer donates a building or privately held shares to a charity, the taxpayer is presumed to have disposed of it at fair market value and must pay tax on the capital gains they have earned. Then, they receive an official receipt for the amount of the donation, also at fair market value.

Since a wealthy taxpayer's tax rate is generally higher than the tax deduction associated with a charitable donation, which is capped at 75% of net income, the taxpayer ends up paying some tax on their capital gains, even if they did not actually pocket the gains.

Under Bill C‑240, all real property would be subject to the same tax provision that already exists for ecologically sensitive land that is donated, for example, to nature conservation organizations. Since all charities provide valuable services to the community, we believe it is only fair that the donations they receive be treated in the same way for tax purposes.

Also on the subject of fairness, donations of shares in private companies would now be treated in the same way as donations of shares in publicly traded companies, which are already exempt from capital gains tax. At first glance, this seems fair.

As I said, the Bloc Québécois supports the principle. However, this bill needs to be studied closely in committee since it raises questions about both effectiveness and fairness.

With respect to the effectiveness of providing funding for charities, the Parliamentary Budget Officer has estimated that passing this bill could result in the government losing out on $775.5 million in revenue over five years.

In return, however, donations of real estate and shares in private companies would increase from $2.9 billion to $3.9 billion. That means the government would be paying $775 million to generate an additional $981 million in donations.

However, it is not clear whether these $981 million in donations of real estate and private corporation shares would be entirely new donations. It is possible that some of them would have been made anyway, but in some other form. The elasticity model used by the Parliamentary Budget Officer to assess the impact of the bill does not make this clear.

If some of that $900 million in donations would have been made anyway, it is possible that the measure will cost the government more than it brings in for charity. That is something that the committee will obviously have to seriously consider.

Also, the $775 million over five years in lost government revenue is quite substantial. According to the government's tax expenditure statement, the capital gains tax exemption for donations of shares in publicly traded companies represented a $105 million shortfall in 2021. Adding private corporations and real estate would increase that by 150%. According to the most recent data I could find, total charitable donations deductions were about $4 billion in 2021: $3.2 billion for individuals, and $725 million for corporations. All of this should be taken into account when the bill is considered in committee.

There is also the issue of tax fairness. The reason we have tax credits for charitable donations is to recognize the public value of charitable organizations and to elicit donations. Anyone who makes a donation gets a receipt that will reduce their taxable income. If the tax credit is to fulfill its role, it must be neutral, no matter the nature of the gift. If some donations generate greater tax benefits than others, the tax credit will incentivize certain taxpayers to structure their affairs with tax avoidance in mind, rather than eliciting more donations. We must, at all costs, prevent this from becoming a tax avoidance technique.

Consider the relationship between the capital gains exemption and the depreciation of a property. Every year, the owner of an income property can deduct a portion of the value of the property from their income during the time they own the property. At the same time, as the book value of the property continues to diminish, the capital gain realized at the time of sale is higher.

With Bill C‑240, this capital gain would become tax exempt. Will the taxpayer have to pay back the amortization tax deduction that they received while they owned the property? If so, that is fair. If not, Bill C‑240 might open a tax loophole for those who invest in real estate. That is something else that will have to be looked at in committee.

Given that we know that the price of housing is skyrocketing, a measure that would encourage investors to outbid everyone else does not seem optimal to us. However, in our opinion, all of this could be resolved in committee. This does not change the Bloc Québécois's support for Bill C‑240 at second reading stage. In 2019, the special committee on the charitable sector in the other place concluded that the proposed measure in Bill C‑240 was positive overall and recommended adopting it.

Once again, I want to thank the member for Charleswood—St. James—Assiniboia—Headingley for his bill and all his work as a parliamentarian. I also want to acknowledge Mr. Johnson's commitment and all the work he has done for this cause. I look forward to Bill C‑240 being studied in depth in committee.

The House resumed from March 22 consideration of the motion that Bill C‑240, An Act to amend the Income Tax Act (donations involving private corporation shares or real estate), be read the second time and referred to a committee.

CharitiesStatements by Members

April 25th, 2022 / 2:10 p.m.
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Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Mr. Speaker, I rise today in support of my private member's bill, Bill C-240, the supporting Canadian charities act. The pandemic has inflicted tremendous losses on charities and their ability to provide much-needed services to Canadians. The situation is bleak. Canada's 85,000 registered charities have lost billions of dollars during the pandemic, at a time when services are needed more than ever. Charities are now facing demands for their programs and services that currently exceed their capacity to deliver.

Bill C-240 could help to solve this problem by amending the Income Tax Act to waive the capital gains tax on the proceeds from the arm's-length sale of privately owned shares or real estate when those proceeds are donated directly to a charity. This simple change to the Income Tax Act would raise over a billion dollars for charities over the next five years.

When charities are hurting, people are hurting. Let us do something about it. I ask every member to support this bill. Working together, we can get the charitable sector back on its feet and Canadians back on theirs.

Income Tax ActPrivate Members' Business

March 22nd, 2022 / 6:20 p.m.
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Conservative

Larry Maguire Conservative Brandon—Souris, MB

Mr. Speaker, it is my privilege to be able to contribute to the debate. I want to commend my Manitoban colleague, the member for Charleswood—St. James—Assiniboia—Headingley, for taking the initiative to present this private member's bill, Bill C-240.

Also, I would try to convince other Manitoban colleagues who have spoken on this tonight to make it a bit more of a priority than was just indicated by my NDP colleague, because this really does affect every family in Canada and Manitoba. I agree with him about the charitable status of Manitoba being as great as it is.

My colleague was a Winnipeg city councillor and now is a member of Parliament and has always been driven by results. I am extremely proud to call him a friend, not only for that purpose but for others. When he sees a problem, he looks for a solution. As an elected official, that is exactly the right mindset to have. I also want to thank him for his efforts to keep the spotlight on these very important changes to the Income Tax Act and how they will positively impact countless charities.

Charities, both big and small, are woven into our communities. From medical research to the arts to recreation to food banks to museums and heritage to housing to education, these charities are integral to every aspect of society.

We both come from a province that is known for the philanthropic efforts of its residents and businesses. When I look around my constituency, multiple buildings at the university, the Assiniboine Community College, the recreation centres and many others were built with the help of private donors. Entrepreneurs, businesses and individuals rose to the occasion to support their communities. Of their own free will they decided to donate to the causes nearest to their hearts. They decided to give back to the community that helped them prosper.

The essence of this bill is very simple, but its impacts are enormous. It will result in more money ending up in the hands of charities. By eliminating the capital gains tax on charitable donations of private company shares and real estate, it will result in millions more dollars going directly to charities, rather than as taxes to the government. From the donor’s perspective nothing will change. The same shares are being sold. The only difference is the level of tax the government would collect. From the charity’s perspective, it will now receive the total sum of the private shares being sold.

We are cognizant that the pandemic has been hard on charities. We know donations are down and demand for charities has gone up. According to the latest available data, donations declined by 10% due to the pandemic, and close to half of all charities are struggling. These are troubling statistics.

As members of Parliament, the onus is on us to propose solutions from all sides of the House. I believe Bill C-240 is a responsible and appropriate response to the challenge that charities are currently facing. It is projected to result in roughly $200 million being directly given to charities from across the country on an annual basis. As a Conservative, I am always keen on advancing ideas that are market-driven and sustainable over the long term.

This legislation does not expand the size of government, nor does it burden charities or individuals with more red tape. It does not reward one charity over another. It does not pick winners or losers. It simply unlocks and leverages the private sector’s philanthropic spirit. This legislation will help our charities prepare for the future. As we have seen in the last two years, a little help can go a long way. Of course, we are presently seeing that with the situation in Ukraine.

That is a win-win and that is exactly why I am supporting this legislation. As parliamentarians, we must advocate for policies that harness ingenuity. We can give people the tools and incentives to help bind communities together. We can make our communities and charities stronger and more resilient. We can empower individuals by letting them take the reins of their generosity and philanthropic efforts. It is about celebrating the value of local communities and charities, and it is a recognition that those at the grassroots level have the capacity to respond almost immediately to the needs and causes they feel passionate about.

It is in that spirit that Bill C-240 delivers in spades, and it respects the decisions made by donors themselves to support the charity of their choice. Not only am I confident of the aims of the bill, but we also have ample evidence to suggest it will accomplish its intended goal. It builds on the success of the removal of the capital gains tax on gifts on limited securities, which was introduced in 2006, as my colleague mentioned earlier. Since that common-sense change, charities have received donations of listed securities of over $1 million every year, and that is for 16 years. It is a tremendous amount of money that is helping do the good work that charities do. It is time to make the Income Tax Act equitable and apply those previous changes to the sale of private shares.

There is no logical argument to oppose the bill, although we have certainly heard from those in government who fear the loss of tax revenue and people using tax loopholes, and have heard that again today from some of my colleagues across the way. These were the same arguments made by the finance officials for my private member's bill last summer, and when presented the evidence at committee, I was pleased to see numerous Liberal MPs vote for the legislation at third reading. I hope they will consider that in this particular bill as well.

I believe if my Liberal colleagues carefully scrutinize the legislation for themselves, they will quickly determine that it was drafted with those concerns in mind. There are safeguards built into this legislation as well, such as the requirement of having to sell the shares to someone at arm's length. Also, the sale of those shares must be at fair market value. These are sensible clauses built into the bill to ensure that the actual disposition of the shares occurs. Moreover, this ensures that shares are not sold at an inflated price to exaggerate the charitable donation tax credit.

My colleague from Charleswood—St. James—Assiniboia—Headingley deserves credit for how well thought out this legislation was designed. As he stated in his speech, though, we all owe Donald Johnson a tremendous round of applause for his passionate advocacy over the years. He has spearheaded these legislative changes for as long as I can remember. Like clockwork, every year members of Parliament would get his budget submission on the proposed changes contained in this bill. Mr. Johnson has been tireless in his efforts to get these important changes to the Income Tax Act, and I am thrilled we are speaking about them here today. I want to quote Mr. Johnson, who wrote a column published in the Toronto Star. He said:

Charities across Canada have been recommending that the government unlock more private wealth for public good. The best way to do that is by removing the capital gains tax on gifts of private company shares and real estate which, it has been estimated, will increase charitable donations by $200 million each year.

That would do a lot of good in Canada, particularly at this moment.

In closing, I want to urge my colleagues and other parties to support this legislation. Let us pass the bill, send it to committee and bring in the charities and tax experts. I also recommend that my colleagues reach out to the charities in their constituencies and ask if they support Bill C-240. Call the volunteers and organizers and ask them if they believe the aims of this legislation will result in further dollars being donated to charities. I know that if my colleagues do, they will find universal support for the bill.

I want to congratulate my colleague from Charleswood—St. James—Assiniboia—Headingley once again for bringing this important bill forward. I am honoured to call him a friend, and he is an integral member of our Manitoba caucus. I am proud to second the bill and speak in favour of it. I pledge to do all that I can to see it pass.

Income Tax ActPrivate Members' Business

March 22nd, 2022 / 6:15 p.m.
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NDP

Daniel Blaikie NDP Elmwood—Transcona, MB

Mr. Speaker, I am pleased to rise to contribute some thoughts to this debate on Bill C-240. It is a bill that seeks to give the same treatment to private shares in real estate as is currently enjoyed for public shares when they are donated to a charity, and specifically to give a break on the capital gains tax for those assets when they are donated to a charity.

I want to start by recognizing the tremendous culture of giving we see in Canada, but I want to particularly single out Manitoba, as it is a province where people are known for their charitable giving and for sustaining charities that do all sorts of good work in our communities. This is particularly true when we are talking about the pandemic and the serious problem of homelessness, which existed before the pandemic, to be sure, but has worsened significantly during the pandemic. That is just one example of an area where charities do an incredible amount of work. Whether it is Siloam Mission, Just a Warm Sleep or the Main Street Project, Winnipeg certainly has benefited from the work of those organizations, which receive some government funding, but also depend, really, on charitable giving to sustain themselves and do the good work they do.

I think of L'Arche in Elmwood—Transcona. It operates in many places but traditionally has had a very strong presence in Transcona that goes beyond the support of housing for its clients. It includes social enterprises like the L'Arche Tova Café on Regent Avenue in Transcona, which is not far from where I live. It has been a wonderful gathering place for the community and helps build life skills for the folks who are part of the L'Arche community.

I could go on and talk a lot about all the various organizations that benefit from charitable giving, but I want to spend some time talking about the bill.

With respect to the bill, we on the NDP side of the House are concerned about the fact that there are already many ways for the wealthy to direct their wealth to causes they support. We are in a time when there has been a need for massive public expenditure to meet the needs that are faced by many Canadians. If we are to do that best, it means trying to coordinate behaviour. It means trying to make sure that when we are talking about wealth redistribution, we are doing it in a way that allows us to ensure the services people genuinely need, particularly those offered on a universal basis and on a basis of need, are adequately funded.

Frankly, this is an issue about which reasonable people can disagree, but we are in a moment when the thrust of our work ought to be on how we manage our resources collectively and well through democratic processes. Our time is not best spent figuring out how to make it possible for the wealthy to direct their personal wealth toward causes they think have value. Often members have heard the New Democrats talk in this place about the need to redistribute wealth, and we should do that by ensuring that the wealthy are paying their fair share.

If it were the case that the things we need in this moment were already adequately funded and that the wealthy were already paying their fair share, then I could see a pathway to a conversation about how we make it easier for them to donate directly to charities of their choosing. However, we are in a moment when, if we take seriously the question of public finance and the role the government needs to play in the pandemic recovery and facing down the challenges of climate change, it is not the best time to be talking about how to promote more complexities within the tax code that give tax breaks to individuals who are fortunate enough to have the kind of wealth in the first place to be able to donate.

It is not the typical donor who is donating in these ways. Often when we think about giving to a charity, we think about supporting different kinds of drives, like food drives for food banks, picking up a bit of food at the local grocery store or buying perogies. There is a church on the corner of Munroe and Watt that is currently doing an excellent fundraiser. It is mobilizing the great expertise in the faith community to make delicious perogies to support the people in Ukraine who are in desperate need of help. That is often what we think about when it comes to charitable giving. This is a select group of donors who may have a lot to give, but our conversation should be centred on how we redistribute wealth and how to do it fairly and democratically without creating more opportunities within the tax code for the very wealthy to direct their wealth to things they choose rather than to things we deliberate about in this place and in other appropriate places.

As I said, there is room for this kind of conversation, but for us it is not a priority of this Parliament to get it to committee to delve further into it. We believe there are other priorities the finance committee should have in this Parliament that very much bear on the kinds of supports and services that Canadians need. We would be better off talking about those directly and ways to finance them than talking about modifications to the tax code to allow the wealthiest among us to make those decisions for themselves.

Income Tax ActPrivate Members' Business

March 22nd, 2022 / 6:05 p.m.
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Bloc

Jean-Denis Garon Bloc Mirabel, QC

Mr. Speaker, I thank my colleague for introducing this very interesting bill. I am perhaps one of the few people in the House who really enjoy studying taxation.

I want to take a moment during my speech to acknowledge the people of the Sainte-Scholastique sector of Mirabel, who continue to fight to have the Minister of Transport approve the Synergie Mirabel project. This project, which the Liberals are blocking, would provide housing for 40 seniors who are losing their independence. Again, the Liberals are blocking the project.

I am talking about this because today we are debating the taxation of charities, the taxation of philanthropy. I want to show how important our organizations are to our families and to our community and social fabric, not only in my riding of Mirabel, but also elsewhere in Quebec.

I was in Blainville last week and I visited Moisson Laurentides, an extraordinary organization that collects food to feed thousands of families and thousands of children, people who do not have an easy life, people who live in extraordinarily difficult situations. This organization helps our food drives, and that shows how important charitable organizations are.

Sometimes, in people's minds, charitable donations are not truly generous because they are simply used for tax credits. However, to a person, a business or an estate and its beneficiaries, that money is a real donation, even if it provides a small tax benefit in return, because those who make the donation are giving up their material goods and financial advantages that could have been used for their own benefit. We must therefore commend people who donate, people who participate. We need these organizations and I say thank you.

There are currently tax measures for charitable organizations. We know the principle of charitable giving. Most people give a cheque or cash to an organization. In return, they receive an official receipt that will give them a small deduction on their tax return.

There are also other ways to make donations, including by donating shares of publicly traded companies. Few people do that, but these are often very valuable donations to endowment funds for our universities, our hospitals or very large organizations. These donations are a huge help.

Donating shares has two tax implications. First, at the time of transfer of the value of the shares, the donor receives an exemption from paying the capital gains tax because they will not personally benefit from the donation. Second, they will receive an official tax receipt.

Not all businesses are incorporated, and neither are all sources of capital. There are different types of businesses. If someone owns their own business, if an individual is a partner in a small business or if an individual owns a building and decides to donate the value of the building, one of the two tax benefits is lost, the capital gains tax exemption. However, an official tax receipt is issued.

There are other types of donations that provide tax benefits, including donations of ecologically sensitive land, which we discussed.

I will now invite my colleagues opposite to listen. The bill seeks to achieve tax fairness in response to the following question: Why does capital in a given legal form provide a tax benefit when donated that is greater than the benefit that would be provided by the same capital, in the same amount, but in another legal form?

I think that this bill is worthwhile. I think it is worth studying it in committee because this is about revenue neutrality. The same amount of money, donated in two different ways, must be treated exactly the same way by the tax authorities.

I understand that we are talking about significant amounts of money. I think it is still worthy of study, but I remind those who are studying the cost of this new tax measure that the federal government already provides very significant tax exemptions to a great many organizations. I would even tell my colleagues across the way that their political donors received tax credits. We therefore really need to study this matter in committee.

We must consider costs and the issue will be studied in committee. The Parliamentary Budget Officer says that the measure will cost $777 million over five years. Members on the other side of the House sometimes forget that they need to divide by five, and I know that it is not easy.

These are tax expenditures, revenue the government is foregoing. This $777 million in tax expenditures will generate $981 million, which is close to an additional $1 billion in donations to our charities. At first glance, the cost to the government is lower than what would be donated.

True, that is not a very big gap. True, the Parliamentary Budget Officer told us there was some uncertainty and that the numbers are not 100% clear. However, when it comes to statistics and estimates, nothing is certain. For example, as recently as yesterday, the Bloc Québécois thought there was just one party in government, and now look at what happened.

Things can change very fast, especially seeing as, in this market, most of these donations will be made in the form of property, and capital gains on property change very fast. We have been seeing higher capital gains and higher property values. That gap could widen.

My suggestion would be to have the Parliamentary Budget Officer appear in committee. We have to study the measure, look at the numbers and analyze the impact of this measure. We are all reasonable people who can talk about these things.

It needs to be socially acceptable, because the rationale behind these tax credits for charitable donations is that perhaps governments have less need to collect taxes on the money that organizations give to serve the community, our hospitals and our universities. That can also cause distortions.

This money goes to some good causes, but it also goes to religious organizations and all kinds of other organizations that do not always correspond to the values espoused by our democratically elected governments. Social acceptability criteria are needed, and they do exist. We will examine them, but at first glance, I think that, on the simple principle of tax neutrality and fairness, if anyone in the House thinks that it is normal for existing charities to be entitled to the current tax treatment, it would be entirely reasonable to consider expanding it. We could also consider making amendments.

People from the Department of Finance will have to be invited to appear before the committee, because the bill was introduced under the Harper government. I would remind members that the Liberals decided not to implement it in 2015. The bill was reintroduced in the previous Parliament, so this idea has been around for a while. As we know, Mr. Johnson promoted this idea, so it has been around for a while.

We will have to ensure that the terms and conditions create true revenue neutrality. I cited the example of buildings for the member for Charleswood—St. James—Assiniboia—Headingley, who was kind enough to discuss his bill with me beforehand. As we know, when someone owns a building, over time there are profits, revenues and expenditures associated with it. A profit is made. Every year, the owner is entitled to a CCA, or capital cost allowance. Every year, this is artificially applied. When the value of the building increases, that decreases profit and taxes. When the amount associated with the liquidation of the building is donated to a charitable organization, the taxes are paid back. However, in the meantime, the owner will have indirectly benefited from an interest-free loan from the government for 5, 10, 15 or 20 years, which will have yielded income and a return that at certain times may have exceeded the value of the capital gain on the building expressed as a percentage.

Thus, there may be other tax benefits associated with these types of assets. We will have to study this, because when shares in a publicly traded corporation are donated, all the profits associated with said company's entire basket of investments are included in the donation, for example. We will have to look at all these aspects.

Taxation is complex. There are a lot of ins and outs. What is more, there are terms to discuss.

Again, I think this is a good initiative, that it is supported by our organizations, and that it will increase donations. I think it would be premature to turn our backs on Bill C‑240 and simply say no to it without studying it in committee.

It was a great pleasure to discuss this with the member for Charleswood—St. James—Assiniboia—Headingley. I know that he is reasonable and open. He knows his bill and taxation. I know that we will be able to discuss various ways of improving the bill. We could talk about other types of assets that may be on the table one day. I know that we will be able to do so calmly and intelligently in a spirit of tax fairness and neutrality.

Income Tax ActPrivate Members' Business

March 22nd, 2022 / 5:40 p.m.
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Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Mr. Speaker, I rise today in support of my private member's bill, Bill C-240, the supporting Canadian charities act. The pandemic has inflicted tremendous losses on charities and their ability to provide much-needed services to Canadians. The situation is bleak. Canada's 170,000 registered charities have lost $10 billion during the pandemic at a time when the help provided by the charitable sector is needed more than ever. More than four in 10 charities are still facing declines in revenue. The average revenue decline is 44%, and more than half are dealing with revenue declines of more than 40%. Some 42% of charities are facing demands for their programs and services that currently exceed their capacity to deliver.

Arts and cultural organizations have been particularly hard hit, with an average revenue decline of 59%. Many charity workers are suffering from pandemic-related stress and mental health issues. Sadly, many of these amazing organizations may not survive.

Charities employ more than 2.4 million Canadians and account for 8.4% of this country's GDP. Under normal circumstances, each year charities raise $18.5 billion in donations and contribute $169 billion to our GDP. The charitable sector fills the gaps that cannot be fully met by government or by the market and is a key partner in the delivery of services including health care, education and social services. Sadly, nearly 40% of charities have laid off paid staff or reduced staff working hours, seriously impacting the ability of the sector to provide important services.

One study by Imagine Canada forecast a loss of private sector donations of between $4.2 billion and $6.3 billion, with estimates of between 117,000 and 195,000 job losses. When charities are unable to deliver services and programs, it means that individuals do not receive the support they need. That is the bottom line. This could be a person looking for a meal at Agape Table in Winnipeg, a child with a disability in need of special equipment or specialized therapy, someone who is homeless and looking for a place to sleep on a cold winter night, a single mother who cannot pay rent or feed her children, a senior not taking life-saving medications, or a person in so many other situations.

Demand for such services is expected to continue to increase in the coming months beyond the ability of charities to service that demand. Arts, cultural and recreational organizations have also reported revenue decreases of as much as 71%. For health organizations, the decline averages 48%.

Bill C-240 would deliver long-term, sustainable funding to the charitable sector. Although the government has played an important role in direct funding of charities, with a simple change to the Income Tax Act, hundreds of millions of dollars in new donations could be raised for charities every year.

Simply put, Bill C-240 would amend the Income Tax Act to waive the capital gains tax on the proceeds from the arm's-length sale of privately owned shares or real estate when those proceeds are donated directly to a charity. The last time the government made such a bold decision was in 2006, with the removal of the capital gains tax on gifts of publicly traded securities. This has resulted in additional charitable donations of over $1 billion ever since. Tax incentives also already exist to encourage the donation of ecologically sensitive lands. This bill is the next step.

The example I like to use is of a retiring dentist who is selling his or her practice after many years and may now choose to donate all or a portion of the sale proceeds to a charity. That dentist would receive a waiver of the capital gains tax so long as the donation was made within 30 days of the sale. The value of the shares is established by an actual arm's-length sale in the marketplace. By using that practice, we avoid the valuation ambiguity of an independent evaluation or appraisal. For years, charities across Canada have been recommending that the government unlock more private wealth for public good. The bill provides us all with the opportunity to help charities by stimulating increased charitable donations from the private sector.

This bill would highly incentivize charitable giving at a time when it is most needed. It essentially incentivizes the redistribution of wealth to those who need it most. I submit that there is no better time to do this than now. It is estimated that this one change will increase charitable donations by at least $200 million per year. These additional donations would cost the treasury the capital gains tax revenue of roughly 25¢ on the dollar, which is roughly $50 million to $60 million per year.

One-time-funding programs like the community services recovery fund and emergency community support fund are important, but represent only a fraction of the charitable sector's needs at this time. The opportunity is now to deliver immediate relief to help Canadians without significant additional costs to a treasury that is already running historic deficits. Existing jobs would be saved. New, permanent jobs would be created, and urgently needed benefits would be delivered.

This is not a partisan debate. We all want to help charities. Charities from across the country have endorsed this bill. This broad support includes local organizations, such as the Grace Hospital Foundation in my own riding in Winnipeg, and extends to some of the largest national charitable organizations. This includes the Special Olympics, Imagine Canada, the Heart and Stroke Foundation, Diabetes Canada and many others.

All stakeholders in the charitable sector are supportive of this measure, as are the hundreds of thousands of small business owners who would like to give back to their communities. A full list of the supportive groups and why they support this bill is available on my website.

Removing the capital gains tax on gifts of private company shares and real estate is much more tax effective than direct government spending for charities because the cost is not borne by taxpayers alone. Rather, it is shared by the taxpayers and donors. Not one penny of the donated proceeds would benefit the donor, but would provide major benefit to recipient charities and those they serve. This initiative actually removes a barrier to charitable giving while immediately reducing the donor's wealth for the betterment of their communities.

The real beneficiaries are the people who are served by not-for-profit organizations, including hospitals, social service agencies, universities, and arts, culture and religious organizations. This measure was also recommendation 34 in the report of the Special Senate Committee on the Charitable Sector issued in June of 2019, which states, “That the Government of Canada...implement and evaluate a pilot project on the impact on the charitable sector of exempting donations of private shares from capital gains tax.”

I want to put on record that laws, as they relate to the charitable sector, are in serious need of modernization. The Senate report also made recommendations for the creation of a secretariat on the charitable sector. This home-in-government approach would provide a stronger framework for discussions and solutions between government and the sector on a wide range of issues.

In the 1997 budget, then finance minister Paul Martin cut the capital gains tax on gifts of publicly traded securities by 50% when donated to a charity. In 2006, then finance minister Jim Flaherty followed suit when he removed the remaining capital gains tax on such gifts. The Senate report quotes Ruth MacKenzie of the Canadian Association of Gift Planners noting, “that the elimination of capital gains tax on gifts of listed securities has been ‘enormously successful, resulting in billions of dollars in shares being donated to charities every year.’”

It is now time for the government to take the next logical step by exempting private shares and real estate. This idea was, in fact, included in the Conservative budget of 2015 by then finance minister Joe Oliver, but it never made it into law before the change in government.

I would be remiss in not giving a shout-out to a very special person many members are familiar with, Mr. Don Johnson who has advocated for this measure for decades. Mr. Johnson has said implementing this exemption would be the single most important and tax effective measure the government could introduce to significantly increase charitable donations every year going forward. Mr. Johnson was directly involved when Paul Martin reduced the tax and when Jim Flaherty reduced the tax, and now he has been advocating for this change all along as well.

Many members recently received a copy of his book, Lessons Learned on Bay Street. He sent a personalized copy to every single one of us. I am about halfway through it, and I can tell members it is an excellent and very interesting read. He is a fellow Manitoban and a recipient of the Order of Canada.

Mr. Johnson made his career on Bay Street and successfully advocated for the current application of this law on publicly traded securities, which resulted in billions of dollars for charities and non-profits. Today, I stand on his shoulders. He has been a tremendous resource for me, and I cannot thank him enough.

The bottom line is that when charities are hurting, real people are hurting. Let us do something about it. I ask every member to support this bill. Working together, we can get the charitable sector back on its feet and Canadians back on theirs.