Currently no separate fund exists. It's about to be commenced.
Evidence of meeting #29 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was housing.
Evidence of meeting #29 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was housing.
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
Currently no separate fund exists. It's about to be commenced.
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
We'll certainly do our part in it. What we're asking for is that changes to the Income Tax Act be equivalent to the mining industry and simply say that the federal government supports a tax-efficient accrual of those funds, so that as you set them aside in those savings, they're treated the same way as other qualified environmental trusts.
12:15 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
You just said accrual, which doesn't necessarily mean payment, so you want to take a deduction for something that you will be paying.
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
It's a payment in the future. You want to make sure you have.... This is how it would work, just as any other--
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
Great. The retirement savings plans or pension plans are kind of similar entities for which you're saying you want to make sure that the right responsibility is fully covered at the time it is necessary. Realistically, in this industry we are talking about something that is five, six, seven, eight decades away, but it's important to load-level the costs across energy consumers for inter-generational equity, and we think this is a fair mechanism that is being used in other sectors currently.
As I said, the recipients are the energy consumers, not the--
12:15 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I understand, but just to clear up what you're saying, if I make my contribution to my RRSP, I get a deduction. If I'm going to make it three years from now, I'm not going to get a deduction this year, even though, in all good faith, I expect to make it in three years. I don't think I deserve the deduction today. Are you asking me for a deduction? That's what accrual accounting is all about.
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
No, I'm sorry. I'm an engineer, so I probably misused that term. My apologies.
12:15 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I'm sorry, I am an accountant, so this is my--
12:15 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
All right, you can correct me on that. My apologies if I used the wrong term, but the QET function means that within the funds that are already set aside in savings, there is a tax advantage that rolls forward over many decades, so at the end of the reclamation period you have a fund that takes into account many decades of gathering of investment equity.
12:15 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you.
I have 30 seconds, so I am going to ask the Canadian Association of Gift Planners a quick question
Focusing on the transfer of real property, Ms. Mason, you suggested that we can do a transfer of real property and get the same deduction we would get if we were transferring a security. The problem has always been how to value that transfer of real property. Something you said was actually quite interesting. It's the first time I've heard it. Perhaps within 30 days of disposing of real property you can allow the individual to transfer to a charity. That might solve the problem.
12:15 p.m.
Canadian Association of Gift Planners
There were two mechanisms. One was just a direct transfer, and, generally speaking, the charity has the obligation to determine what the fair market value is, so the charity would be using appraisal mechanisms and that sort of thing.
12:15 p.m.
Liberal
12:15 p.m.
Canadian Association of Gift Planners
The onus is on the charity. Under the act the charity has to ascertain the value of the receipt they are issuing.
The other proposal we have is that if someone sells to any third-party purchaser and then donates the proceeds of the sale to charity, we're also saying they should have an exemption from the capital gains tax. But there the value is clearly set in the market, so they would have the sales proceeds in hand--
12:20 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
You're not asking that the real property be sold. These are two different ideas.
12:20 p.m.
Canadian Association of Gift Planners
They're two different ideas, because in some cases the charity would be happy to receive the piece of property because they might use it for a school or for other activities, building a transition home for teenaged girls and that sort of thing. For others it might be more appropriate for them to have cash.
12:20 p.m.
Liberal
12:20 p.m.
Bloc
Daniel Paillé Bloc Hochelaga, QC
I will continue in the same vein as Mr. Pacetti. You have some interesting recommendations when it comes to planned gifts. If I understand correctly, you would have someone over 65 with an assessed income create a trust fund solely for managing the money contributed to that trust fund. In the end, whatever is left in the trust fund upon the donor's death would go to the charity. You say that amount is assessed at 70% of its future value.
In that case, who would conduct the assessment? Once we get into this subject, those familiar with it know that we could discuss the matter at considerable length.
12:20 p.m.
Canadian Association of Gift Planners
Yes, we actually do charitable remainder trusts right now. There is actually a trust agreement, and in a trust you separate who's entitled to the income and who is entitled to the capital. The trust agreement provides that the only entity entitled to the capital is the charity or a number of charities. The income beneficiary could be the donor; it could be their child, or whoever. But when you calculate the value of the capital, because the donor is getting an immediate cash receipt--because they are divesting themselves of their capital--now we actually go and get an actuarial opinion to determine the present value, the value today of that gift in the future. That is what we do now. We piece it together. We're really looking for the mechanics in the act that say yes, this is a viable tool; this is how you do it. Right now we're kind of pushing it into the act. We think we can do it, and we know we can do it, but it would be best if there were more guidance, because then it would be a tool that more knew about.
12:20 p.m.
Bloc
Daniel Paillé Bloc Hochelaga, QC
Intentions are always good, but the fact remains that someone aged 67 or 68 who has had tremendous capital gains over a year could create a trust fund and benefit from tax deductions on 70% of the total amount. The charitable organization could then grant, through the trust fund, new deductions to that person. Under those conditions, some annual contributions become subject to tax again. It's a technicality, but it could well become a tax loophole that would allow for major capital gains over time.
12:20 p.m.
Canadian Association of Gift Planners
I understand, but I would dispute that characterization of it. The charity has to issue a donation tax receipt, so they're going to be very certain that they have full entitlement to the capital with no ability for that to be disbursed back. Under the act as it currently stands, charities are allowed to give funds only to qualified donees. So they could not, in any way, give back to the donor.
12:20 p.m.
Canadian Association of Gift Planners
The other thing is that the way we're doing them right now, which is what would be, I imagine, the situation going forward, typically the trustee is a third party such as a trust corporation.
It would have to be a very sophisticated charity that was willing to take on the legal and fiduciary responsibility for being the trustee of the trust. It could happen, but that's certainly not what we're seeing now in terms of these structures.
