Hello. I represent the Canadian Association of Gift Planners. I am accompanied by our Executive Director, Diane MacDonald.
We have over 1,000 members. Our expertise is in the area of planned giving and legislation respecting planned giving.
I am the Executive Director of the Jewish Community Foundation of Montreal and was previously a tax partner with Zittrer, Siblin, Ernst & Young.
Our association, CAGP, has three proposals, which we've outlined in our brief.
The first is the stretch tax credit. This was designed by Imagine Canada and has been talked about for a few years. As a nation, we are losing donors, which is troubling. More particularly, we are losing young donors, the young adults. Consequently, we have to change this movement and do something different. We have to change the paradigm, the agenda, and the discussion around the water cooler to civic involvement and charity. This requires leadership. We think this stretch tax credit can be one tool in moving Canadians to greater civic involvement, and this requires leadership from Parliament.
The second and third proposals we have are the capital gain exemptions on real estate and private company shares. When we're talking about private company shares, we're talking about something that's part of a unique system in the world.
The Canadian tax act is very unique, and how it treats corporations is unique. It motivates Canadians to create small businesses and put them in companies. They pay a lower rate of tax in that corporation. If they pull money out, they'll pay tax on dividends and salaries. But for the most part, if they don't need the money personally, they're going to keep it in that company and not pay that second round of tax. They're going to move it into holding companies. They're going to build wealth in their companies. That's different from the Americans.
So we need something to unblock that wealth—to move wealth from the wealthy to the public good—where a lot of it is in the hands of these corporations and holding companies. We believe this capital gain exemption on the transfer of private company shares to charities can be a great tool in providing that unblocking. This isn't for Bay Street. This is for coast-to-coast small businesses that have grown, that have done well, and that are the backbone of our economy, and whose turn it is to provide extra dollars to charity. We got that from the marketable securities from Bay Street; we got it from them, and they've done great. Now it's the others' turn.
Now, real estate is also another asset that is widely owned by Canadians across the country. Also, in some sense, there's an inability by some holders of real estate to dispose of it. The tax treatment is onerous because there is a tax shelter to real estate, and when you sell it, you pay back tax that you've saved. So sometimes they don't want to sell; they hold on to it. But we think the capital gain exemption is another way to unblock the movement of the value in real estate to charities. And when I talk about the movement of real estate, it's not the real estate; it's the cash.
At the end of the day, the CAGP, in examining these provisions and looking at it from a fairness point of view and the right way of doing it.... We've looked at the legislation currently in the Income Tax Act and we see that for gifts of non-arm's-length private company shares, sitting in the Income Tax Act today there are restrictions. The restrictions involve obtaining cash for those shares within a five-year period.
So we want to mirror the existing legislation used by CRA today, to their satisfaction, which indicates that for gifts of real estate or private company shares we have five years to monetize those gifts. If they are monetized within the five-year period, then that capital gain originally taxable on the transfer will be reversed and exempt. We want to use the same legislation.