Good afternoon, and thank you for giving the Association of Fundraising Professionals the opportunity to testify before you today on an extremely important topic of tax incentives for charitable donations.
I am the chair of the association's board of directors. I'm also a fundraiser and have my own personal experience with raising charitable dollars for philanthropic missions and with working with donors and philanthropists across the country.
AFP is a professional association representing individuals responsible for generating philanthropic revenues for charitable and public service organizations. We are the largest association of fund-raising professionals in the world, and we represent more than 30,000 practitioners worldwide, including more than 3,400 in Canada in 16 chapters across the country in every province.
Fundraising is an integral part of the charitable sector. It serves as the gateway that drives philanthropy. It develops and maintains relationships with donors and philanthropists who provide funding for education, social services, health care, medical research, and many other altruistic but extremely necessary functions in a civil society.
Fundraising complements government supports for charities and ensures the survival of the charitable sector when governments lack the budgetary means to help.
Through AFP we foster development and growth of fundraising professionals through training and education, and we promote high ethical standards in our profession. The charitable sector in Canada represents a major source of jobs and economic stimulus, with more than 85,000 registered charities, over 1.2 million paid staff, 6.5 million volunteers, and more than $190 billion in annual revenue. In addition, the sector holds a large amount in net assets.
The economy has taken its toll on the sector. Statistics Canada mentioned that Canadians donated $7.8 billion to charity in 2009, down from the previous year of $8.19 billion. We were very pleased to see that giving levels rose again to $10.6 billion in 2010. However, many charitable organizations are still reeling from the downturn and this was compounded by the fact that Canadians and communities were relying on their philanthropic services even more than before.
There is a need for new incentives to spur additional charitable giving, and we offer the committee two recommendations for consideration. The first is to increase the flow of charitable funds in the wake of the recession and encourage Canadians to enhance their individual and personal charitable giving by establishing a stretch charitable tax credit. The second is to extend the exemption from capital gains tax to charitable gifts of private company shares, land, and real estate.
These recommendations are both contained in the brief that we submitted to the committee in January. AFP supports Imagine Canada's stretch tax credit proposal, which would apply to donated amounts above $200 that exceed a donor's previous highest giving level. This new measure would be based on an individual taxpayer's best previous year of giving and would provide a stretch tax credit of 39% on these new donations, which is 10 percentage points higher than the current level of tax credit on donations over $200.
Canadians would need to increase their levels of giving over their previous year's baselines to continue benefiting from the stretch tax credit in subsequent years. The maximum benefit would be $980 if it was used all in one year—for example, a one-year increase from $200 in charitable giving to $10,000 in giving. It is highly likely, however, that for many the increased benefit would be incrementally achieved over several years.
The stretch tax credit would benefit all charities across Canada and should over time broaden the base, while increasing the giving levels of Canadians. This is particularly important to small and medium-sized charities that find it more challenging to raise philanthropic dollars.
The government should also consider eliminating the capital gains tax on gifts to charities of private company shares and appreciated land and real estate. Peter Braid's private member's motion M-559 launched this study on tax incentives for charitable donations and included this key proposal, which is supported by Canadians such as Don Johnson and other representatives of the charitable sector.
In 2006 the government removed the capital gains tax on donations of marketable securities to most charities, making them more attractive to potential donors. In the subsequent year we saw a doubling of the number of gifts of securities to charities. Moreover, the total value of those gifts more than doubled.
We encourage the government to turn its attention to private company shares, land, and real estate. Gifts of both of these appreciated capital assets are exempt from capital gain taxes in the United States, and Canadian charities and donors should have the same opportunity to access and give donations from the private sector.
At the C.D. Howe Institute's March 2011 conference on strengthening charity finance in Canada, one of the presenters estimated that eliminating the capital gains tax on gifts of land, real estate, and private company shares would result in an annual increase in charitable giving of $170 million to $225 million, and that the tax revenue cost to the government would be only $50 million to $65 million.
There is lots of potential and interest from Canadian donors regarding land and real estate. The 2005 survey of financial security points out that the single most important asset for Canadians was their main residence, which accounted for one-third of the $5.6 trillion in total assets surveyed.
From 1999 to 2005, a significant change in the composition of assets consisted of growth investments in real estate such as cottages, timeshares, rentals, and other commercial properties. Charitable organizations need the support of government to better serve Canadians. We work side by side with government to deliver much-needed services. Most important, a healthy charitable sector can help drive our economy.
We believe that these two recommended policy changes will assist in lowering the tax burdens on Canadians while strengthening the capacity of the charitable sector to provide critically needed programs and services.
Thank you for giving me the opportunity to testify.