Estate Donations and Non-Qualifying Securities
Since the announcement of the “estate donation” rules in the 2014 Federal Budget, there have been a number of amendments that have addressed sector concerns and drafting errors. One unintended consequence in the original estate donation provisions relates to gifts of private company shares.
Donations involving Private Company Shares and Real Estate
The announcement in the 2015 Federal Budget that capital gains would be eliminated on donations involving private company shares and real estate was short on detail. As a result the measure, which would be effective beginning 2017, was not passed by Parliament. In mid-summer, the Department of Finance released the technical details and invited public comment. Feedback is due on September 30, 2015.
Returning a gift after 36 years
What’s a charity to do when a donor asks for a gift to be returned? As my fellow blogger Derek de Gannes recently reported, CRA provided a technical interpretation in response to a charity inquiry relating to life insurance policy donated in 1981.
Spend-down Charitable Funds
Until 2010, the disbursement quota provisions in the Income Tax Act mandated that charities handle donations in one of two ways: for immediate use or held as long-term endowments through the “10-year gift” capital hold mechanism. These binary rules drove donor and charity behaviour. The 2010 reforms provided charities with greater flexibility regarding the acceptance and use of funds. They have also transformed the way major donors plan their philanthropic legacies.
Journalism and Charities
The interconnectedness of registered charities and journalism is growing. In this era of digital content explosion and “fake news”, traditional media outlets — especially newspapers — are seeking new ways to serve their communities and survive. Increasingly, public benefit non-profit journalism is becoming a charitable activity. There are estate donors who are interested in supporting this space.
Ontario Donation Tax Credits - Proposed Rationalization
The Canadian donation tax credit regime is generous, but opaque and needlessly complex. The March 28, 2018 Ontario Budget proposed a welcome reform for an intricate system. Too bad the idea is from a government that polls predict will likely to be voted out of office in eight weeks.
The Senate Speaks Charity
It’s hard to underestimate the importance of the Special Senate Committee on the Charitable Sector report to that was released on June 20th. After almost 18 months of hearings and consideration, this once-in-a-generation study came up with 42 recommendation on topics ranging from volunteerism, social enterprise, regulatory system, and judicial review process. There are five recommendations that deal with giving and tax incentives.
Charitable Remainder Trusts in Canada
The Charitable Remainder Trust (CRT) is a gift planning structure that rarely works in Canada. An import from the U.S. – where it is an integral part of the gift and estate tax regime – the CRT in Canada has fewer tax and planning benefits. It’s a foreign plant that doesn’t thrive in the Canadian soil.
Tax Shelters and Charitable Intent
In early February, the Tax Court of Canada put another nail in the coffin of “one of the biggest tax scams in Canadian history.”
Foundation vs. Charitable Organization
The WE Charity scandal has been fascinating to charity watchers. On July 22, it was revealed that the Canadian Government contracted with the WE Charity Foundation for the Canada Student Service Grant (CSSG) program, not the WE Charity as previously reported.
Outdated Donation Clause
Legal precedents are invaluable – except, that is, when they are wrong or out of date. Recently a Scotiatrust colleague contacted me about a clause in a client’s will that was intended to create an endowment fund at a registered charity. The clause imposed a 10-year capital hold on the donation. He asked, “is this clause still necessary?”
Endowment Variations
COVID-19 has hit the charitable sector hard, and arts organizations face particular challenges. A recent article in The Globe and Mail about the Banff Centre described closed facilities, lost fundraising, cancelled programs, layoffs, deficits, resignations, and protests…
Foundation Disbursement Quota Increased
The 2021 Federal Budget announced the Government’s intentions to launch a consultation with charities about “potentially increasing the disbursement quota…beginning in 2022.” Any increase of the disbursement quota (DQ) rate above the current 3.5% annual requirement will have significant implications for the charitable sector, foundations and donors. Below is a longer than usual analysis of what it means and what to expect.
Estate Donations of Private Company Shares
One of the concerns about the “estate donation” rules when they were introduced in 2016 is illiquid property would be harder to donate and administer. Perhaps the most challenging type of illiquid property is private company shares. Five years of experience with the system has validated some concerns and produced planning solutions.
Canadian Donation Incentives
Canada has the most generous tax incentives for charitable giving in the world, but few Canadian donors understand what they save and how the system works. Why the paradox? Here’s a longer-than-usual blog providing an overview that I hope will help demystify the topic.
Estate Donations: Six Years Later
The 2016 introduction of the Graduated Rate Estate (GRE) regime was accompanied by the “estate donations” rules. How are charities and executors managing with these rules six and a half years later?
Complaining about a Charity
Charity regulators all have processes for members of the public to make complaints about the charities. These processes reveal as much about the regulator and the underlying laws as they do about charity malfeasance.
Are Charities Second-Class Beneficiaries?
Charities face a bizarre challenge when administering gifts by will. It should be simple. After the donor’s death, a charity named as a recipient of an estate donation becomes the beneficiary of a trust. The money is owed to the charity and the interest in the trust is legally enforceable. Charities, however, are often considered to be second-class beneficiaries.
Estate Donations = Faster Distributions
Matt Johnston, my tax colleague at Scotiatrust, says the 12-month tax filing deadline is upon us. The initial round of major distributions to charities will occur in January 2017 under the “estate donation” rules introduced in 2016. As mentioned in my previous blog, executors and their advisors are discovering that new rules create new procedures. And the new procedures may lead to faster distributions to charities.
Donor-Advised Fund: Foundations and Borrowed Assumptions
Language matters. When technical terms are borrowed from other jurisdictions, they may be imprecise, confusing, or even irrelevant in a different context.