Donations to Charitable Organizations and Foundations

March 30, 2010

Charitable organizations and foundations with their many volunteers provide a great service to the communities in which they live as well as humanitarian assistance to those in need all over the world.  Since coming into office in 2006, our Conservative Government has taken important initiatives to encourage Canadians to donate to registered charities.  We exempted the donation of publicly listed securities to public charities from capital gains tax and extended this exemption to donations to private foundations in order to improve tax incentives for Canadians wishing to donate to their favourite charities and/or foundations.
 
Our Government changed the tax policy allowing donors to charities and foundations the ability to donate to publicly-listed securities without triggering a personal capital gains tax. This would allow for instance, a person with bank stocks purchased, say, twenty-five years ago, to donate their stocks to their favourite charity or foundation without having to incur capital tax on the appreciated value of the stocks. The effect of this great tax relief resulted in a spike in equity donations to Canadian charities and foundations.  (Community foundations reported a significant increase in equities and security donations.) Since the tax policy was implemented, our government estimated there was an increase of over $50 million in donations.

Canada has one of the tightest controls on charities and not-for-profits in the world. However, abuses still emerge when citizens set up charities and not-for-profits to evade taxes or, those administrating charities take unreasonable compensation for their work.

Last year, it was revealed that large sums collected for charities ended up being paid to executives.  It was reported that the head of one Toronto charity received $2.7 million in a single year.  Research revealed it was not mandatory for charities to reveal the amounts they paid their top executives.  They just had to reveal how many earned more than $120,000. 

It turned out that over 2,000 people earned more than this amount from charities in Canada.  Some family corporations were setting up a charity administered by a front person.  They would then donate to the charity.  By doing this they received a tax benefit for the donation.  Then, they would siphon off the money in the charity to family members through expensive golf memberships, vehicles, vacations and other perks.

Presently, there is before Parliament, a Private Members Bill, C-470 that aims to add a small measure of transparency and clarity to our nation`s charities. This bill will require charities to disclose the salaries of their five highest paid employees.  As well, starting in 2011, it would give the Minister of National Revenue (CRA), the power to deregister a charity if it continues to pay individual employees more than $250,000 per annum.

Bill C-470, if passed, will restore trust for those of us that donate by limiting the amount that gets siphoned off to support the lavish lifestyles of those that abuse the generosity of Canadians.

Charities that are well established and have shown compassionate service have earned your trust and need your financial support.  However, those that use a charity as a tax benefit or lavish meal ticket are going to be held accountable to donors and the CRA.

Colin Mayes, MP
Okanagan - Shuswap