Charitable Tax Receipts
What is it?
Charitable Tax Receipts are given in return for donations deemed by the Canada Revenue Agency to be charitable gifts. A charitable gift is one given by the donor freely and without consideration (meaning they expect nothing in return). Canadian taxpayers can use Charitable Tax Receipts when filing their federal and provincial income taxes to reduce their tax payable or taxable income. All municipalities are eligible to provide Charitable Tax Receipts in return for donations to the municipality (i.e., they are ‘qualified donees’).
How can municipalities use it?
Owners of parcels of land with valuable natural infrastructure often consider donating the land or an interest in the land (e.g., a conservation easement) to their local government. However, the financial impact of doing so may be too great a barrier. Municipalities may not have the resources to purchase these parcels/interests, but they can offset that financial impact to a significant degree by offering a Charitable Tax Receipt in return, which costs the municipality nothing to provide.
What are the advantages?
The advantages of Charitable Tax Receipts include:
Even moderate-income recipients can make use of tax receipts, due to the numerous applications, and the ability to use them over a 6-year period
While there may be administrative costs, the issuance of the tax receipt costs the municipality nothing
Can overcome financial barriers to landowners providing valuable parcels for natural infrastructure protection
If the donation is registered as a Gift of Ecological Property, it qualifies for extra tax benefits
Tax receipts can be combined with cash payments in cases where the municipality has some resources, and the landowner needs some cash compensation
What should you watch out for?
There are potential issues with regard to Charitable Tax Receipts, including:
A tax receipt can only be given for a freely-given donation, meaning it cannot be given in return for land provided as part of a complex development scheme
Donations do not negate the capital gain on a property, so a landowner’s capital gains taxes are still due when the property is ‘disposed of’
If a landowner has a very high-value parcel and negligible income, the tax receipt may not be used up after 6 years
To ensure the landowner is not visited by the Canada Revenue Agency, there should be an assessment conducted by a qualified assessor
Corporate entities that buy and sell land may not benefit from a tax receipt as ‘inventory lands’ are treated differently than privately-owned land
How can it help maintain natural infrastructure?
Much of the important natural infrastructure in a municipality is on private land, which – even if available – is priced beyond a municipality’s means. Charitable Tax Receipts can reduce the cost of the land acquisition while still fully compensating the nature-conscious landowner. This allows the municipality to protect the natural infrastructure assets, functions, and benefits.
Municipalities as Qualified Donees - This Canada Revenue Agency web site lists the requirements for a municipality giving out tax receipts with regard to donation receipts, books and records.
Ecological Gifts Program - This web site gives information about federal ‘EcoGifts’ program, including what is required to have a donation of land (or an interest in land) certified, and what are the additional tax benefits.
Claiming Charitable Tax Credits - This Canada Revenue Agency web site describes how the donor would calculate and claim their charitable tax credits.
Did we miss something?
If you know of a resource that should be on this list - or your municipality has a sample or case that should be here, please let us know!