The 2006 Canadian Federal Budget included a provision eliminating capital gains tax on gifts of appreciated securities to charities.

The tax measures were effective immediately and are expected to significantly increase charitable giving.

The budget document notes that “[s]ince the capital gains inclusion rate was initially reduced in 1997, donations of listed securities grew from $69 million to about $200 million in 2004. While many factors influence the donation of listed securities, it is estimated that the elimination of the capital gains tax on these donations may support about $300 million in annual donations.”

The budget also eliminated capital gains tax for the Ecogift program that allows Canadian landowners to donate ecologically sensitive land, or easements and covenants on such land, to conservation charities to ensure its preservation in perpetuity.

Measures Not Extended to Private Foundations

The favourable tax measures do not apply to the donation of gifts and appreciated securities to private foundations. This government noted concerns it had about current legislative safeguards related to conflict of interest. However, it committed to holding discussions with foundations and other interested parties to try to develop legislation that would address the concerns. If appropriate rules were developed, the government indicated that it would bring them forth to Parliament and extend the capitals gains tax provision to private foundations.