Provincial Charitable Donation Tax Credit
April 21st was a good day for Alberta donors and charities.
Provincially, the Alberta government cancelled its proposal to reduce the Alberta charitable donation tax credit (CDTC) from 21% to 12.75% which was to be effective starting in 2016. Instead, the CDTC will remain at 21%.
Sometimes dubbed “the real Alberta Advantage”, Alberta’s CDTC is not only the highest in Canada (currently tied with Nova Scotia), it is elegantly simple in its application.
Alberta’s CDTC of 21% combined with the federal tax credit of 29% totals 50%, which is easy to calculate. It is also easy to communicate: a charitable gift in Alberta costs the donor only half of the gift amount, once the tax savings are considered.
A “50% off” sale, so to speak!
But while the reversal of Alberta’s CDTC reduction is very good news, it comes with a distinct caution: The original proposal to reduce the CDTC serves as a vivid reminder that taxes and incentives can be changed and that charities and donors should not take this one for granted.
The debate about the CDTC raised the profile of charitable giving. The original proposal to reduce the CDTC was stated to be based on limited success it had had in encouraging larger total donations to charities. Wonderfully though, Albertans strongly affirmed the CDTC’s importance to community wellbeing when the CDTC was threatened.
We now need to encourage Albertans to make unquestionable good use of the CDTC before another threat arises.
Federal Tax Incentives
Federally, April 21st also held good news for donors and charities.
The April 21st Federal Budget promised new tax incentives for some gifts of real estate and private company shares made after 2016. Starting in 2017, the budget proposes a capital gains exemption for real estate and/or private company shares if:
1. the proceeds of sale are donated to an arm’s length charity;
2. the gift of the proceeds is made within 30 days of the sale.
If only a portion of the proceeds is donated, the federal budget proposes to provide a partial exemption from the capital gains tax. We will know more about how these incentives work when legislation is drafted and made public and passed into law.
The federal proposals, along with Alberta’s CDTC’s second chance, give us reason to encourage our supporters to make good use of the incentives available. This is a message that all charities need to broadcast strongly to their supporters and to potential supporters.
Let us not miss these opportunities.
Kathy Hawkesworth, Director of Donor Services
Edmonton Community Foundation