Private Shares, Real Estate & Donations: Changes Proposed by Bill C-240

Last month, Bill C-240 was introduced in the House of Commons. Also known as the Supporting Canadian Charities Act, this private member’s bill would amend the Income Tax Act to waive capital gains tax on the arm’s-length sale of private shares or real estate when the proceeds of the sale are donated to a charity.

Capital gains tax would be reduced to zero if listed conditions are met. Some of those conditions include:

• that the gift is made within 30 days after the disposition
• that any advantage received is accounted for
• that the purchaser is at arm’s length to both the taxpayer and the charity

This is the second time this bill has been introduced. In November 2020, it’s predecessor Bill C-256 was introduced but when the election was called, the bill died. Similar legislation was also introduced in 2015 but was never enacted.

Senate Report

The Senate Report on the charitable sector, Catalyst for Change, dedicates an entire section to this topic. It outlines the potential advantages and disadvantages to eliminating capital gains tax on donations of the proceeds from private company share and real estate sales.

Advantages and disadvantages are listed together and include:

• increased funding for the sector
• equity between entrepreneurs (those who keep companies private versus those who take them public)
• equity among charities (there was debate amongst the witnesses on the breadth of benefit that would result),
• taxpayer equity (with debate about whether it would disproportionately benefit wealthier donors and the advantages of voluntary wealth redistribution)
• cost to the federal government (estimated amount of charitable donation tax credit that would result is $65-70 million)

In the end, the committee recommended that Canada Revenue Agency launch a pilot project to evaluate the impact on the charitable sector of exemptions donations of private shares from capital gains tax.

Potential Impact of C-240

Bill C-240 moves forward with a similar proposal but avoids the difficulties of in-kind donations and valuation by incentivizing the proceeds rather than the shares or property themselves.

Whenever donations are incentivized, proper safeguards need to be in place to prevent manipulation and abuse, but when those are in place, expanding sources of donations for charities is good news for the sector.

Charities add to the richness and strength of our nation and positively impact local communities where we live, learn, worship, and serve.  Healthy charities help create strong civil societies. CCCC is generally supportive of policies like this one that promote greater civic engagement by encouraging charitable donations, especially in light of lingering pandemic-related challenges.

CCCC Community Trust Fund Can Help with Publicly-Traded Securities

In the meantime, you might be wondering about whether you can donate publicly-traded securities. The answer is a big yes! And we can help you donate through our CCCC Community Trust Fund.

Not all charities have the necessary set-up to receive your donated securities, but that’s where CCCC can help. From the enhanced tax benefits of donating securities (no capital gains tax!) to the practical matters of valuation, receipting and accounting, we’ve got answers for donors and fundraisers. It’s all on our Community Trust Fund page. And if you can’t find what you’re looking for we invite you to reach out to us directly at ctf@cccc.org or 519-669-5137.