Charitable Donation Tax Incentives

Economic Action Plan 2013 responds to the report of the House of Commons Standing Committee on Finance on charitable donation tax incentives and proposes a new temporary First-Time Donor’s Super Credit to encourage all young Canadians to donate to charity.

Canadians recognize that the charitable sector plays a vital role in our society and provides valuable services to Canadians, including the most vulnerable. Canadians also provide generous support to the sector in recognition of its important work: recent data from Statistics Canada show that more than 5.7 million Canadians donated almost $8.5 billion to registered charities in 2011.

Canada’s incentives for charitable donations have been described as among the most generous in the world. Registered charities are exempt from tax on their income and may issue official donation receipts for gifts received; donors may use those receipts to reduce their taxes by claiming the Charitable Donations Tax Credit (for individuals) or the Charitable Donations Tax Deduction (for corporations). In 2012, federal tax assistance for charitable donations exceeded $2.9 billion.

Most recently, the Government has taken additional steps to ensure that tax incentives for charitable giving remain effective. The Government supported Motion 559, sponsored by the Member of Parliament for Kitchener– Waterloo, Peter Braid, and subsequently adopted by the House of Commons, which called for the Standing Committee on Finance to study charitable donation incentives. The Committee published its report, Tax Incentives for Charitable Giving in Canada, on February 11, 2013. The Government thanks Peter Braid for this important initiative, and thanks the Committee for its work.

The Standing Committee on Finance heard that there is a need to foster and promote a culture of giving, and that tax incentives can play a role both in increasing the number of new donors and encouraging existing donors to give more.

Economic Action Plan 2013 responds to the Committee’s report by proposing a new temporary First-Time Donor’s Super Credit (FDSC) designed to encourage new donors to give to charity.

The FDSC will increase the value of the federal Charitable Donations Tax Credit by 25 percentage points if neither the taxpayer nor their spouse has claimed the credit since 2007. The FDSC will apply on up to $1,000 in cash donations claimed in respect of any one taxation year from 2013 to 2017. This new credit will significantly enhance the attractiveness of donating to a charity for young Canadians who are in a position to make donations for the first time and - by helping to rejuvenate and expand the charitable sector’s donor base—will have an immediate impact in supporting the sector. This measure is expected to cost $25 million in each of 2013-14 and 2014-15.

The Government will redouble its ongoing efforts in the areas identified by the Committee in their recommendations:

  • With respect to monitoring charitable giving trends and characteristics, Statistics Canada publishes annual data on the amounts Canadians donate to charity, as well as a demographic breakdown and trends in giving. With respect to public awareness, the Canada Revenue Agency provides education and information related to charitable giving.
  • With respect to social finance, as noted below, the Government will bring together key players in the non-profit and private sectors to develop investment-worthy ideas and tap the potential of the social finance marketplace to promote economic growth and prosperity.
  • With respect to red tape reduction, the Government has taken action, as part of the Small and Rural Charities Initiative, by restructuring the Registered Charity Information Return to minimize the time small and rural charities need to complete the form.
  • Finally, with respect to transparency and accountability, the Government has taken steps to combat fraud and abuse in the charitable sector and enhance transparency and accountability around the political activities of charities.

Consistent with recommendations put forward in the Standing Committee’s report and the need for restraint in the current fiscal context, the Government will work with the charitable sector, including Imagine Canada, to encourage more donations by a greater number of Canadians and further enhance public awareness, reduce red tape, and increase transparency and accountability in the charitable sector.


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