BRIEF FROM THE ASSOCIATION OF
FUNDRAISING PROFESSIONALS (AFP)
Background/Executive Summary
The Association of Fundraising Professionals (AFP) is a professional association representing individuals responsible for generating
philanthropic resources for charitable and public service organizations. AFP is
the largest association of fundraisers in the world, representing more than
30,000 practitioners across the globe, including 3,400 members in 16 chapters
across Canada.
AFP sets the highest standards for ethical behavior in the
fundraising profession. AFP members are required annually to sign our Code
of Ethical Principles and Standards, which was first developed in 1964 and
is one of the few codes that is enforced. The AFP Code of Ethics has
provided the basis for subsequent codes of conduct for fundraising in different
countries around the world, including Canada. AFP also instituted a
credentialing process in 1981, which was designed to identify for the giving
public fundraisers who possess the demonstrated knowledge and skills necessary
to perform their duties in an effective, conscientious, ethical and professional
manner. More than 4,000 fundraisers around the world have earned the CFRE
(Certified Fund Raising Executive) and ACFRE (Advanced Certified Fundraising
Executive) credentials.
AFP collaborates with fundraising communities, government agencies
and partners internationally to advance fundraising and philanthropy. AFP
convened more than 30 national fundraising associations from around the world
to draft the International
Statement of Ethical Principles, a series of values and standards
for the global fundraising community.
Recommendations
AFP appreciates the opportunity to once again provide our
recommendations to the Standing Committee on Finance. We also are grateful for
the committee’s commitment to the charitable fundraising profession and
Canada’s voluntary sector, as indicated by the committee’s support of the
elimination of the capital gains tax on gifts of listed securities a few years
ago. This year, AFP offers the following recommendations:
1. Increase the
flow of charitable funds in the wake of the recession and encourage Canadians
to enhance their charitable giving by establishing a “stretch” charitable tax
credit.
2. Extend the
exemption from capital gains tax to charitable gifts of land and real estate.
3. Create a
government-sponsored day – National Philanthropy Day, November 15 – which
unambiguously recognizes the importance of the voluntary sector and increases
public awareness of charitable giving.
Charitable Incentives Lower Tax Burdens and Drive Economic Recovery and Job Sustainability
The charitable sector represents a significant source of jobs and
economic stimulus. The charitable sector in Canada is made up of more than
161,000 organizations with over 1.2 million paid staff and 6.5 million
volunteers (Voluntary Sector Awareness Project).
The sector has more than $100 billion in annual revenue and
possesses even more than that amount in net assets. The charitable sector is
approximately equal in size to the economy of British Columbia. In effect, the
sector is a business unto itself, essentially an entire province worth of
organizations exclusively devoted to the strengthening of the factors
(workforce, infrastructure, cultural initiatives, etc.) on which our country’s
economic future is based.
When the economy stagnates, that is when charitable organizations
and their services are needed the most. Charitable and philanthropic
organizations provide jobs and bridge the gap by serving those in need and our
communities when budgetary constraints hinder provincial and federal
governments from providing similar services.
Unfortunately, the economy has taken its toll on this vital sector.
According to Statistics Canada, Canadians donated $7.8 billion to charity in
2009, down from $8.19 billion in 2008. The 2009 data represents a $700 million
decrease in charitable giving in comparison to 2006 numbers, which set the
all-time high for Canadian giving.
There is clearly a need for new incentives to spur additional
giving to charitable organizations, particularly in this tumultuous economic
climate. The government and the nation’s economy both benefit when the charitable
sector receives the resources it needs. Private donations can help leverage the
impact of government investments and allow charities to provide the programs
and services that do much to augment the work of the government.
Accordingly, AFP encourages the committee to examine and approve
the following recommendations that will promote more robust private giving to,
and support for, the charitable sector.
Recommendation #1:
Increase the flow of charitable funds in the wake of the recession and
encourage Canadians to enhance their charitable giving by establishing a
“stretch” charitable tax credit.
To immediately increase charitable giving and create a long-term
national culture of giving, AFP supports the recommendation from Imagine Canada
that proposes a Stretch Tax Credit that would apply to donated amounts above
$200 that exceed a donor’s previous highest giving level. This new measure
would be based on an individual tax payer’s best previous year of giving using
2008 as a baseline. It would provide a Stretch Tax Credit of 39 per cent on
these new donations – 10
percentage points higher than the current level of tax credit on donations
above $200.
To continue benefitting from the Stretch Tax Credit in subsequent
years, tax payers would need to continue to increase their levels of giving
over their 2008 and previous year’s baselines. This measure is intended
to encourage all Canadians, but particularly middle-income earners, who wish to
give for the first time or to give more in response to current needs up to a
maximum of $10,000.
This provision would have the beneficial effects of reducing the
tax burden on Canadians while fuelling charitable giving directly, which, in
turn, creates economic gains throughout the sector. This giving incentive would
particularly alleviate tax burdens on working families and middle income
Canadians. A $10,000 cap on eligibility for the Stretch Tax Credit would target
it towards average families who donate cash and have not benefited from
previous tax measures that encourage larger gifts of assets. Because there is
no floor on the Stretch Tax Credit, even those who can only afford to make smaller
donations will benefit.
The maximum benefit would be $980 if used in one year (i.e. a
one-year increase from $200-$10,000 in giving), though it is likely that for
many, the increased benefit would be incrementally achieved over several years.
The Stretch Tax Credit would benefit charities of every size and in every
region and should, over time, broaden the base and increase the giving levels
of Canadians across the country. It would also complement recent incentives
encouraging gifts of assets aimed primarily at higher income Canadians with an
initiative that is less exclusive and recognizes that most Canadians donate
income rather than assets.
The Parliamentary Budget Office (PBO) recently prepared an analysis
based on implementing the Stretch Tax Credit on donations above $200. The PBO
estimated that after three years, the incremental cost to the Treasury in
foregone revenue would be between $10 and $40 million a year. Within three
years, the PBO estimates that there would be up to 600,000 new donors, and that
median donations would increase by up to 26%. The Stretch Tax Credit would be
an extremely efficient way to maximize and leverage federal investment in vital
community services.
Research shows that more than half of Canada’s donors would increase
their giving if there were better tax incentives. By encouraging more Canadians
to become donors, the Stretch Tax Credit would also help strengthen
communities. We also know that donors are more likely to be involved with
charities in other ways, including volunteering; thus, encouraging more donors
could lead to higher levels of volunteerism in communities.
Recommendation # 2: Complete
elimination of the capital gains tax on gifts of appreciated land and real
estate to charities.
In addition to the Stretch Tax Credit, the Government of Canada can
further lower the tax burden on Canadians while spurring charitable giving and
the associated economic growth of the sector by eliminating the capital gains
tax on gifts of appreciated land and real estate to charities.
Donors are interested in giving all types of wealth, and the two
most common ways individuals are acquiring and accumulating wealth are through
securities and real estate.
The federal government removed the capital gains tax on donations
of securities to most charities in 2006, making these donations more attractive
to potential donors than they had been previously. We encourage the federal
government to now turn its attention to land and real estate.
Eliminating the capital gains tax would remove a huge barrier to
these types of gifts and make it far more likely and appealing for donors to
give land and real estate to charity.
In fact, there is significant potential and interest from Canadian
donors for these gifts. Land and real estate are not just owned by the very
wealthy. According to the Survey of Financial Security (2005), the
single most important asset for all Canadians was their principal residence,
which accounted for one-third of the $5.6 trillion in total assets surveyed. In
addition, a significant change in the composition of assets from 1999 to 2005
consisted of growth investments in real estate such as cottages, timeshares,
rental properties and other commercial properties. The aggregate amount of
investment in this type of real estate was $481 billion in 2005,
roughly 1.8 times what it was in 1999, in
constant 2005 dollars. This asset category exhibited by far the
largest rate of growth of any asset type.
As was the case for gifts of securities, contributions of land and
real estate are currently stymied by a tax system that makes such giving too
burdensome and not attractive to most donors. It is, therefore, instructive to
examine the effect of the elimination of the capital gains tax on gifts of
securities to learn more about the potential positive impacts of similarly
eliminating the capital gains tax on gifts of land and real estate.
The initial evidence is quite strong. Research conducted by Imagine
Canada and supported by AFP found that the number of stock donations doubled
from 2005 to 2006. In addition, the value of those gifts more than doubled, and
the average value of donations to securities, expressed as a percentage of
organizational revenues, almost doubled as well. All of this evidence points to
the increasing importance of these gifts for many organizations and that the
provision is working as intended. It should also be noted that just 50 percent
of organizations in the survey had marketed the new incentive or otherwise
tried to educate donors about the elimination of the capital gains tax on gifts
of appreciated securities. Thus, there is still significant donor education to
be done about the provision, which will in turn lead to additional gifts in the
future.
Both the Finance Committee and the Standing Senate Committee on
Banking, Trade and Commerce have already recommended that the capital gains tax
be eliminated for gifts of land and real estate to charities.
Recommendation # 3: Creation of a government-sponsored day –
National Philanthropy Day, November 15 – to recognize the importance of the
voluntary sector and increase public awareness of charitable giving.
In 2009, the Minister of Canadian Heritage officially declared Nov.
15, 2009 as National Philanthropy Day in Canada. Canada is the first country to
officially recognize National Philanthropy Day since its creation in 1986.
To instil some added permanence to the Minister’s declaration,
Senator Terry M. Mercer, CFRE (Liberal, Nova Scotia-Northend Halifax)
introduced Bill S-203 on March 4, 2010 that would permanently recognize
National Philanthropy Day every November 15. The bill received its third
reading in the Senate on June 10, 2010, and now awaits House passage. It is
hoped that the House will pass the bill as well.
National Philanthropy Day was created with the intent of increasing
awareness of giving at all gift levels. Many organizations such as AFP already hold celebrations designed to encourage giving, raise awareness and honour donors
and volunteers. Many voluntary sector organizations already celebrate National
Philanthropy Day on November 15 every year across Canada. The government’s
involvement could help create partnerships with media sources and other
organizations to further increase awareness of philanthropy and encourage
Canadians to invest in the voluntary sector.
As you may recall, National Philanthropy Day legislation has come
very close to passage over the past few years, but each time, it died just
prior to passage in the House due to adjournment or prorogation. With this bill
on the cusp of passage for so many years, it is time to finally pass it and
formally honour this country’s donors, volunteers and charities.
We encourage the Finance Committee to support this recommendation.
Charitable organizations need the support of government in order to
better serve all Canadians. More importantly, a healthy charitable sector can
help drive Canada’s economy. These three recommended policy changes will go a
long way towards lowering the tax burdens on Canadians while strengthening the
capacity of the charitable sector to provide critically needed programs and
services.