Tax Tools for
Private Land
Facts for Advisors |
|
Manitoulin
Island Ecogift / James Sidney |
Ecogift Donors Across Canada
Since 1995, over 450 properties have been donated worth more
than $123 million.
Ranging from thousands to millions of dollars, ecogifts are
among the largest charitable gifts being made in Canada. Many
Canadians who own wetlands, woodlands and other wildlife habitats
cherish their land and want to see its natural features preserved.
Those interested in creating a ‘green’ legacy, either
directly or through a bequest, require well-informed professional
advice. |
THE ECOLOGICAL GIFTS PROGRAM offers an income tax tool for clients
who count rural or wilderness lands among their assets and who wish
to leave a legacy for future generations. Protecting nature on such
properties, through partial or full donations, can result in large
charitable donation receipts and substantial income tax benefits.
In many scenarios, the landowner can continue to hold title and/or
live on the land. Ecogifts enable clients to create a natural legacy
and protect family lands while benefiting from specific tax benefits.
Select Income Tax Act (ITA) References:
110.1(1)(d), 118.1(1), 118.1(10.1 to 10.5, 12), 207.31
Ecological gifts (ecogifts) receive tax treatment that is superior
to most other charitable gifts:
- eliminated taxable capital gain on the disposition of the property
(38 (a.2) ITA)
- no income limit for calculating the tax credit/deduction (118.1(1)
ITA)
- donation value certified by the Government of Canada (118.1(10.1
to 10.5) ITA)
- tax liability for donees that do not protect the gifted land
(207.31 ITA)
Donation Options
Each ecogift is unique and a number of options are available to
donors. Landowners do not need to sever their connection with the
land. Ecogifts donated to land trusts, selected other charitable
conservation organizations, and government agencies include:
- Conservation easements: Landowners can
conserve the natural values of their property and still retain
ownership by entering into a conservation easement agreement with
a nature conservation organization that will restrict designated
activities in perpetuity.
- Residual interests (IT
226R Canada Revenue Agency): Landowners may donate the
property to an eligible organization and retain the right to use
or live on the land for their lifetime or the lifetime of someone
else they name, such as children.
- Full title: Of course, it is possible
to donate fee simple title with no reserved rights – many
landowners choose this option. In some cases, donors of large
properties who wish to protect the land from development or other
land uses may retain a homestead, cottage or farm, giving the
woods, meadows, wetlands and streams to a trusted charity or government
conservation agency.
Split-receipts
| 
|
Dr. Henry and Kathleen
Barnett shielded their remarkable forested lands north
of Toronto from development with an ecogift conservation
easement. |
Photo: James Sidney |
|
In some instances it is possible for a donor to receive cash that
is equal to up to 80% of the value of their gift. The eligible amount
of the gift is the difference between the fair market value of the
donated land and the amount of the cash advantage received. Split-receipting
can be applied to all donation options described above. In addition,
a license entitling the donor to use the property after title is
donated could be considered as a split-receipt advantage. (Income
Tax Technical News #26 Dec. 24, 2002 Canada Revenue Agency)
Income Tax and Other Benefits
- Ecogift donations are not subject to the
usual income limits (usually 75% of income) in calculating
the income tax credit (for individuals) or deduction (for
corporations).
- Ecogifts made after May 2, 2006 benefit from the elimination
of the normal capital gain realized on disposition
of the property. Currently 50% of the capital gain for non-certified
gifts or sales of land is included in taxable income.
- Environment Canada issues a Statement
of Fair Market Value certifying the
gift’s value after the gift is made, which
the donor submits with the income tax return.
- Potential donors who want certainty about the value of
their intended donation can request that Environment Canada
issue a Notice of Determination of Fair
Market Value before the donation
is made.
- Environment Canada reviews and approves
charitable recipients to ensure such organizations
are dedicated to protecting Canada’s natural heritage.
- Donors worried about their cherished lands can be confident
that income tax penalties can be imposed
on charitable and municipal recipients of ecogifts
who dispose of title or make a change of use without Environment
Canada’s prior authorization.
- Making an ecogift can help eliminate potential
family disputes over what to do with the land following
the death of the owner.
- An ecogift involving certain partial interests may
reduce the property tax burden.
To claim a land donation as an ecogift, Environment Canada
must approve the recipient and certify the ecological sensitivity
and fair market value of the gift.
|
For further information, including handbooks, fact sheets, forms
and guidelines:
www.cws-scf.ec.gc.ca/egp-pde
www.on.ec.gc.ca/ecogifts
Contacts
Click here to
view / print this document in PDF format
|
