Green Budget Coalition

Recommendation
Amend the Income Tax Act to better encourage gifts of ecologically significant land and easements by:

Reducing the capital gains inclusion rate for taxable income on ecological gifts from 25 per cent to zero; and
Recognizing all donations of ecologically significant lands as ecological gifts, including the donation of lands held as inventory, by corporations or individuals.

Background and Rationale
The Government of Canada has made strong commitments to protecting species at risk, national parks, national heritage, and to supporting stewardship on private lands. Working with landowners to protect private lands is essential to meeting these commitments. The Government of Canada has already taken some important steps to encourage private landowners to conserve their ecologically significant lands, most notably by reducing the capital gains inclusion rate for donations of certified lands and easements by 50 per cent and allowing “bargain sales” or “split receipting”.

However, as important as these measures have been certain donations of ecologically significant lands still do not qualify under the Ecological Gifts program and donors are still subject to a tax penalty in the form of capitals gains tax.

Owners of ecologically significant lands have often stewarded their lands for generations and are frequently of modest financial means. The capital gain arising from the donation of their land - even at the reduced 25 per cent inclusion rate – can result in the donor exceeding the current threshold income amount, above which partial or complete claw-back of Old Age Security benefits is triggered. Furthermore, donations of ecological gifts require the same rigorous process as donations of cultural gifts (i.e., certification of value by government-appointed review board), yet the latter are completely capital gains tax exempt. Removal of capital gains tax from ecological gifts has been recommended in numerous reports dating back as early as 1994.

The disposition of land held as inventory yields a profit rather than a capital gain (because it is not a “capital asset”), one hundred per cent of which is deemed income for income tax purposes. The tax benefits of the Ecological Gifts program apply only to the capital gain associated with the gift. The Ecological Gifts program is intended to offer incentives to preserve significant ecological areas. It should, therefore, apply to all people and companies owning qualified lands regardless of how these lands are held.