The PBO just released a report on a private member’s bill, Bill C-256, An Act to amend the Income Tax Act (donations involving private corporation shares or real estate).  The PBO report notes “This private member’s bill would amend the Income Tax Act so that charitable donations of the cash proceeds of the disposition of real estate and privately-held shares would not be subject to capital gains tax. The donations would have to be made to a qualified donee within 30 days of the disposition of the property to an arm’s length third-party.”   The report worked with a number of assumptions including that less than 10% of shares sold would be donated.

“Provincial and territorial data was used in calculations of the behavioural effect to estimate behavioural change. Provincial government revenues would be affected by this measure, but they are outside of the scope of this analysis.”  It is unfortunate that there was no estimate of the provincial governments’ costs as provincial governments will also lose a large amount of tax revenue if this proposal ever passes and provincial governments provide far more funds to Canadian charities than fundraising does.

The report estimated that the “total net cost [to the Federal government] of this measure to be $777.5 million over the first 5 fiscal years of the policy.”

The report notes that some of the cost would be people donating the same amount but obtaining a larger tax incentive.  Some would be attributed to people donating more because it costs them less.  If the Federal and provincial tax costs were put together the number would be well over $1 billion.

The report does not say how many people would be donating and how much tax benefit would go to the largest individual donors.  I would guess that most of this extra tax benefit would in a typical year go to between 5 and 20 people.  In other words, a few thousand may benefit from this proposal each year, but between 5 and 20 people would get most of the benefit!  Also, the report does not say how much would go to private foundations or DAFs versus operating charities – again I would guess that most would go to private foundations and DAFs and a much smaller amount would trickle down to charities.  Of that trickle, an even smaller part would benefit charities that support the most disadvantaged in our society.

At a time when the richest Canadians are doing quite well and income inequality is increasing, this is a proposal that our country cannot afford.