The House of Commons finance committee is calling on the government to eliminate the capital gains tax when shares of private corporations or real property are donated to registered charities, and to provide other supports to a Canadian charitable and non-profit sector hit hard by Covid-19.
The recommendations were part of the committee’s pre-budget report submitted to the government on Tuesday after members finished their consultation for the 2021 federal budget.
In total, the committee presented the government with 145 recommendations in the 362-page report.
When Canadians donate publicly traded shares or mutual funds to a charity, they receive a donation tax receipt equal to the value of their gift and pay no capital gains tax on any gain realized on those shares. In contrast, taxpayers who donate private company shares or real estate remain liable for capital gains realized on their donation.
The committee’s recommendation would allow donations of shares of privately held companies to receive the same capital gains exemption that donations of shares of privately held companies receive.
In addition, the committee recommended the government review existing tax measures and make amendments “to encourage giving to, and supporting the recovery of, the health charities sector” and creating a fund “to provide bridge operating grants for up to 12 months to essential community service organizations.”
The committee also recommended reforming the registered disability savings plan (RDSP) regime to make the plan easier for individuals with disabilities to access. The committee said the government should “uncouple” eligibility to the RDSP from the disability tax credit (DTC) so that individuals who are denied the DTC don’t have their RDSP government co-contributions clawed back.
In its fall economic statement released Nov. 30, the Liberal government said it would remove the limitation on the period of time that an RDSP may remain open after a beneficiary becomes ineligible for the DTC, effective Jan. 1, 2021.
In addition, the committee recommended making the DTC itself fully refundable and providing targeted personal income supports for Canadians living with disabilities.
The committee also recommended changing a rule that currently makes it more advantageous for the owner of a farm or a small business to sell their business in the form of corporate shares to an outside party than to sell to their own children.
Further, the committee recommended making the CRA legally liable if it fails to provide a certain standard of care in its treatment of a taxpayer.
The Liberals haven’t said when they’ll table the federal budget, which usually comes out between February and April. There’s extra anticipation this year after the 2020 budget was postponed indefinitely due to the Covid-19 pandemic, and because of the record amount of federal spending that followed to offset the pandemic’s economic impact.
The 2021 budget will also be the first from Finance Minister Chrystia Freeland, who replaced Bill Morneau in August, and there’s speculation in Ottawa that a spring election may follow.
Read the committee’s full report here.