Parachin appears before Standing Committee on Finance
February 06, 2012
Western Law Professor Adam Parachin appeared before the House of Commons Standing Committee on Finance on February 2 to advise the Committee regarding its study of charitable donation incentives.
The Federal government committed to studying donation incentives in the 2011 Budget in response to concerns over declining donations and a shrinking donor base.
“The study represents a rare opportunity to bring reform to tax incentives for charitable donations,” says Parachin, an expert in charity law.
A number of proposals have been put before the Standing Committee, including a new stretch tax credit and exempting donations of private corporation shares and real estate from capital gains tax. The stretch tax credit would apply where donors give above their previous level of giving. Enhanced giving would be recognized by existing charitable tax credits plus an additional 10 per cent stretch tax credit.
However, Parachin recommended an alternative reform to the Standing Committee.
“The range of donations eligible for donation incentives should be broadened,” he argues. “The legal tests used to identify eligible donations are overly restrictive. They often disqualify donations serving the very goals donation incentives are meant to achieve. Further, the cases and regulatory publications are unnecessarily complicated. The confused state of the law results in lost donations and heightened regulatory compliance costs for charities.”
“The problem is especially acute in relation to donation arrangements involving trusts,” submits Parachin. “The stage is set for billions of dollars of baby boomer wealth to flow through testamentary trusts in future years, but the tax treatment of charitable donations through trusts is inconsistent and often unprincipled.”