By Karen Kleiss
When Ted Rogers donated a record $10 million to Ryerson’s fundraising campaign two years ago, the gift arrived in the form of stocks. Last week the executive director of the university’s fundraising campaign went to Ottawa to ensure that big donors like Rogers will keep giving that way.
In his capacity as chair of the Association of Fundraising Professionals, campaign director Rob Peacock urged the government to eliminate all capital gains taxes on stock gifts to charities.
“Donors will have greater incentive to give, charities will receive more support and increase their capacity to sustain themselves and the government may find that funding pressure decreases as private giving increases,” Peacock told the House of Commons Standing Committee on Finance.
Investors who see their stocks go up pay tax on the increase, which is called a capital gain. If a stock is bought for $10 and sold for $15, the capital gain is $5.
If stock is donated to Ryerson, the university can sell it and pay tax on only half the capital gains.
“There is significant research, as well as extensive anecdotal evidence, which shows that tax incentives impact the size of a gift,” Peacock told the committee. “The larger the gift a donor is considering, the more influence tax implications will have on the decision.”
Peacock wants the federal government to eliminate capital gains tax on stock gifts to charity altogether, pointing out that the United States implemented similar changes last year, and charities there have reaped the benefits. The finance committee itself recommended that the changes be made in 2001, but the government didn’t work them into the federal budget.
The main difficulty with stock donations is that their value and donor’s inclination to give them swings with the stock market.
“The stock market tanked [and] large gifts tend to decline in market downturns,” said Gordon Cressy, vice-president of university advancement. “We’re still succeeding, but the very large gifts have slowed down.”
Cressy said the economic downturn may cause the fundraising campaign to run for six years instead of the five as originally planned.
“It may take us a little longer, but we’ll still get there for sure,” he said. “That hasn’t been finally decided, but in my view the extension makes some sense.”
The government’s decision on allowing tax exemption for stock donations could be reached as early as next year.
“Capital gains exemption for these types of donations is a win-win,” said Peacock. “It’s good for the government, it’s good for the charitable sector, and it’s fabulous for the donor.”