Owners of ecologically sensitive private land have the option of making a certified ecological gift (ecogift) to a designated charitable organization and receiving significant tax savings.
An ecogift may be a donation of the fee simple title to a parcel of land, or a gift of certain rights to the land that, depending on the circumstance and province, are known as a covenant, easement or servitude. Ecogifts have resulted in thousands of hectares of land across Canada protected for nature in perpetuity.
To be eligible as a donor, your property must be certified by the Federal Minister of the Environment to be ecologically sensitive land. Degraded lands may also qualify if the donation is accompanied by a firm commitment to a restoration plan. The appraised fair market value of the land must also be reviewed and certified by the Minister.
Registered charities may be approved by the Federal Minister of the Environment to receive such gifts when one of their primary purposes includes the conservation and protection of Canada's environmental heritage. Land trusts and conservancies are the primary recipients of ecogifts. In addition any level of government in Canada may accept ecogifts.
Canada Revenue Agency also allows landowners to sell their land for less than its market value to governments or conservancies and receive a tax receipt for the difference between the property sale price and its market value. This is known as split-receipting.
Benefits to you?
- As a donor you will have the satisfaction of preserving one of Canada's ecological treasures for present and future generations. To ensure that a property remains protected, a charity that sells or changes the use of such donated land without the prior permission of Environment Canada is subject to a special tax, equal to 50% of the ecogift's market value at the time the change in use or disposition takes place. This provision helps to ensure that donated lands will not be altered in an unacceptable fashion or sold by a charity for financial gain.
- Individual donors of ecological gifts receive a non-refundable tax credit based on the full value of their donation, whereas corporate donors may make a deduction from their income for the value of their donation. In either case, the donation of an ecological gift is not subject to capital gains tax. The capital gains inclusion rate is zero and the donor receives a tax receipt for the total value of their donation.
- Unlike other charitable gifts, there is no limit to the total value of ecogift donations eligible for the deduction or credit in a given year. Further, any unused portion of the donor's tax credit or deduction may be carried forward for up to five years, allowing donors to use the tax receipt over a total of six years.
- As the appraised value of the property is peer-reviewed and certified by Environment Canada, you have added peace of mind in the event of an audit.
Who can give ecogifts?
A gift of ecologically sensitive land will appeal to generous individuals who care about the environment and who wish to reduce taxes now. Such gifts may also appeal to community-minded companies or those with significant tax liabilities. These gifts may not be as appealing to land developers because land held for development (i.e., business inventory) is not eligible for the same tax treatment vis a vis capital gains as are non-inventory lands. As such any gain in land value would be taxed as regular income.
How do I give an ecogift?
Contact your local land trust or conservancy for information about the steps involved in making an ecological gift donation, including land appraisal, survey, and legal requirements. While the certification processes are somewhat detailed, you can draw upon a land trust or conservancy for help and resources to make the process as easy as possible for you. These organizations will work with you to ensure that your wishes to protect your property in perpetuity are realized. See the Directory of Organizations for contacts in your region.
Planned gifts can provide beneficial results for a donor, however, in order to ensure that all provisions and regulations under the Income Tax Act are met, prospective donors should seek qualified legal and accounting advice.
Recipients of such gifts must be the Federal or Provincial government, Canadian municipalities or registered charities approved by the Minister of the Environment to receive this type of gift.
Please check with the selected recipient organization regarding its policies about accepting such gifts.
Owners of inventory land may make donations under the Ecological Gifts Program, and are still eligible to have the full value of their gift recognized as a charitable donation. However, such gifts are not subject to the same tax benefits as gifts of capital property. All profits derived from the disposition of inventory land must be included in the taxpayer's income for the year.
Donors have the right to appeal to Environment Canada and, ultimately, to the Tax Court of Canada to re-determine the value of a gift of ecologically sensitive land if they are unsatisfied with the value certified by Environment Canada.
For more information please refer to the Professional Advisors section on Ecogiftsand/or contact the Ecological Gifts Program.