Gifts of ecologically sensitive land

June 22, 2023 | Gwenyth Stadig, Sarah Hallman-Krul

Gifts of private land are becoming increasingly important to the preservation of Canada’s environmental heritage. The federal Ecological Gifts Program (the “EGP”) provides a way for Canadians who hold ecologically sensitive land to simultaneously protect nature for future generations and attract favourable tax consequences. This article briefly addresses the benefits, requirements and risks of donating ecologically sensitive land.

Benefits of Donation

Two sections of the Income Tax Act (Canada) (the “ITA”) govern gifts of ecologically sensitive property. Subsection 118.1(1) of the ITA governs gifts for individuals, while subsection 110.1(1) governs gifts for corporations. In Quebec, the process is also governed by the Quebec Taxation Act (Quebec). If the requirements are met, corporate donors may deduct the amount of their ecological gift directly from their taxable income. An individual donor receives a non-refundable tax credit. In addition, the tax payable on a capital gain arising on a qualifying ecological gift is reduced to nil. There is currently a ten year carry-forward period for claiming these benefits.

Process for Donation

Gifts of ecologically sensitive property can be a useful tax reduction tool when made by inter vivos or testamentary disposition, but each method has its own considerations to keep in mind. When making an ecological gift inter vivos, the donor may lose their personal use of the land following donation. Another consideration for an inter vivos donation is the importance of a well-drafted gift agreement. Testamentary gifts on the other hand provide the donor with lifelong use of the property, but create complexities in the donor’s estate. When making an ecological gift by will, ensure the donor’s estate plan contemplates the steps that will need to be taken by their executor in connection with the gift. If the gift is made as a consequence of the death of the donor then it will qualify for the nil capital gains inclusion only if made by a graduated rate estate. It can be difficult to complete the ecological gift process within the limited time frame of a graduated rate estate (see “Testamentary charitable giving and the graduated rate estate: A refresher” by Elena Hoffstein).

In order for donors to receive the tax benefits from such donations, there are three main requirements. The land must (i) be donated to an eligible recipient, (ii) be certified as “ecologically sensitive land” by the federal Minister of Environment and Climate Change (the “Minister”) and (iii) obtain a certified fair market value from the Minister.

In Quebec, the ecological gift process is the joint responsibility of the federal government and the provincial government. The Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs (“MELCCFP”) is responsible for certifying the eligible recipient and the land’s ecological value, while Environment and Climate Change Canada certifies the fair market value of the land.

1. Donation to Eligible Recipient

The ecologically sensitive land must be given to the federal government or a provincial government, a municipality, a municipal or public body performing a function of government, or a registered charity. In the case of a registered charity, the charity must be designated as either a public foundation or charitable organization that has a charitable purpose that aligns with conservation of the environment. Importantly, private foundations cannot be eligible recipients.

2. Certification of “Ecologically Sensitive Land”

Pursuant to subsections 118.1(1)(a)(ii) of the ITA, land that is the subject of an ecological gift must be:

“…certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of the Minister or the designated person, important to the preservation of Canada’s environmental heritage.”

The donor must apply to the Minister or a delegated authority for this certification. The donor, often in partnership with the recipient, collects required information and submits it to its regional EGP coordinator or a delegated certification authority. In the Province of Quebec, the delegated authority is MELCCFP. Contact information for regional EGP coordinators is available on the Government of Canada website. There is currently no formal application form, but the Ministry provides a list of information on its website. Certain provinces have additional unique requirements, so it is important to review the criteria for the relevant jurisdiction by contacting its regional EGP coordinator, or MELCCFP in the case of Quebec.

Potential tax benefits are available for gifts of land or eligible interests in land, depending on the province. In the case of land in Quebec, eligible interests in land include a personal servitude or a real servitude.  Outside of Quebec, eligible interests include covenants and conservation easements. Put simply, how title to the real property composing the potential gift is not the most relevant nor important to the Minister’s assessment of the application. Instead, in order to qualify all ecologically sensitive lands must be found to be significant to the conservation of Canada’s biodiversity and environmental heritage. In making this assessment, the Ministry considers the current environment value but also the potential future environmental value of the land. Currently, the Minister makes this determination based on the following criteria:

  1. areas identified, designated or protected by a local, provincial, territorial, national or international system or body as ecologically significant or ecologically important;
  2. natural spaces of significance to the environment in which they are located;
  3. sites that have significant current ecological value, or potential for enhanced ecological value, as a result of their proximity to other significant properties;
  4. municipal or rural lands that are zoned or designated for biodiversity objectives;
  5. natural buffers around environmentally sensitive areas such as water bodies, streams or wetlands; and
  6. areas or sites that contribute to the maintenance of biodiversity or Canada’s environmental heritage.

However, there is a possibly that additional factors may be relevant to the Minister’s determination, including applicable provincial criteria. For example, in Ontario, land falling into the category of Provincially Significant Wetlands is deemed to be ecologically sensitive land.

3. Certification of Fair Market Value

If the applicant is successful with the certification of ecological sensitivity, then they must also obtain the fair market value determination from the Minister regarding the prescribed value of the real property that the applicant wants to donate to the eligible recipient. This determination is material to the value of the donor’s tax credit which in many cases is a critical factor to the donor’s ultimate decision to donate the land.

The administrative procedures to be followed in respect of a request for a determination or redetermination of fair market value by the Minister are set out in subsections 118.1(10.2) to (10.5) of the ITA. The donor or recipient must commission an independent appraisal of the fair market value of the donated lands and submit it to the regional EGP coordinator, along with a signed Application for Appraisal Review and Determination. The appraisal is reviewed by Environment Canada’s Appraisal Review Panel, after which the donor will receive a notice of determination indicating the fair market value that the Minister is prepared to certify. This can be a contentious finding, as donors naturally hope to receive the highest fair market value certification as possible in order to maximize their potential tax benefits. Within 90 days of receiving the notice of determination, the donor may either accept the fair market value as certified by the Minister, request a redetermination under subsection 118.1(10.4) of the ITA if dissatisfied with the Minister’s findings, or withdraw from the program by notifying Environment and Climate Change Canada.

Once the donation is complete, and proof such as a registered transfer is provided to the Minister, a Statement of Fair Market Value is issued to the donor. In Quebec, the Statement will also be signed by MELCCFP so that the donor is eligible for provincial tax benefits. If donors are still dissatisfied with the fair market value of the donated property as certified by the Minister, an appeal may be made to the Tax Court of Canada and, in the case of land in Quebec, to the Court of Quebec.

Tax Treatment

It is important to note that Environment and Climate Change Canada does not determine what constitutes a gift under the ITA; donors should contact their tax and legal advisors before applying to the EGP. There is a potential, after going through the above process, that at some point in the future the Canada Revenue Agency may reassess the gift of land and treat it as a disposition of inventory generating income for a business, as opposed to the realization of a capital gain. This is a possibility particularly where individual or corporate donors engage in some level of business related to land holding or development.

In this circumstance, elimination of any taxable capital gain and the inclusion of the capital gain in the capital dividend are benefits that do not apply. Instead the proceeds of disposition are treated as taxable income, which can be offset by corresponding deduction or tax credit.  This was the case in Staltari v The Queen (2015 TCC 123), in which a gift was reassessed and treated as a disposition of inventory because the taxpayer was a real estate specialist who often sold properties for others. In this case, the Tax Court of Canada ultimately found no evidence that the taxpayer acquired the land in connection with a business and did not attribute a profit motive to the taxpayer. Even so, the case serves as a reminder that a donor could be surprised down the road by reassessments.


In order to receive the tax benefits stemming from a qualifying gift of ecologically sensitive property, the donor is required to arrange a donation to an eligible recipient, and receive certifications regarding the ecological sensitivity and fair market value of the land. These steps can be onerous to complete, and the timeline for the entire process can be uncertain given that it is largely dependant on Ministerial discretion. However, if the application and appraisal contain all the required information, the Notice of Determination of Fair Market Value is typically issued within 90 days of receipt. Timelines are similar for the issuance of certificates of ecological sensitivity. Despite the risks and the specific requirements, gifts of ecologically sensitive property can be rewarding for donors and ensure the preservation of Canada’s environmental heritage.

Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s Private Client Services team.


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