Tax Credit Carry-forward Extended for Donations of Ecologically Sensitive Land

February 11, 2014

The Budget expands upon an existing incentive for gifts of ecologically sensitive land. Under the Tax Act, donors of land that has been certified by the Minister of the Environment as “ecologically sensitive” are already eligible to claim enhanced tax recognition for such donation as compared with normal charitable gifts. Whereas tax credits or deductions for charitable donations are generally capped at 75% of the donor’s income, gifts of ecologically sensitive land can be claimed up to 100% of the donor’s income. This enhanced tax treatment promotes the donation of ecological property in an effort to protect the natural environment in Canada. In order to qualify for this special tax treatment, the certified ecologically sensitive land must be donated to the federal or provincial government, a Canadian municipality, a public body performing a function of government in Canada (often a body set up by a First Nation in the context of self governance), or to a registered environmental conservation charity that has been approved by the Minister of the Environment.

Currently, charitable donations of ecological property not claimed in a period may be carried forward for up to 5 years. Because gifts of ecologically sensitive land may be of large value, donors without significant other income may not be able to use the full tax credit or deduction within the carry-forward period. The Budget proposes to extend the carry-forward for donations of ecologically sensitive land to 10 years, thus doubling the length of the normal carry-forward period.

The Budget notes that this change was recommended by the House of Commons Standing Committee on Finance in its February 11, 2013 report. It is hoped that this change will encourage further donations of ecologically sensitive land for the preservation of Canada’s natural environment and heritage.

This measure will apply to donations made on or after Budget Day.

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