Options for Charitable Giving. November 13, 2012

Transcription

1 Options for Charitable Giving November 13, 2012

2 Statistics on Registered Charities in Canada Number of Registered Canadian Charities: Public Foundations 5,050 Private Foundations 4,937 Other Charitable Organizations 75,450 Over 160,000 charitable and non-profit organizations (85,459 registered) Canada Revenue Agency, Charities Directorate. Data as at December Assets all Private and Public Foundations (2010): Public Foundations $16.8 billion Private Foundations $19.4 billion US Independent Foundations $403.5 billion Canada Revenue Agency, Charities Directorate. Data as at December

3 Private Foundation Causes for Canadian Charities 5% 1% 24% 13% community benefit international aid environment health 7% 19% social services arts and culture 8% other education 24% 3

4 Philanthropic Alternatives Clients have the following options when considering a philanthropic strategy: Direct Contribution to a registered charity: One-time, quick and straightforward, direct to the cause, typically smaller dollar, lower involvement, no cost Public Community Foundations (i.e. Toronto Community Foundation TCF ) TCF is one of approximately 180 community foundations across Canada. TCF s goal is to make Toronto the best place to live, work, learn and grow Limited gifting options, less control of investments versus a private foundation, 1% - 2% per annum Donor Advised Funds (DAF s) Flexibility in annual gifting, varying control of the assets or investments, smaller minimums versus a private foundation Setting up a Private Foundation Ability to create long term philanthropic goals, complete flexibility with assets and granting, greater than $1 million in assets under management ( AUM ), active involvement 4

5 Donor Advised Funds Popular in the US but just starting to gain popularity in Canada (Fidelity Charitable Gift Fund approximately $4 billion in AUM) Offered by most banks, bank owned brokerage firms and some mutual fund companies Fees 1.5% - 4% Minimums typically $100,000 or lower Grants typically made on an annual basis Investment options typically limited by financial institution offering DAF Administration by financial institution 5

6 Private Foundations Higher commitment to philanthropy Personal structure for dedicating personal wealth for public benefit Flexibility and control Both of the gifting and asset management Philanthropic engagement and efficacy Intergenerational family involvement Source: Malcolm Burrows, Scotia Private Client Group, presentation November 8,

7 Private Foundation Activity Approximately 10,000 foundations in Canada, less than 2000 active in making grants Most foundations have assets less than $50 million The majority of private foundations have assets of less than $10 million 7

8 Private Foundations Strengths Weaknesses Comparative advantage of private foundations: Donors are rooted in their communities and know the needs Generally have a tolerance for risk Often responsive to innovation Community influencers and advocates Scope of foundation action bound by: Regulatory framework Definition of charity in ITA Little political advocacy permitted Disbursement quotas Restrictions on debt Administrative requirements 8

9 Entity Trust or Corporation? Trusts Trustees have higher degree of potential liability No government filings, no dealing with changes to legislation Higher level of privacy Corporation Higher level of protection from liability Operating formalities in legislation (and by-laws) and challenges with changes to legislation (Part 11 CCA, audit requirement) Corporate disclosures and filings compromise privacy 9

10 Typical Foundation Services Foundation Services Manage all of the administrative and regulatory requirements of the foundation Services include: Preparation of the philanthropy statement, investment policy statement, governing and incorporating documents and budget Coordination of legal, tax, and financial advisors Management of board meetings, committees, succession planning and communications Coordination of grant-making, including customized plan of donations and due diligence on donees Preparation of annual reports on activities and/or act as spokesperson of the foundation 10

11 CRA Considerations Audit results for had only 9% of charities in compliance. Issues included: Incorrectly issuing donation receipts, Making gifts to non-qualified donees, Failing to maintain direction and control of funds, Keeping inadequate books and records, and Filing incomplete and/or inaccurate registered charity information returns. If the donor receives an advantage for a donation, part or all of the donation may not qualify for a tax receipt. Generally, if the value of the advantage received by the donor is greater than 80% of the gift, no receipt can be issued. If the advantage is less than $75 and 10% of the gift, the amount is not deducted from the tax receipt amount. 11

12 CRA Considerations ITA permits registered charities to operate by either carrying on their own charitable activities or gifting funds to qualified donees (organizations that can issue official donation receipts) T3010 return must be filed six month after the charity s fiscal period For property not used in charitable activities, the disbursement quota is 3.5% of the average value of the property over the previous 24 months Fundraising is not a charitable purpose nor are political activities 12

13 Additional Resources CRA Charities Directorate Philanthropic Foundations Canada Guide to starting a foundation CAGP (Canadian Association of Gift Planners) Canadian Taxation of Charities & Donations (Drache - Carswell) Additional information and articles upon request 13