What CPAs should know about the Ecological Gifts Program

Habitat loss and degradation are the greatest threats to biodiversity in Canada today. Many key habitats, from marshes to grasslands, are found on private property with landowners playing a vital role in their conservation. Thanks to its tax advantages, Canada’s Ecological Gifts Program grants Canadians the ability to leave a legacy for tomorrow and receive a tax break today.

With the Ecological Gifts Program being so unique, more CPAs should know about it. They play a valuable role in making ecological gifts happen, along with financial advisors, estate planners and other professionals. The Ecological Gifts Program is made possible through provisions in the Income Tax Act and the Quebec Taxation Act and is administered by Environment and Climate Change Canada. It provides a way for both individuals and corporations with ecologically sensitive land to protect nature and leave a legacy for future generations, while also reaping benefits of their own.

For example, there may be clients (individual or corporate) who own property that includes significant wildlife habitat, such as forest, grassland and wetland. But what happens when the landowner can no longer care for their property, or if they have children who aren’t interested in maintaining it? They may worry about the tax consequences of selling their land (such as capital gains tax), or that the pristine land they have cared for over decades may be developed into something garish.

Ecological gifts are made by the donor to an eligible recipient, such as a land trust or a government body. These recipients then become responsible for the conservation of the donated land’s biodiversity and environmental heritage.

Qualified donations of ecologically sensitive lands, or of conservation easements, covenants and servitudes, are eligible for special tax benefits beyond those offered for most other types of gifts. Advantages of ecological gifts include no tax on capital gains, no limit on the total value eligible for deduction or credit in any one year, and any unclaimed amount may be carried forward for up to 10 years.

Corporate donors may deduct the eligible amount of their gift directly from their taxable income, while the eligible amount of a gift made by an individual (or an individual’s spouse or common-law partner) is converted to a non-refundable tax credit. The donors receive a charitable receipt for the fair market value of their donation.

To be eligible, the land must qualify as ecologically sensitive and be certified as such by the Minister of the Environment. The landowner then presents an appraisal of the fair market value of the property for review by the Minister. The fair market value is determined by the Minister, and this process can be completed before the decision to proceed with the gift is made.

Since 1995, Canadians have made more than 1,800 ecological gifts across the country. To date, more than 240,000 hectares of private land are protected for future generations, at a value of over $1.2 billion. Each donation, no matter how small, makes a substantial contribution to protecting species and habitats across the country for future generations. In the words of Karen Cooper, KPMG Law: “Without the help of professional advisors who are familiar with the Ecological Gifts Program, these kinds of donations may not occur.”

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Photo caption: The Ecological Gifts Program is made possible through provisions in the Income Tax Act and the Quebec Taxation Act (iStock)