Ottawa is removing tax discrimination against private foundations. The 2007 federal budget contains a proposal to eliminate taxes on capital gains arising from donations of publicly listed securities.

Taxes on capital gains arising from donations to publicly listed securities to public charities has gradually been reduced since 1997. Since May 2, 2006 those donations have been completely exempt from capital gains taxes.

This move resulted in calls from the tax experts to level the playing field between private and public foundations.

In a January 2007 paper entitled “Uncharitable Treatment: Why Donations to Private and Public Foundations Deserve Equal Tax Status,” the C.D. Howe Institute wrote that there are more than 3,000 private foundations in the country, with annual donation receipts totaling more than $700 million, compared with 4,000 public foundations that receive a perhaps twice as much.

The group noted, however, that the difference should not result in unequal treatment that discourages their development. “Charitable giving is no place for tax policy to play favourites.”

At present, an employee who acquires a publicly listed security under an option granted by the employer to donate the security to a public charity within 30 days can receive a special deduction. The 2007 budget proposes to extend this provision to donations to private foundations.

These measures will apply to gifts made on or after March 19, 2007.