Awareness of environ-mental issues is growing; there’s a good chance you have clients who are interested in incorporating green consciousness into their estate and philanthropic planning. One way to do that is through the Ecological Gifts program run by Environment Canada.
The program is particularly appropriate for clients who own farms, ranches, woodlots, cottages or tracts of undeveloped land that could be certified as ecologically sensitive. Clients who count a qualifying rural or wilderness property among their assets and who wish to preserve all or a portion of their property as a legacy for future generations may be entitled to generous tax advantages under the program. In many cases, the landowner can continue to hold title or live on the land while enjoying the tax benefits of making the gift.
The donation must be given to a qualifying charity or federal, provincial or municipal government body that is recognized by the program.
“Habitat loss and environmental degradation are huge threats to biodiversity as forests are cleared and wetlands are drained for development,” says Dawn Laing, habitat biologist and Ecologi-cal Gifts program co-ordinator for Environment Canada in Toronto. “One of the major goals of this program is to protect our country’s ecologically sensitive areas in perpetuity.”
Gifts can include wetlands, forests, prairies or property with access to protected areas and other environmentally sensitive lands. Since the program was launched in 1995, there have been 669 donations nationally, amounting to almost 118,000 hectares with a market value of $405 million. Many of these gifts contain habitats that are home to species of plant and animal life that are at risk.
In exchange for their donations, donors receive a tax credit for the value of the land: the credit can be applied against 100% of net income and also carried forward for up to five years. Corporate donors may deduct the amount of their gift directly from taxable income, while the value of an individual’s gift is converted to a non-refundable tax credit. In addition, there are no capital gains taxes levied on any increase in the value of the property if it is donated as an ecological gift.
More than 170 organizations are eligible to receive such donations of land. Environment Canada maintains a list of conservation charities qualified as “ecogift” recipients. (See “eligible environmental charities” at www.cws-scf.ec.gc.ca.) Eligible charities include such national bodies as Ducks Unlimited Canada, the Nature Conservancy of Canada, Land Stewardship Centre of Canada and the Trans-Canada Trail. A wide range of similar conservation agencies exist across Canada under provincial regulations. Local community land trusts such as the Oak Ridges Moraine Land Trust in Ontario also qualify.
Recipients of ecogifts are responsible for maintaining the biodiversity and environmental values of the property indefinitely, whether the donation is full title or partial rights. If the recipient of the land fails to maintain it properly, or sells or degrades the land, the recipient is subject to a federal tax of 50% of the fair market value of the land, in addition to any legal action the donor may take against the recipient. Some recipients help with initial assessment of the property’s ecological sensitivity, arranging for an appraisal and assisting with the application process. Value must be determined by a qualified appraiser and conform to Environment Canada’s standards.
NATURAL PLACES
“We have received about a dozen ecological gifts,” says Ron Reid, executive director of the Couchiching Conservancy in Orillia, Ont. “The people involved share a strong sense of responsibility to the natural world and to future generations. Often, there is a nice piece of green space or a property that enhances a community in which people live and work. People love natural places that are near at hand, where they can go for a walk in the woods and see a deer, raccoon or woodpecker.”
As people approach retirement age and think about leaving a legacy and transferring assets to the next generation, the financial services community needs to be aware of the opportunities, Reid says. Many properties are donated in memory of a person important to the donor, and in some cases the donor has named the property to honour a memory.
Rhonda Cowen, a financial advisor with Investment Planning Counsel in Orillia, recently donated 23 acres of her 61-acre farm to the Couchiching Conservancy. Her property was valued at $285,000, and she is deducting this amount from her earned income during the next couple of years. The donation was dedicated to her parents; the donated property has been named Jennett Woods in their honour.
@page_break@Cowen, who still has almost 40 acres left to live on and enjoy, is pleased that the bush property will be used for skiing, horseback riding and walking trails, and will be protected from clearing and development. She is especially pleased that when her land was studied for eligibility under the program, the rare black-backed woodpecker was spotted.
“Donating land is another alternative for people who are interested in charitable giving,” Cowen says. “Many people want to act in an environmentally responsible fashion and leave a lasting legacy. My piece of land will always have the Jennett name, and the land will be preserved in its natural state.”
Donors who don’t want to part completely with their land may continue to hold title or live on their land by donating a partial interest, such as a conservation easement. A conservation easement is an agreement between a conservation body and the landowner that contains restrictions and allowances for land use but allows the donor to retain title to the property.
PARTIAL INTEREST
For example, dumping, subdivision, construction and tree clearing can be permanently forbidden, no matter who owns the property in the future. The agreement is registered in the title of the land and remains in effect even if the property is sold or transferred. The value of the gift is the difference between the “before” and “after” fair market value of the property once the restrictions have been registered. About half the ecogift donations made are partial interests in land with permanent terms and conditions on its use to protect its ecological value.
When Lorne and Rhoda Almack granted a conservation easement to protect the woods, meadows and streams on their property on Ontario’s Oak Ridges Moraine, they specified that the land could be used for horses and farming but could not be severed or developed for uses such as housing or golf courses.
When Brian and Jane Buckles donated a conservation easement on their 40-hectare property to the Toronto and Region Conservation Authority, they established covenants that severely restrict the Buckles or any subsequent owners of the land from creating building lots, constructing new buildings and water-taking, while allowing selective tree-cutting and maple sap collection.
The Buckles and Almacks continue to live on their land and are free to sell at any time, but all new owners must abide by the restrictions indefinitely.
Covenants are usually negative, which means they do not allow particular activities or land uses that impair the land’s natural attributes. But they can also provide for specific activities such as responsible forestry or trail maintenance. It is advisable to include only covenants that address major threats to the natural integrity of the land and which can be enforced and monitored.
The holder of the conservation easement must ensure that current and future owners of the land comply with the covenants, and must be prepared to take action in the event of non-compliance. IE
Helping donors protect the land — forever
- By: Jade Hemeon
- September 3, 2008 September 3, 2008
- 10:30