MONTREAL – The weakened economy may deter some Canadians from making charitable donations as the holiday season approaches, but it isn’t stopping the wealthiest from digging even deeper to help those in need.
The founder of Canadian IT giant CGI (TSX:GIB.A) is among those who is sharing his good fortune by donating millions more to charity this year.
Serge Godin is donating more than $14 million to a foundation he created 12 years ago by handing over 2.2 per cent of the stock options he holds in his Montreal-based company.
“We’ve been very fortunate here in creating this company and I thought it was normal to try and give back to the community in which we are living,” he said in an interview.
While many company stocks have taken a beating since the 2008 recession, CGI’s shares have gained about 66 per cent, providing Godin more opportunity to give.
Since creating Fondation Jeunesse-Vie in 2000, the 61-year-old has donated about $25 million to the charity that help youth struggling with drugs and mental illness. He plans to give up to about $5 million a year for the rest of his life.
Donations have historically been in cash. But upon the advice of tax specialist Serge Bilodeau – father of Olympic ski moguls champion Alexandre – he’s begun handing over shares of his publicly traded company in order to reduce his tax burden and funnel more to the charity.
“It’s a good idea, because the amount for donors is the same, but more money is available to give to people in need.”
While cash is still king for most charitable donations, many Canadians are giving stock, art, land, life insurance and other assets.
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Some estimates suggest Canadians have made more than $1 billion worth of non-cash donations since the federal government changed the tax laws in the 2006 budget to eliminate capital gains taxes on securities donations.
The United Way of Toronto says it received $26 million in securities from nearly 500 donors in the first year after the change. That amount has stabilized at $10 million, or about 10 per cent of the $110 million worth of donations it received last year.
“The tax benefits are certainly having a very big benefit on local charitable organizations,” says Julia Gorman, vice-president resource development.
Giving publicly traded securities, including shares, bonds and mutual funds, to a registered charity allows donors to reduce their taxable income to help offset other taxes on capital gains.
Any excess can be carried forward for five years.
Donating securities-in-kind can save donors up to about $1,800 for each $10,000 donation, depending on factors such as the original cost of the security.
Anyone can donate securities, but the typical donor of securities is someone with big capital gains after selling a business created over decades of work, says Marvi Ricker, managing director of philanthropic services at BMO Harris Private Banking.
They feel grateful and want to share their good fortune. Like Godin, many create foundations to involve their families in giving.
She suggests donors large and small plan their giving by involving a financial adviser to maximize the tax benefits of the gift.
As the gap between rich and poor grows, the wealthy have more available to share and people like U.S. billionaires Bill Gates and Warren Buffet are encouraging them to give more, she said.
“Talking to my clients, a lot of people have been saying exactly what Buffett has said, namely that he wants to leave his children only so much.”
Both billionaires give away millions each year and have vowed to distribute the vast majority of their considerable fortunes.
While the type of donation may have changed, a recent survey sponsored by BMO found that 71 per cent of Canadians planned to same or more to charities next year.
That appears to be good news for charities that have taken a hit over the past few years as economic turbulence has reduced donations.
Statistics-Canada said donations dropped five per cent in 2008, the largest decline in 40 years. They fell another three per cent in 2009.
The number of Canadians donating is declining but those who give are giving higher amounts, said Gorman.
The average gift received from the United Way jumped to $505 in 2010 from $448 two years earlier.
“They do realize it’s the most vulnerable individuals and families in our communities that will suffer the most from lost employment and decreasing government support of some of the important programs.”
Ricker said there could be a little softening of donations from the general public this year, but among those with much to give, there’s no falling off.
As the key holiday donation period gets underway, charities are anxiously watching the public mood.
“We, like any other charity out there, are a little worried about what may or may not happen, but based on the history of people giving to the Salvation Army, we’re cautiously optimistic that people will come through,” said Andrew Burditt, national director of marketing and communications.
The large charity hopes to collect more than $19 million again this year from its annual kettle campaign, which gets underway next Tuesday.
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