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First-time charity donors should check rules for new tax credit

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Like other Canadian charities, the British Columbia SPCA is hoping that more people will take advantage of a new tax credit for first-time donors and be inspired to keep giving year after year.

Called the first-time donor's super credit by the federal government, the tax credit is aimed at getting new donors to give to charities by increasing the value of the federal charitable donations tax credit by 25 per cent. The credit can be applied to cash donations of up to $1,000, and can be claimed only once in any taxation year from 2013 to 2017.

Rosemary Conder of the B.C. Society for the Prevention of Cruelty to Animals called the so-called super credit a "sweetener" to attract new donors. The animal-welfare group hopes to raise $17-million in donations this year.

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"Hopefully, it will work over the long-term, that donors will fall in love with us and want to continue supporting us," said Conder, the charity's chief development officer. "Maybe it's a chance to start a relationship."

To be eligible for the credit, first-time donors can't have claimed a charitable donation tax credit since 2007, according to the Canada Revenue Agency. The credit can also only be applied to cash donations and not to donations of land or art collections, for example, said agency spokeswoman Julie Pronovost.

For a first-time donor who made $500 in charitable donations in 2013, the super credit would be $125, or 25 per cent, in addition to the federal and provincial charitable donation tax credits.

With the addition of first-time donor's credit, an individual can get a 40 per cent federal credit for cash donations of $200 or less, and a 54 per cent federal credit for the part of the donations over $200.

"So it's an added incentive to donate to a registered Canadian charity," Pronovost said.

The tax agency has resources on its website, including a charitable donation tax credit calculator, to help first-time donors with the calculations.

The number of charitable donors in 2012 was 5.6 million, down 1.4 per cent from 2011 and the average age was 53, according to the most recent figures from Statistics Canada. Donations reported by tax filers declined 1.9 per cent to $8.3-billion in 2012.

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Pronovost said the first-time credit can be claimed during the five-year period when it's most advantageous to the first-time donor.

As a first-time donor, the credit along with the charitable donations tax credit, can be shared between the individual and spouse, or common-law partner.

But lawyer Adam Aptowitzer, who specializes in tax and charity matters, said many Canadians already don't understand how the charitable donation tax credit works.

"The initial system is complicated enough and the first-time donor's credit does not make it easier," said Aptowitzer with firm Drache Aptowitzer in Ottawa.

"I don't think an incentive is any good if you don't know how it works."

He believes the complexity of the first-time donor's credit will diminish its effectiveness, and suggests that the deadline for charitable donations be moved from the end of December to coincide with the end of RRSP season to help Canadians become more familiar with the process.

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Matt Kanas, spokesman for tax software program TurboTax Canada, said the first-time donor's credit is an opportunity for Millennials – those born between 1980 and 1995 – to give to charities.

"They're socially minded," Kanas said. "It's likely they're donating to various causes and probably filing for the first time on their own. For them, it's an opportunity to reflect on what do those donations mean."

The Canadian Cancer Society has started its April daffodil fundraising campaign, which raised just under $19-million last year. It's hoping that the new credit will help it gain more permanent donors.

"We're definitely hoping that it would draw in a different demographic, a different group of Canadians and get them accustomed to becoming part of the charitable sector and join so many other Canadians in giving to the fight against cancer," said Lauren Dobson-Hughes, senior manager of public issues for the organization in Ottawa.

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