1	OSGOODE HALL LAW SCHOOL TAX EXPENDITURES AND PUBLIC POLICY IN COMPARATIVE PERSPECTIVE Toronto – September 11, 2009 Ecological Gifts are a Bargain
2	Introduction The ITA provides enhanced charitable tax benefits and relief from taxable capital gains for gifts of ecologically sensitive property through the Ecological Gifts Program (“EGP”) The EGP was introduced in 1995 as a tool for encouraging the conservation of habitat and biodiversity across Canada
3	"Tax expenditure estimates include the..." Tax expenditure estimates include the expenditures related to ecological gifts in the charitable category They are critiqued as part of the general critique of charitable expenditures, with particular negative attention focused on capital gains relief
4	"BUT" BUT, the EGP is really an environmental expenditure The EGP is one of many programs designed to protect Canada’s environmental heritage and biodiversity It recognizes that conservation measures focused on private lands are essential Economic incentive or payment for stewardship - retention and restoration of natural capital
5	Evaluating a Conservation Tax Policy As an environmental expenditure, it should be evaluated based on Environmental effectiveness Economic efficiency Equity (distributional) impacts Flexibility and political feasibility
6	"Focus on environmental effectiveness" Focus on environmental effectiveness by looking at the net benefits of the environmental services provided Net Environmental Benefits = Value of Ecological Services Obtained – Costs Costs = tax expenditure administrative costs transactional costs
7	"This analysis" This analysis Demonstrates that the EGP is a bargain Society receives ecological goods and services worth far more than the compensation paid to private land owners thru the tax expenditure Allows better comparisons with other environmental tools Identifies EGP design weakness Responds to the charitable expenditure based critique
8	Basic Requirements Of Ecogifts 1. Eligible Recipient: Territorial, provincial or federal departments or agencies A municipality or quasi-municipality An approved registered charity whose main purpose is the conservation and protection of the environment
9	"2" 2. Ecologically Sensitive Land: The property must be ecologically sensitive and its conservation and protection important to the preservation of Canada’s environmental heritage Environment Canada has developed a definition of “ecologically sensitive land,” see The Canadian Ecological Gifts Program Handbook 2005 and the Environment Canada website The Minister of the Environment, or his designate, will issue a Certificate for Donation of Ecologically Sensitive Land (or, in Quebec, a Visa pour dons de terrains ou de servitudes ayant une valeur écologique)
10	"3" 3. Certified Fair Market Value: The FMV of the gift must also be certified The FMV of an easement, covenant or servitude is determined using the “before and after” method of valuation, e.g. the FMV of the gift is the value of the land before the grant minus the FMV of the land after the grant Independent appraisals are submitted to Environment Canada, which is reviewed by the Appraisal Review Panel An appeal process is available
11	Tax Benefits Some of the tax benefits of an ecological gift are the same as for all gifts: Donors receive a non-refundable tax credit or deduction Any unused portion of the donor's ecological gifts may be carried forward for up to five years
12	"Ecological gifts also receive tax..." Ecological gifts also receive tax benefits which are more significant and similar to those available for gifts of publicly listed securities: The taxable capital gain realized on disposition of property is nil The upper donation limit has been removed
13	Tax Expenditure Budget Estimates What do they really tell us?
14	Case Study: Jack’s farm in Ontario Jack is a small farmer who works as a truck driver for additional income During the last 5 years, his income from trucking exceeds his gross farm revenue. The annual household income is $67,000 He is considering either an outright donation or a conservation easement on his 100 hectares of land in the Credit Valley River watershed
15	"Although much of this land..." Although much of this land (50 hectares), which has been in his family for several generations, is in cultivation or used as hay land, 20 hectares are wetlands and 30 hectares are a managed woodlot Ducks, geese, and other wildlife are abundant on these lands The land has an adjusted cost base of $150,000 and is now worth $1,500,000. Although it is zoned agricultural, current zoning allows the severance of a building lot With a conservation easement, the land is valued at $500,000
16	Natural Capital and Ecosystem Services
17	Ecological Services: Use Value of Wetlands
18	Ecological Services: Forest and Agriculture
19	Valuing Ecological Services Data emerging from a relatively new field Millennium Ecosystem Assessment Contributes to strategic decision making: Investing in natural capital Business case for conservation over built capital Choice and design of fiscal instruments Quantifying fines and damage Limitations: Large data gaps; complex inter-relationships Best used for comparisons on a relative scale rather than absolute values
20	Measuring Natural Capital Values
21	Economic Valuation Approaches
22	Ecological Gifts: What can be valued?
23	Credit River Valley Minimum Estimates of Natural Capital Value $3,911 / ha / year from preliminary study
24	Range of Values from Different Studies
25	Back to Jack Calculating the Environmental Economic Flows /Benefit Obtained from the Donation
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28	Transaction and Administrative Costs
29	Stewardship
30	Net Economic Environmental Benefit
31	Responding to the Critique Produces demonstrable positive effects Payment for ecological value vs Personal and Discretionary expenditure
32	"Translates into needed public services"
33	Future Directions Carryforwards and carrybacks Refundability Expanding use with agricultural lands Inventory lands Transferable credits (not so much)
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