The First-Time Donor’s Super Credit (“FDSC”) was one of the measures proposed in the March 21, 2013 Federal Budget. On May 2, 2013, the Canada Revenue Agency (the “CRA”) released a “Question and Answer” describing some of the essential features of the FDSC as currently proposed.
The FDSC is a temporary measure designed, in part, to encourage young Canadians to donate to charity. First-time donors (discussed further below) may claim the FDSC once between the 2013 to 2017 taxation years.
The FDSC works by effectively enhancing the existing charitable donations tax credit (“CDTC”) by 25% for donations of money up to $1,000. As an illustration for calculating the CDTC and FDSC for a donation of $800, the first $200 would be subject to a rate of 40% (the basic rate of 15% plus the enhanced rate of 25%) and the remaining $600 would be subject to a rate of 54% (the basic rate of 29% plus the enhanced rate of 25%) for a total credit of $404. A similar donation without the FDSC would result in a credit of $204.
The FDSC only applies with respect to donations of money (made after March 20, 2013). Where a taxpayer donates a mixture of money and other property in a taxation year, it will be important to clearly identify the portion of the total donation that is money. The CRA has indicated that Schedule 9 “Donations and Gifts” will be amended for the 2013 to 2017 taxation years to add a line for the taxpayer to identify the eligible portion of charitable donations that are donations of money.
The FDSC is limited to a “first-time donor” which is defined as an individual (other than a trust) who has not claimed the CDTC in any of the five preceding taxation years and whose spouse has not made such a claim. Where an individual is a first-time donor, the individual and his/her spouse must share the $1,000 limit. Also, if both the individual and his/her spouse claim the FDTC and it is in excess of the $1,000 limit, the CRA will apportion the claim in the absence of an agreement between the taxpayers.