It’s pretty rare for me to write twice in the same year about the same issue. I’m going to make an exception, and deviate from my usually storytelling this month, to put a spotlight on an urgent issue that will be of high concern to many of our readers.

You might recall in my article “The Ghost of 1986” back in the spring, I mentioned that the government has proposed changes to something known as “Alternative Minimum Tax” or AMT. AMT was first introduced almost 40 years ago to ensure that high income earners didn’t pay unreasonable low taxes. It was a prudent public policy measure that required taxpayers to calculate their tax in two different ways, and pay the higher. It was originally designed only to impact people who earned more than $40,000, with much of their income coming from capital gains or other lower-taxed source of income.

This year, the government announced changes that at first glance, seemed like smart public policy – for example, the threshold has moved from $40,000 to $173,000, which means that many Canadians will no longer be exposed to AMT. That’s good news – in fact, it’s probably, in my opinion, the only good part of the proposed changes.

Two proposed changes to the AMT will have a tremendous negative impact on people with an interest in making donations:

  • For donations of Publicly Listed Securities, 30% of capital gains on the donated securities will be included for calculating AMT.
  • Only 50% of non-refundable tax credits (which is the type of credit charitable donations receive) will be applied for AMT purposes.

The net result is going to be absolutely detrimental to people who donate, and donate gifts of securities in particular, if their income exceeds $173,000.

At first glance, one might think that only a small group of people would earn over $173,000 in a calendar year. However, in my experience, many people are often particularly charitable during years where they might have an unusually high amount of income, due to a one-time event. Imagine someone who sells a cottage, a farm, or a rental property, for example, or someone who sells a business. We often see our clients generously wanting to make a donation as they have a sudden influx of cash, as well as a higher-than-normal tax bill.

For many of these scenarios, the new tax rules will be quite punitive. I recently ran an analysis for a client who we will call Taylor, who was closing her Holding Company (a one time event), and redeeming her shares. She planned to donate the full $500,000 of proceeds entirely to charity. In her situation (where she would donate the $500,000 from her existing non-registered personal publicly traded share holdings), if she completes this in 2023, the tax on the transaction is essentially zero. If she waits until 2024, the tax cost would be about $50,000 to $60,000 higher, based on what we know of the proposals.

That’s a HUGE difference. It’s definitely in her best interest to be “Swift” in making the donation this year if she does it personally. (See, there was a reason we called her Taylor!)

Here’s the most interesting part: AMT rules are not changing for corporations. So, if you have a corporation, and you donate from your corporation, there’s no difference between donating in 2023 and 2024.

This difference breaks one of the fundamental principles of tax in Canada – that for high income earners, there shouldn’t be a substantial tax difference between donating or saving personally or corporately. There may be some minor differences, but never before can I recall seeing such a huge differential.

One of my CAGP colleagues has speculated that CRA is specifically targeting larger donations of publicly traded securities. I think he might be right. A number of companies have cleverly found a way to package donations together with other highly tax-advantaged transactions (including but not limited to flow-through shares) to allow higher income earners to donate large sums at very little net after-tax cost. I’ve seen some situations where the cost to the donor is only 5-15% of the amount the charity receives. Importantly, these transactions are 100% compliant with CRA rules, even if they are “too generous” in spirit.

I suspect that CRA was forced into an uncomfortable situation – they created preferential tax treatment, which some very smart parties found a way to package together in a way that the government probably never intended or foresaw as a possibility. I suspect that these proposed AMT changes have been designed specifically to address what CRA might see as an inappropriate benefit. For those engaged in this type of gift, the new rules turn an incredibly tax-efficient donation method into a good donation method, probably to the point that this “bundling” of different tax credits might not be all that appealing going forward. Frankly, that’s probably very good public policy.

Unfortunately, the new proposals are going to catch a number of people in a wider net than perhaps intended. Certainly, for my client Taylor, the rules sweep her up in a very unpleasant way. At least we’ve had some time to do some planning and realize that it will be to her advantage to donate now, rather than wait until 2024.

In the meantime, many charities and industry organizations are providing feedback to CRA. Historically, CRA has taken the time to listen to the sector when the sector has highlighted unanticipated consequences of tax changes. I’m hopeful that perhaps CRA will blink on their proposed changes, but it’s getting pretty close to the end of the tax year. The closing date for submissions to CRA is September 8th – so if you have some last-minute thoughts on these changes you would like to submit to CRA, you had better get started right away! Feedback can be emailed to

In the meantime, if you think this issue might affect you, I’d highly recommend chatting with your accountant in the next few weeks. AMT calculations are complicated, and have many variables, and that was before the changes.