Tax Credit for a Major Cultural Donation

When charitable giving is discussed, medical research, poverty reduction, education and food security are among the causes most frequently mentioned and widely supported by the public. Culture, however, generally receives less support, despite its fundamental role in shaping a society’s identity and vitality.

To encourage major donations to the cultural sector, the Quebec government introduced an additional 25% tax credit for a first major cultural donation through Information Bulletin 2013-6. This measure is specific to Quebec’s tax system and has not been harmonized with the federal system. Initially introduced as a temporary measure, it has since been extended and made permanent.

What Is a “Major Cultural Donation”?

To qualify, the donation must meet certain conditions:

• It must be a cash donation of at least $5,000 and no more than $25,000;

• It must be made after July 3, 2013, by an individual other than a trust;

• It must be made to one of the following eligible organizations:

1. A registered charity operating in Quebec in the arts or cultural sector;

2. A registered cultural or communications organization;

3. A registered museum;

4. A museum established under the Act respecting national museums or a museum located in Quebec and established under the Museums Act.

A One-Time “Additional” Tax Credit

The credit is described as “additional” because it is added to the tax credit an individual would normally receive for charitable donations. In other words, an individual may claim the additional 25% credit for a first major cultural donation without giving up the regular charitable donation tax credit.

The additional credit may be claimed only once. However, when several donations are made to the same eligible cultural organization during the same year, they are deemed to constitute a single donation. The tax credit may therefore be claimed on the total amount donated to that organization during the year.

This is a non-refundable tax credit. However, any unused portion may be carried forward for four years. The credit cannot be transferred to a spouse. Each spouse may nevertheless claim the additional tax credit for their own first major cultural donation.

In addition, the amount of donations claimed for a particular year generally cannot exceed 75% of the donor’s income for that year. An exception applies when the particular year is the year of the donor’s death or the preceding year. In these cases, the donation limit is equal to the donor’s income for the year.

How Does This Tax Credit Apply?

The tax treatment of charitable donations varies according to the donor’s taxable income. More specifically, tax credits are calculated using progressive rates that differ between the federal and Quebec tax systems. The following table illustrates the applicable percentages based on the donation amount and certain income thresholds:

To illustrate the additional benefit of the tax credit for a major cultural donation, the following table compares a regular donation with a donation eligible for this credit for a taxpayer subject to the highest marginal tax rate of 53.31%:

In summary, the additional tax credit for a first major cultural donation provides an attractive opportunity to use tax planning in support of both philanthropy and Quebec culture.