Determining the fair market value

Program Process

Ecological gifts are donations with preferential income-tax treatment, and therefore have specific requirements above and beyond other kinds of donations. In order for an ecological gift to meet these requirements, the federal Minister of the Environment must certify the property as ecologically sensitive, approve the recipient to receive the ecological gift, and certify the fair market value of the donation.

In Quebec, the ecological gift process is the joint responsibility of the federal and provincial governments: the Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs, which is responsible for certifying the property’s ecological value and the recipient; and Environment Canada, which determines and certifies the fair market value of the property. 

There are a number of steps involved in this process, including: arranging the donation; preparing and filing information on ecological sensitivity; and determining the fair market value of the donation.

Once this process has been completed successfully, the donor will receive:

• a Certificate for Donation of Ecologically Sensitive Land (or, in Quebec, a Visa pour dons de terrains ou de servitudes ayant une valeur ecologique);
• a Statement of Fair Market Value; and
• an official donation receipt for the gift from the recipient.

All three of these must be included with the donor’s income-tax return. 

It can take several months to arrange a donation, and up to six months or longer to receive the necessary certifications. As a result, donors are advised to apply to the Ecological Gifts Program for a determination of fair market value as early in the year as possible--mid-September at the latest--if they wish to use their ecological gift tax benefits that same year. The donation receipt can be used beginning in the year the donation was made.

Program Coordinators are available to help at any time with a variety of aspects of the Ecological Gifts Program process.

Certifying the Value of the Donation

The fair market value of all gifts under the Ecological Gifts Program must be certified by the federal Minister of the Environment. In Quebec (in accordance with the Quebec Taxation Act), they must also be certified by the Quebec Minister of the Environment. The donor of a property that has been certified as ecologically sensitive must submit an independent appraisal of the fair market value of the donated lands or conservation easement, covenant, or servitude to the regional Ecological Gifts Program coordinator, along with a signed Application for Appraisal Review and Determination. Applications are available from coordinators and on the Program's Web site.

Commissioning the appraisal

Either the donor or the recipient must commission an appraisal to estimate the ecological gift’s fair market value.

Appraisals must conform to the Canadian Uniform Standards of Professional Appraisal Practice (The Standards) or, in Quebec, Les normes de pratique professionelle des evaluateurs agrees, as well as to all Environment Canada requirements above and beyond these standards. These requirements are outlined in the Ecological Gifts Program’s Guidelines for Appraisals, which is available on this site and through the Program’s regional offices and National Secretariat.

The party that engages the appraiser should ensure that the appraiser has experience both in the location of the property and the type of real-estate interest involved (i.e., fee simple, conservation easement, covenant, or servitude). Ecological gift valuation training courses for appraisers and recipients have been held across Canada to help improve knowledge and understanding of requirements specific to the Ecological Gifts Program. It is mandatory that, if the appraisal assignment involves a partial interest in land, the appraiser have a dated copy of the completed (or nearly completed) agreement when doing the appraisal.

All appraisals will be reviewed by one or more members of Environment Canada’s Appraisal Review Panel, as per the standards of the Appraisal Institute of Canada. The Panel is an independent advisory body made up of appraisers and other specialists.

For more information, see the Ecological Gifts Program's Engaging an Appraiser to Appraise an Ecological Gift.

Submitting the appraisal and application

Three colour copies of the completed appraisal must be submitted to Environment Canada’s Ecological Gifts Program regional coordinator, along with a completed Application for Appraisal Review and Determination signed and dated by the donor. For appraisals of partial interests in land, a copy of the signed final or dated draft easement, covenant or servitude must be included in the report.

If a donor wishes to receive a Notice of Determination of Fair Market Value before the end of the calendar year, applications must be submitted by mid-September or earlier, if possible. Incomplete or inadequate application forms or appraisals may be returned for more information.

Receiving a Notice of Determination of Fair Market Value

Following the review of the appraisal by one or more members of Environment Canada’s Appraisal Review Panel, the donor will receive a Notice of Determination of Fair Market Value indicating the fair market value that the federal Minister of the Environment is prepared to certify for the property. In most cases, when the appraisal conforms to the standards outlined in the Guidelines for Appraisals, this process takes no more than 90 days.

The donor must, within 90 days after the day on which the Notice of Determination of Fair Market Value was originally issued, choose one of the following options:

• accept the fair market value as determined, notify Environment Canada in writing, and complete the donation process with the recipient;
• request, in writing, a redetermination by the Redetermination Committee of the Appraisal Review Panel at its next scheduled meeting; or
• withdraw from the Ecological Gifts Program and notify Environment Canada in writing.

The fair market value on the Notice of Determination of Fair Market Value applies to the property for two years from the notice date for all income-tax purposes related to charitable gifts. A donor who has withdrawn from the Program and wishes to re-enter during this period should contact the regional Ecological Gifts Program coordinator.

The Redetermination Process

Donors requesting a redetermination of fair market value should provide details of factors or circumstances pertaining to the proposed ecological gift, as well as any new information that could affect the recommendation of the Appraisal Review Panel.

This could include additional written submissions by the appraiser or others supporting the value estimated in the appraisal report or responding to reasons given for the determined value, additional appraisal reports, or relevant market information.

The Redetermination Committee makes its recommendation to the Minister on the fair market value of the ecological gift within 60 days of completing its redetermination. The Minister issues a Notice of Redetermination of Fair Market Value after considering the recommendation received from the Committee.

Statement of fair market value

The donor may accept the determination of fair market value by completing, signing, and returning either the Notice of Determination of Fair Market Value or the Notice of Redetermination of Fair Market Value to the appropriate regional coordinator. The donor and the recipient are responsible for completing the donation by registering the land transfer or partial interest in land on title.

Once Environment Canada has received evidence that the donation has been completed--such as a copy of the registered transfer document or documentation proving that the easement, covenant, or servitude agreement has been registered on title - a Statement of Fair Market Value will be issued to the donor. In Quebec, the Statement will also be signed by the Ministère de l’Environnement, de la Lutte contre les changements climatiques, de la Faune et des Parcs so the donor will be eligible for provincial tax benefits. If the content of the registered easement, covenant, or servitude agreement differs from that of the draft used for the appraisal, a letter from the original appraiser indicating whether this change has any effect on the donation's value must be provided for consideration by the Appraisal Review Panel. The value on the Statement should appear on the donation receipt issued by the recipient.

If, following the completion of their ecological gift donation and the issuance of their official donation receipt for the gift, donors are still not satisfied with the amount that the Minister of the Environment has determined as the fair market value of their donation, they may appeal that determination to the Tax Court of Canada and, in Quebec, the Court of Quebec. The value determined by the Tax Court of Canada will serve for the purposes of the federal income-tax return, and that determined by the Court of Quebec for the provincial return. However, this course of action may only be pursued after the redetermination process has been completed.