Feds look to increase charities’ disbursement quota

The federal government is considering increasing the minimum amount that charities are required to spend each year on programs and gifts to qualified donees.

In Monday’s budget, the government said it would launch public consultations with charities over the coming months on potentially increasing the disbursement quota, beginning in 2022. The quota is currently set at 3.5% of the average value of a charity’s property not used for charitable activities or administration.

“While most charities meet or exceed their disbursement quotas, a gap of at least $1 billion in charitable expenditures in our communities exists today,” the government said.

“Furthermore, growth in the investment assets of foundations has increased significantly in recent years. In 2019, charitable foundations held over $85 billion in long-term investments. But grant-making and other charitable activities have not kept pace.”

As well as looking at the rate of disbursement, the government would also look at updating the tools that the Canada Revenue Agency (CRA) has to enforce the annual quota. Increasing the quota and updating the CRA’s tools could potentially increase disbursements by between $1 billion and $2 billion annually, the government estimated.

The government has also proposed amending the Income Tax Act to revoke the charitable status of organizations listed as terrorist entities and to prevent people with a known history of supporting terrorism from becoming a director, trustee or similar official of a registered charity. The amendments would also revoke a charity’s status when it makes false statements for the purpose of maintaining registration.

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.