Policy priority: A scaled disbursement quota to increase funds available to communities
Policy priority: A scaled disbursement quota to increase funds available to communities
Registered charities are required to spend a certain percentage of their assets on charitable programs or on grants to other charities annually. This quota mainly impacts foundations.
Summary
The federal government has passed legislation regarding changes to the disbursement quota. Investment assets (cash in bank accounts, inventory, land, and buildings) owned by a charity in the 24 months immediately preceding the taxation year that have not been used directly in charitable activities or administration are subject to this legislation. For investment assets exceeding $1 million, the rate of the disbursement quota will increase from 3.5% to 5%. The first $1 million of investment assets will be subject to a DQ rate of 3.5%. The rate will be 5% for all investment assets exceeding $1 million. Changes to the disbursement quota took effect for taxation years beginning on or after January 1, 2023.
Did you know?
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From 2008 to 2019, total foundation assets have almost tripled, going from $39.5 billion to $116 billion in constant 2019 dollar terms.
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On the whole, a small amount (approx. $200 million) of new spending will be released if the DQ is raised to 5% when compared to the total amount of funding that the sector receives annually.
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We analyzed the impact that a 10% DQ would have on the largest foundations (e.g. those with more than $3 billion in assets). Our data shows that 84% of those foundations can afford to disburse at 10% without spending any of their endowment.
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Equity-seeking communities are often underserved by philanthropy. A sample from 2015 of private foundation disbursements (Snapshot of Foundation Giving in 2015) demonstrated that funds tend to be directed towards charities with mission areas in education & research (over 30% of total disbursements) and health (at 17%) leaving some equity-seeking communities underserved.
Our ask
In Imagine Canada’s 2026 pre-budget submission, we have requested that the federal government fulfill the Budget 2022 commitment to review the disbursement quota in 2027.
Learn more
Submission for the Pre-Budget Consultations in Advance of the Fall 2026 Budget
Imagine Canada, 2026
A Rising Tide? Early evidence on the disbursement quota change
Imagine Canada, 2026
Government of Canada, 2023
Imagine Canada, 2022
Department of Finance Canada, 2022
Government of Canada, 2021
Imagine Canada, 2021
The Equitable Recovery Collective, 2021
Imagine Canada, 2021
Ian Murray, 2021
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