Fed launches consultations on increasing disbursement quotas for charities
The disbursement quota (DQ), which is the minimum amount that foundations must devote each year to charitable programs or gifts to qualified donees, has been set at 3.5% since 2004, when it was lowered by 4 , 5%. QD is determined based on the value, averaged over a 24-month period, of a charity’s property not used for charitable activities or administration.
In Budget 2021, the Liberal government expressed concern that despite the significant growth in investment property in charitable foundations in recent years, grantmaking has not kept pace.
While most charities are currently meeting or exceeding their DQ, “a gap of at least $ 1 billion in charitable spending” exists, the Finance statement said, “An increase in the disbursement quota could significantly increase support. the charitable sector, for the benefit of those who depend on its services, including the most vulnerable members of Canadian society.
In a backgrounder accompanying the statement, the government said it was asking interested parties to increase QD; the level at which it should be set; the desirability of increasing QD to such an extent that foundations gradually encroach on private equity; and whether temporary QD changes should be considered in the context of the Covid-19 resumption.
The government is also questioning what additional tools, such as “monetary penalties or other immediate sanctions”, should be available to the CRA to enforce the disbursement quota. Currently, the CRA has the power to revoke the charitable status of a registered charity that does not comply with the DQ, but it rarely takes this step, the government said, because “a such action is widely considered to be disproportionate to the non-compliance in question ”.
The government is asking stakeholders to provide comments by September 30. It will also consult with representatives of the charitable sector through the Charitable Sector Advisory Committee, a government body. According to the release, there are more than 86,000 registered charities in Canada.