Draft Budget Implementation Legislation: Part I, Disbursement Quota

  • August 31, 2022
  • Terrance S. Carter, Theresa L.M. Man and Jacqueline M. Demczur


The disbursement quota is expected to soon be increased, as first announced in Budget 2022. Two pieces of draft legislation – one to make technical amendments to the Income Tax Act (“ITA”) and Income Tax Regulations (“Regulations”), and one to implement parts of Budget 2022, among other proposals, by amending the ITA and Regulations – has been released.[1] In particular, the draft legislation proposes changes to the disbursement quota (“DQ”), trust reporting, technical updates regarding filing returns, as well as listing of prescribed donees. The draft legislation was released by the Department of Finance on August 9, 2022, together with explanatory notes.[2] It is expected that the proposed changes will appear in budget implementation legislation to be introduced in the House of Commons when Parliament resumes in September 2022. This article, which is Part I of a Three-Part series, will discuss the disbursement quota. 

Disbursement Quota


The DQ has been the subject of much discussion in the charitable sector for the past few years.[3] The DQ is the minimum amount that a charity must spend on its charitable activities or gifts to qualified donees to ensure that charitable property is used for charitable purposes and is not accumulated indefinitely. The DQ obligation, currently set at 3.5%, applies to property (such as real estate, investments) that is not used directly in charitable activities or administration.[4] The DQ only applies if the value of this property exceeds $25,000 for charitable foundations or $100,000 for charitable organizations.

A potential increase to the DQ was first proposed in the 2021 Federal Budget released on April 19, 2021. Finance Canada launched a public consultation which ran from August 6, 2021 until December 2, 2021, in which stakeholders and interested members of the public were provided with the opportunity to provide feedback to Finance Canada on potentially increasing the DQ and updating the tools at the Canada Revenue Agency’s (“CRA”) disposal to enforce the DQ rules.[5] Following the consultation, on April 7, 2022, Budget 2022 was released which proposed that the DQ be increased from 3.5% to 5% for charities with investment assets above $1 million.[6]

The Budget Implementation Act, 2022, No.1 was tabled as Bill C-19 in the House of Commons shortly after the release of Budget 2022, receiving Royal Assent on June 23, 2022.[7] Bill C-19 introduced the new regime of “qualifying disbursements” made to “grantee organizations” which would be included in calculating whether a charity has met its DQ obligations.