Budget 2022 disbursement quota changes

The disbursement quota is an annual spending requirement calculated from certain property a registered charity did not use directly in charitable activities or administration. A charity can satisfy it through eligible expenditures on its own charitable activities and administration and through qualifying disbursements, including gifts to qualified donees and qualifying grants to grantee organizations. Budget 2022 changed the rate for fiscal periods beginning on or after January 1, 2023.

What changed

Pre-2023:

• Disbursement quota = 3.5% of the value of property not used directly in charitable activities or administration.

For fiscal periods beginning on or after January 1, 2023:

• Disbursement quota = 3.5% on the first $1,000,000 of such property, and
• 5% on the portion above $1,000,000.

The change targets larger foundations and well-endowed operating charities. For most small operating charities under $1M in non-program property, the effective rate is unchanged.

What this means in practice

For a foundation with $5M of investment portfolio not used in direct charitable activities:

• Pre-change: 3.5% × $5M = $175,000 minimum disbursement.
• Post-change: (3.5% × $1M) + (5% × $4M) = $35,000 + $200,000 = $235,000 minimum disbursement.

That’s a $60,000 increase in required annual disbursements for a single mid-size foundation. For larger endowments, the absolute increase is correspondingly larger.

Knock-on effects boards should consider

• Investment policy. A foundation with an investment policy targeting 4% real returns now has a tighter envelope between investment returns and required disbursements. Some boards have revisited investment policy statements as a result.
• Disbursement quota tracking. Tracking the quota only at year-end is now riskier. Under section 149.1, it is a disbursement excess — spending above the required quota — that a charity can carry forward (up to five years) or back (one year) to offset a different year. A shortfall itself is not carried forward; it must be made up, drawing on any available prior-year excess.
• Granting strategy. Foundations that had been granting at the 3.5% level now need to grant more (or shift property mix toward direct charitable activities, which doesn’t count toward the quota property base).

What we’re watching

As of the July 10, 2026 source review, CRA guidance continues to describe the 3.5% / 5% split. Confirm the current rule before relying on an older calculation.

What to do

If you are a Canadian foundation or a charity with material non-program property:

• Confirm your disbursement quota for the current and prior fiscal years.
• Review whether the post-Budget-2022 rate has been applied correctly.
• If not, model the cumulative shortfall and the carry-forward / carry-back rules under section 149.1.
• Make sure the next T3010 reflects the correct quota and quota satisfaction.

If your bookkeeping team has not raised the quota change with you proactively, that is itself a reason to ask why.