The disbursement quota — the minimum amount a Canadian registered charity must spend on its own charitable activities or on gifts to qualified donees each year — was changed by Budget 2022. Several years on, many charity boards still treat the change as something to be addressed “next year.” It isn’t.
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 — a quota miss in any given year can be carried forward but not forever.
- 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
The Department of Finance has discussed possible refinements to the quota framework in subsequent budget cycles. As of the June 2026 source review, the 3.5% / 5% split remains the operative rule. We update this post as new guidance is issued.
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.
Sources
Last Updated: June 2026
Sources reviewed: June 27, 2026
General information only. This page is not legal, tax, assurance, or professional advice for any specific organization. Confirm decisions with the CRA, your CPA, and legal counsel for your facts.