Reminder for Charities to Take the Necessary Steps to Meet the DQ
Feb 2022 Charity & NFP Law Update
Published on February 24 2022

By Terrance S. Carter and Theresa L.M. Man
   
 

Following the proposal for a public consultation to potentially increase the 3.5% Disbursement Quota (“DQ”) in the April 2021 Federal Budget, there has been much discussion in the charitable sector regarding charitable tax policy as it relates to the DQ, including in our own firm’s submission in Charity & NFP Law Bulletin No. 498. However, what has been overlooked in the discussion is an understanding of the process that charities are required to follow in order to calculate and meet the DQ, whether or not the DQ rate is to be changed.

The DQ is a requirement set out in subsection 149.1(1) of the ITA and is the minimum amount that a charity must spend on its charitable activities or gifts to qualified donees to ensure that its charitable assets are used for charitable purposes and are not simply accumulated indefinitely. The 3.5% DQ obligation applies to property owned by the charity in the preceding 24 months that is not used directly in charitable activities or administration. This Bulletin sets out a brief outline of the steps charities would need to take to comply with the DQ rules, and highlights a few key areas to pay attention to.

For the balance of this Bulletin, please see Charity & NFP Law Bulletin No. 507.

   
 

Read the February 2022 Charity & NFP Law Update