Disbursement Quota Reform: Stabilizing a Three-Legged Stool
Mar 2022 Charity & NFP Law Update
Published on March 31 2022

By Terrance S. Carter

Terrance S. Carter authored an article entitled “Disbursement Quota Reform: Stabilizing a Three-Legged Stool” concerning disbursement quota (“DQ”) reform for the Canadian Tax Foundation, published in its March 2022 edition of Perspectives on Tax Law & Policy. A few selected excerpts, as well as a link to the full article can be found below:

In the April 2021 federal budget, the government announced a public consultation on a proposal to potentially increase the minimum amount that charities must spend each year on charitable activities or gifts to “qualified donees.” This minimum amount, known as the “disbursement quota” (DQ), is currently calculated at 3.5 percent of the value of the charity’s assets that are not used directly in its charitable activities or administration.


The DQ consultation ended in December 2021. It generated considerable interest in the charitable sector, with some submissions … calling for a 5 percent increase or higher in the DQ, and other submissions … recommending a more measured and holistic approach.

Some participants in this debate may not have fully considered what charities need to do to meet their DQ obligation. In this regard, it is instructive to conceptualize the DQ as a three-legged stool. A charity’s compliance with its DQ obligation rests on three crucial components: (1) accurately calculating its DQ each year, (2) funding its annual DQ obligation from its resources, and (3) meeting the DQ obligation by spending at least the minimum amount each year either on charitable activities or gifts to qualified donees.

Just as a three-legged stool’s balance would be affected by a change in the length of one leg, so too would a proposed change to any single aspect of the DQ potentially affect the other two components. All three of these interdependent components must be carefully considered before changes are made to any one of them.

The full article may be accessed here.


Read the March 2022 Charity & NFP Law Update