What Canadian Charities Can Expect from 2022 Federal Budget

The last two years have left Canadians frustrated by social distancing and quarantines, and slashed nonprofit revenues to the extent that many struggle to survive. 

The 2022 Canadian Federal Budget attempts to deal with both of these issues with a 304-page budget that attempts to address some of the nation’s most pressing issues of economic recovery and housing — as well as issues affecting charities. 

“After two years of COVID, while many people are exhausted, there is hopefully light at the end of the tunnel to a more normalized society,” Mark Blumberg and Helene Mersky wrote for Canadian Charity Law

In a document titled “2022 Canadian Federal Budget – How will it affect the Canadian charitable sector?” Blumberg and Merksy laid out the main changes the budget will have for nonprofits — and what nonprofits should expect. 

Disbursement Quotas

For more than 10 years, Canadian Charity Law has been calling on the federal government to increase the “disbursement quotas” for nonprofits, Blumberg and Merksy wrote in the report, and now the government is finally following through — though just barely. 

For those unfamiliar with this, charities are required to spend a minimum amount every year that’s based on the total value of investment assets. This is called the “disbursement quota,” which is meant to ensure that donations are actually invested in local communities. 

“The Liberal government essentially provided an increase but listened to foundations and did the absolute minimum that they could get away with,” the report said. 

The changes to disbursement quotas include the following:

  • The disbursement quota for charities with “investment assets” under $1 million will remain at 3.5%. 
  • For charities with “investment assets” over $1 million, it will increase from 3.5 % to 5 %. (However, the report noted that this applies only to charities with more than $1 million. It will only be effective in 2023 and will only apply to the portion of the “investment assets” over $1 million. This does not seem to count “assets” only “investment assets.”) 

While it’s a welcome change, Blumberg and Merksy argue that the government should have acted much sooner, and have contributed to the sad state of the nonprofit sector as a result. 

“The failure of the Liberal government to act on this matter has resulted in tens of billions of dollars not making it into the hands of operating charities and beneficiaries,” the report said. “If you’re wondering about the difficult situation of charities, then you certainly see the Liberal inaction as causing some of those problems.”

Non-qualified donees

The second major change in the 2022 Federal Budget revisits the rules for how Canadian charities handle non-qualified donees (another technical term for an entity that donates money). 

There are two types of donees:

  • Qualified donees are groups that can issue official donation receipts.
  • Non-qualified donees are groups that cannot issue those receipts, which includes individuals, Canadian non-profits that are not charities, most foreign groups and businesses. 

The Budget proposals surrounding this issue are quite technical, and Blumberg and Mersky said the suggested rule changes include a lot of ambiguity and a few contradictions. They created a list of 17 comments and potential problems with the Budget’s language. 

“We have significant concerns with that legislation and we have discussed those concerns here,” they wrote. 

If you work at a charity or help manage a Canadian non-profit, it’s worth reading the full 29-page report from Canadian Charity Law here