The last two years have led to nonprofit revenues slashing in half, to the extent where many are struggling to stay afloat.
The 2022 Canadian Federal Budget is attempting to address some of the nation’s most pressing issues of economic recovery and housing — as well as issues affecting nonprofits.
“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.
Bumberg and Mersky laid out in a report titled “2022 Canadian Federal Budget - How will it affect the Canadian charitable sector?” where they discuss the impacts the budget will have on 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.
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,” and it is meant to ensure that donations are invested in local communities.
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 %. (It will only be effective in 2023 and will only apply to the portion of the “investment assets” over $1 million, not overall assets of the organization.)
While it’s a welcome change, the report argues that the government should have acted much sooner and have contributed to the sad state of the nonprofit sector as a result.
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 include individuals, Canadian non-profits that are not charities, most foreign groups and businesses.
The Budget proposals surrounding this issue are quite technical, and the report states that 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.