FAQs
Isn’t holding funds in perpetuity in foundations good for the future?
Permanent charitable capital has value, but perpetuity should not automatically outweigh present charitable need. Public policy must prioritize current communities when tax-assisted charitable assets are being leveraged (and remain undeployed for decades).
The charity sector plays an important role in the civility of our communities. For this reason, we have offered preferred tax treatments for charity organizations, and charity tax credits to donors who give money. These are taxpayer dollars which otherwise could have been used for other purposes. Thus, parliamentarians have an obligation to see taxpayer money used in a charitable and timely manner, and certainly within the lifetime of taxpayers. Holding money for 50+ years is not fair to current taxpayers.
Holding back funds to solve social problems 50 years from now also allows current problems and suffering to compound. Lives lost, environmental damage and species extinction cannot be reversed after the fact. There is little benefit to holding back funds to solve a problem 50 years from now versus spending more, sooner, to solve the problems within the next 10 years.
Wouldn’t a higher DQ put foundations out of business?
Perhaps some individual foundations would slowly run out of money. But as history has shown, new philanthropists and new foundations (including DAFs) are created. We do not rely on 100+ year-old foundations today. Most philanthropy is from the generosity of living current donors.
But that is not the important point. Public foundations disburse double-digit ratios each year and continue to grow their assets. A 10% DQ is not a threat to their existence. The key is to fundraise, which public foundations do so well. There is nothing preventing private foundations from fundraising for the missions they believe in. If foundations wish to have longevity, in perpetuity, they should be fundraising.
Interestingly, many foundations have committed to disbursing all of their funds and closing their doors sooner. Such “sunsetting” is a growing trend in the USA.
Why does GIV3 want a higher DQ?
Canadian charities (and millions of Canadians in need) are facing what Statistics Canada calls a growing “charity gap”. This is where demand for charitable services exceeds supply. GIV3 believes foundations should not be rapidly accumulating (tax-assisted) wealth while Canadians are suffering. More funding should be applied sooner.
This also reflects Canadian taxpayer wishes.
Requiring more disbursements, sooner, is a more responsible tax policy, respectful of taxpayers.
See: The Struggle of Canadian Charities · What Canadians Think
Would a higher DQ cost the federal budget money?
A DQ increase is a regulatory change to the required use of charitable assets already in foundation endowment accounts. There is no direct cost to the Budget by increasing the DQ.
What are “excess” disbursements?
They are amounts by which a charity’s eligible spending can exceed its DQ in a year and, subject to the rules, may be available to carry forward to offset (reduce) DQ obligations in later years.
What is a donor-advised fund?
A DAF is generally an account or fund within a sponsoring or host foundation where a donor donates money and his or her donations are held in a designated account for them. The hosting foundation is the legally registered charity, and may have hundreds of DAF accounts from many donors. The donor is receiving a charity tax credit for their donation to the foundation, into their DAF account. Over time, the donor can request distributions from their respective DAF accounts to qualified/registered charities they prefer. The DQ rules do not apply to any one DAF account.
Who is behind “Increase the Grants”?
Increase the Grants is a volunteer-driven Canadian initiative founded and largely supported by GIV3, focused on policy reform affecting foundation disbursement. It joins the voice of many others in support of a higher DQ rate.
Where do the numbers come from?
The foundation figures on this site are derived from all 11,000+ filed T3010 registered-charity information returns provided courtesy of the CRA, using the methodology published on the Research & Methodology page.