A charity’s disbursement quota, or DQ, is the minimum amount of money it must spend each year on its charitable activities or gifts to qualified donees. This minimum is set to ensure funds collected or held by charities are used for charitable activities and not accumulated indefinitely. The DQ is calculated as a percentage of a charity’s property value that is not used for charitable activities or administration.
The Charities and Not-for-Profit Law Section of the Canadian Bar Association, in a letter to the Tax Policy Branch of Finance Canada, urges the government to consult with First Nations who may be affected by proposed changes to the disbursement quota.
The government has a constitutional obligation to consult with First Nations to hear their views on proposed changes. “This obligation arises where the Government references the disbursement rules in modern treaties and other agreements with First Nations; and these agreements could be impacted by any changes,” the letter says.
First Nations settlement corporations or trusts are created with various governments pursuant to treaties to receive settlement funds. Those funds are expected to be held in perpetuity in order to benefit future generations and are consequently treated like endowments and invested for the long term. Raising the DQ could, potentially, force First Nations settlement corporations or trusts to spend more of these monies than the long-term benefits of their populations demand.
The CBA Section believes the First Nations settlement corporations or trusts should be consulted before having such a change imposed on them.
“Under the recently adopted United Nations Declaration on the Rights of Indigenous Peoples Act,” the Section says, “any legislative changes, including changes to the DQ for registered charities and qualified donees, which affects First Nations, should be done in consultation with those affected modern treaty First Nations.”