Policy Advisory

Executive Summary 

It is a very busy and consequential period for federal policy affecting charities and foundations, with several opportunities to shape the conditions for greater impact. Federal Budget 2026, the newly launched consultation on the federal framework for charities, and the expected disbursement quota (DQ) review in 2027 create important, timely opportunities to strengthen philanthropy’s contribution to Canada’s economic and social resilience.  

Building on its long-standing policy agenda, PFC is advancing three complementary budget priorities: mechanisms to mobilize more philanthropic investment in communities; fiduciary duty clarity that charities can consider charitable impact alongside financial returns when investing; and a public, evidence-based review of the disbursement quota. 

The federal consultation, open until December 3, focuses on charity registration, digital services, audit and compliance, and revocation and objections processes. PFC will work with sector partners to advance practical improvements informed by members’ experiences. We also continue to advocate for community-driven solutions to sector capacity challenges and oppose the House of Commons Standing Committee on Finance (FINA) Recommendation to impose a levy on foundation assets or tax investment income. 

Member participation is essential to this work. Supported by the Philanthropic Impact Task Force, PFC will draw on member input through the forthcoming survey for the Foundation Investment Report, government consultations, and in-person policy gatherings, including upcoming convenings in Montreal in November and Toronto in December. Member experience, evidence and questions will shape credible recommendations that strengthen community impact while preserving foundations’ independence and impact. 

Canada’s Policy Context and the Opportunity today for Philanthropic Foundations 

Canada is in the midst of a period of significant economic, fiscal, and geopolitical uncertainty. Concerns about productivity, economic resilience, competitiveness, community wellbeing, and Canada’s ability to mobilize investment at scale have moved to the forefront of the national policy agenda. 

At the same time, charities, including foundations, and other social impact organizations continue to play an essential role in supporting communities across the country and beyond, and in addressing challenges that governments and markets alone cannot solve.  

As policymakers seek innovative approaches to strengthen Canada’s economic and social resilience, there is growing recognition that philanthropic capital represents an underappreciated and overlooked resource that helps advance collective priorities. 

PFC’s most recent analysis indicates that Canadian foundations steward approximately $160 billion in assets and distribute roughly $11 billion annually in grants. While grants are critically important, they represent only one small dimension of philanthropy’s contributions. Increasing attention is being paid to how foundations can deploy a greater share of their assets in ways that advance both financial returns and community outcomes, reflecting a growing desire across the sector to contribute more fully to solving complex societal challenges. Indeed, a growing number of foundations are exploring how a larger share of their assets can be aligned with positive social change, generating both financial returns and positive community outcomes while maintaining the independence and flexibility that are central to philanthropy’s unique role in society. 

PFC’s Long-Standing Policy Agenda 

PFC’s policy work is rooted in a board-mandated policy agenda that has been developed and advanced over many years through extensive engagement with members, other foundations, sector partners, governments, parliamentarians, and regulators.  

During the review of the disbursement quota (DQ) in 2021, PFC advocated for reforms that would increase resources flowing to communities while preserving the long-term sustainability and independence of foundations. This work contributed to significant policy changes, including the new disbursement quota rate of 5% for assets above $1 million, and a commitment to a review of the DQ regime after five years, which was promised in Budget 2022. The Government is making preparations to launch this review – which we have recommended should include a public consultation – for 2027.   

Building on this work, PFC continued to champion a broader modernization agenda rooted in conclusions from our DQ consultations and our recommendations to government, focused on strengthening the legislative framework governing charities and foundations, improving the data deficit, and improving the ability of foundations and other charities to partner with non-qualified donees, and increasing impact investing.  

Working in partnership with sector colleagues and leaders, we have achieved significant advances on many of our policy priorities including the introduction of a new DQ regime and the qualifying disbursements framework, which created a new pathway for granting to non-qualified donees. The T3010 has also been improved thanks in part to PFC’s advocacy which will hopefully lead to a better user experience and improved data. 

Progress has been limited however on impact investing and program related investment (PRI). CRA has yet to issue updated guidance on PRIs. We have consistently advanced the view that foundation philanthropy should be understood not only through annual grantmaking, but through the full range of expertise, partnerships, and investment tools available for foundations. A central objective of this work has been to remove regulatory and normative barriers that limit foundations’ ability to pursue mission-aligned and impact-oriented investment strategies while maintaining prudent stewardship and fiduciary oversight. 

Budget 2026 Recommendations: Philanthropic Foundations and Community Resilience  

Against this backdrop, PFC’s Budget 2026 recommendations represent the next phase of this long-standing modernization agenda. They are well aligned with the federal government’s focus on investment, resilience, and economic growth, with advice from experts with deep familiarity of the current Government’s thinking, alongside important community-driven sector partner proposals. 

PFC’s Budget 2026 Recommendations 

PFC’s Budget 2026 recommendations focus on three complementary recommendations:  

• First, PFC is recommending the co-creation of mechanisms already being used by government with private sector investment such as guarantees, co-investment opportunities and risk-sharing mechanisms to help attract philanthropic investment into community priorities.  

• Second, PFC is calling for the government to clarify that charities’ fiduciary duties allow them to consider social and charitable impact alongside financial returns when making investment decisions.  

• Third, PFC recommends that the government begin preparations now for a disbursement quota consultation that examines actual investment returns, inflation, liquidity, charitable spending and the experience of organizations of different sizes and structures to assess how the current regime is working in practice.  

Our immediate objective is to get a commitment from government to co-develop these processes with the sector.   

Alignment with Community Resilience  

PFC’s Budget 2026 recommendations were developed to complement and align directly with work underway by sector colleagues, including the broader Community Resilience agenda being advanced by a national coalition of community finance, local economic development, business, philanthropic, and social sector leaders. In this case in particular, PFC has been deeply involved in the Policy Circle convened by Impact United, through which we have helped advise and refine this policy agenda via discussions held between and at the Victoria Forum gatherings in 2025 and 2026.  

The Community Resilience strategy is grounded in the premise that Canada does not lack capital or will, but rather the appropriate financial and policy architecture needed to direct more capital toward communities, local economic development, affordable housing, Indigenous economic development, climate resilience, and other areas critical to long-term prosperity and sovereignty. It argues that unlocking philanthropic and private capital is an essential component of building stronger and more resilient communities across Canada. A central pillar of the Community Resilience strategy is the creation of new mechanisms to mobilize philanthropic capital through guarantees, regulatory reforms, targeted incentives, and investment vehicles that enable this kind of capital to flow more effectively to community priorities.  

PFC’s recommendations fall within this broader agenda, and represent a part of a cross-sector effort to strengthen Canada’s economic resilience by unlocking new sources of community investment and ensuring that philanthropic capital can contribute more fully to national, regional, and local priorities.  

Looking Ahead: Federal Consultation and Disbursement Quota Review 

The 2026 Spring Economic Update committed the federal government to modernizing tax rules for charities through consultations in 2026–27.  

On October 8, the federal government announced a consultation on the modernization of the federal framework for the charitable sector, related to four specific areas:  

1. the registration process,  

2. digital service delivery,  

3. audit and compliance activities with respect to charities, and  

4. the revocation and objections processes for charities.  

The consultation closes December 3, with recommendations expected to inform the Spring Economic Statement. 

PFC welcomes this engagement and views it as an opportunity to build on PFC’s long standing calls for a modern regulatory regime that better reflects the sector’s role in addressing contemporary economic and social challenges. In particular, it aligns with our calls and those of other sector leaders in designating the Tax Court of Canada as the primary venue for charity‑related appeals, improving fairness, reducing cost and delay, and allowing charity law to evolve transparently in response to changing societal needs. 

In addition, PFC was an active participant in the Government of Canada’s Advisory Committee on the Charitable Sector. The Committee issued four reports. Many of their recommendations remain relevant to this consultation. PFC will collaborate with other peak organizations to articulate shared recommendations. In addition, we will seek input from members, notably on recent experiences with the CRA Charitable Branch. 

The consultation comes at an important moment for the anticipated review of the disbursement quota framework. The 5% DQ set in 2022 represented one of the most significant changes to charitable regulation in decades and was accompanied by a commitment to assess after five years. This review process, expected in 2027, must be evidence-based, informed by data, and focused on understanding both the impacts on community funding and the long-term sustainability of philanthropic organizations’ granting, investment and other community contributions and impacts. 

Together, the forthcoming DQ review and the federal consultation on modernizing the charitable legislative and regulatory framework create a unique window for a more enabling environment for charities and foundations. PFC will work hard to ensure the government works to advance practical solutions that strengthen communities and enhance the sector’s contribution to Canada’s economic and social resilience. 

Next steps: We Need to Hear from You 

PFC’s policy work brings together member engagement and research, informed by the work of the Philanthropic Impact Task Force, and mandated by PFC’s board of directors. Established by the board in November 2025, the Task Force supports the CEO as an advisory body, examining evidence, sector perspectives and the implications of different policy options to inform policy work and our recommendations for board consideration. 

Preparing for the Federal Review of Charity Tax Rules and the Disbursement Quota

Dedicated member policy discussions have taken place in Vancouver in August, Winnipeg in September at the member CEO breakfast during the PFC Conference, and in Calgary in early October. These gatherings help us test emerging policy considerations and understand members’ experiences. Further convenings are planned for Montreal in November (primarily in French) and Toronto in December. Details and registration will be shared shortly. 

In addition, PFC’s Foundation Investment Survey will launch in the coming days to inform our forthcoming report and provide current evidence on foundation assets and investment practices and inform our policy work. Your participation will strengthen the evidence informing the Task Force’s work and PFC’s recommendations. 

We also encourage and welcome members sharing with us directly and on their own through the government consultation their perspectives on the federal consultation questions, alongside practical examples of how the disbursement quota, investment rules and reporting requirements affect their work.  

Members do not need a developed policy position to contribute. Their experience, questions and differing perspectives will help PFC advance informed recommendations that strengthen philanthropy’s contribution to communities across Canada.  

Reach out anytime with your thoughts, ideas and feedback: president@pfc.ca.  

Annex: A word about FINA Recommendation 16  

In September 2026, the House of Commons Standing Committee on Finance (FINA) released a set of recommendations for Budget 2026. The report contained 130 recommendations derived from a selection of public submissions covering a range of subjects. These recommendations do not form part of the 2026 Federal Budget, nor do they represent government policy.  

One recommendation in particular, Recommendation 16, proposes strengthening the capacity of the charitable and nonprofit sector through investments in shared infrastructure and capacity building, financed through an annual levy on “unused foundation assets” or a 1% tax on foundation investment income. 

This recommendation reflects growing recognition of the barriers nonprofits and charities face in building capacity, advancing shared priorities, and sustaining infrastructure for collective action. However, while there is broad recognition of these critical challenges, this policy solution is not widely supported as it raises significant legal, governance, programming and impact issues. PFC and other leading sector networks have consistently advocated for community-driven, evidence-based reforms that increase resources and enable greater impact, rather than new requirements or restrictions that create worrying precedents for government interference in civil society, redirect attention away from critical government-sector responsibilities, and risk other serious unintended consequences.  

PFC has made it clear to the main advocate of this proposal and to the Government that we do not support it.