In September 2026, the House of Commons Standing Committee on Finance (the Committee) released its recommendations for the 2026 Federal Budget. While these recommendations do not form part of the Budget itself, they provide insight into current political policy priorities and proposals that may be reflected in future legislative and fiscal initiatives. In this article, we highlight several recommendations of particular relevance to charities and not-for-profit organizations, with a specific focus on the proposed social sector fund.
Social Sector Fund
The recommendation with the potential to have the most significant impact on the charitable and non-profit sector is the proposed establishment of a social sector fund to support capacity building and shared infrastructure across the sector. The Committee recommends that the fund be financed through either:
- a 0.025% annual levy on unused foundation assets; or
- a 1% tax on foundation investment income.
The recommendation does not define “foundation,” but it is fairly clear from the recommendation that it includes public and private foundations. Similarly, the term “unused foundation assets” is not defined. The proposed fund would be governed by an arm’s-length agency representing sector stakeholders.
Importantly, these foundation contributions would count toward satisfaction of foundations’ disbursement quota obligations. At present, registered charities are generally required to annually spend on charitable activities and qualifying disbursements:
- 3.5% of the charity’s average value of property up to $1 million; and
- 5% on the amount that exceeds $1 million.
Continuous failure to meet the disbursement quota may lead to revocation of a charity’s registration. Where a charity exceeds its disbursement quota in a given year, the excess may be carried forward for up to 5 years or carried back 1 year.
The proposed fund has a credible policy rationale: stable funding for shared infrastructure, data, technology, governance and other capacity-building initiatives that individual organizations may be unable to finance, particularly smaller and under-resourced organizations. However, it assumes that assets not currently disbursed are “unused.” Retaining and investing capital may instead support a foundation’s charitable strategy by sustaining grants through market downturns, funding multi-year commitments, responding to future crises, or building toward major initiatives. Appropriate spending levels therefore depend on a foundation’s purposes, obligations, assets and time horizon – not simply its current asset value.
Although a levy or tax may fund collective needs that foundations are unlikely to support individually, its effects would vary by size and financial circumstances. For smaller foundations, even a modest charge could reduce grant funding, particularly where returns are limited or assets are restricted or illiquid. Valuation, reporting and compliance costs may also be disproportionate to the amount collected.
For larger foundations, the direct financial effect may be modest, particularly if the contribution counts toward the disbursement quota. The more significant issue is governance: the measure would redirect charitable resources to sector-wide priorities, potentially displacing board-selected grants aligned with the foundation’s purposes, donor intent or community needs. Its justification will depend on the fund’s collective benefits, governance and accountability. The design of the measure would therefore be critical, including whether it incorporates thresholds or graduated rates, excludes restricted and illiquid assets, minimizes compliance burdens and recognizes the materially different circumstances of smaller and larger foundations.
Additional Recommendations
Additional recommendations from the Committee that are likely of interest to charities and non-profits include:
- establishing an early intervention network for young men and boys, supported by an investment in men’s health research;
- maintaining funding for key non-profit data products, and developing a binding regulatory framework governing the development and deployment of artificial intelligence;
- modernizing federal partnerships with non-profit service providers to improve delivery and reduce administrative burdens;
- adopting a “one partner, one profile” approach to federal grants to eliminate redundant administrative work for organizations receiving funding from multiple federal funders;
- continued investment in the Canada-wide childcare system, and continued prioritization of non-profit and public childcare providers;
- increased core funding and long-term funding commitments for public legal education organizations;
- ensuring that mental health research and innovation receive equitable funding that reflects the burden of disease and disability in society;
- requiring greater transparency from anti-abortion pregnancy centres to mitigate harm to clients and prevent the misuse of charitable status;
- establishing national targets to increase community and social housing, and ensuring federally funded affordable housing remains permanently affordable; and
- investing in community, Indigenous and university radio stations.
Many of these recommendations appear to reflect the priorities advanced by organizations such as Imagine Canada and the Federal Nonprofit Data Coalition, and other sector stakeholders that participated in the pre-budget consultations.
We will continue to monitor developments and watch to see which, if any, of these recommendations are incorporated into the 2026 Federal Budget.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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