Foundation distribution rate to see a steady rise in the coming years
The minimum Distribution Rate is the amount that a charity must spend annually on its charitable activities, in accordance with the Income Tax Act. Starting in 2023, the minimum distribution rate has increased from 3.5 percent to 5.0 percent.
For our Foundation, the primary charitable activities are distributions to other charitable organizations -- and the payment of educational awards to students.
To date, the Foundation’s growing asset base exceeds $140 million and has distributed over $78 million in grants and scholarships. The new distribution rate means an approximate $1.8 million over and above current distributions will go out to the community over the next few years.
“This is truly great news for the community,” says Ian Barnes, Chief Financial Officer at the JFM. “It means more money will be granted to the community, meaning more people and organizations will be able to get the support they need.”
For decades, the JFM has been distributing more than the minimum annual distribution rate mandated by the Income Tax Act. This over-distribution allowed the JFM to accumulate distribution tax credits for future years.
Therefore, the Foundation will not be increasing its distribution to 5 percent immediately in 2023, instead working its way to 5.0 percent over the next few years, gradually increasing annual distribution to charitable organizations.
“The mandated increased distribution is a significant adjustment for the Foundation,” says Barnes. “The analogy is pivoting an ocean liner 45 degrees at full speed.”
The goal of the JFM is to consistently provide distributions to the organizations that need support each year.
“The increased distribution is a big change for us at the Foundation,” says John Diamond, CEO. “Despite its challenges, the increased rate allows us to provide even more support for our community, something we are proud to be able to do.”