Currently the only sanction against charities which fail to comply with the income tax rules is revocation of registration. The Budget proposes to replace this harsh result with monetary sanctions for specific minor infractions. These sanctions will apply to taxation years that begin after March 22, 2004.

A charity's "disbursement quota" is the amount it must disburse annually based generally on 80% of its tax-receipted donations, other than endowments, received by it in the previous year. A charitable foundation is also required to disburse 4.5% of the fair market value of its capital assets which are not used directly in charitable activities or administration.

The Budget proposes to reduce the current disbursement quota rate on certain capital assets from 4.5% to 3.5% for taxation years commencing after March 22, 2004. However, this 3.5% requirement will be extended to charitable organizations. This proposal will only apply to existing charitable organizations in taxation years beginning after 2008.

The Budget papers outline a number of other proposals which are intended to address specific issues applicable to charities.