Ottawa is giving farmers what could amount to a $10 million tax break.
Producer associations collect an estimated $200 million every year
through checkoffs, assessments and other levies.
Approximately $30 million of the $200 million collected is spent on
funding research and development activities.
In the past, it has been impossible for Canadian farmers to receive tax
credits for those contributions.
The levies are collected by associations, which then dole out the cash
to universities, governments and private companies so there is no
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direct link between the farmer’s expenditure and a particular research
project.
And producers can’t claim the entire levy amount because a large
portion of the money collected pays for non-research related activities
such as marketing and promotion.
As a result, it has been tough for tax collectors to identify exactly
how much research an individual farmer has funded.
“The process has been very cumbersome,” said Lorne Heslop, science
policy analyst with Agriculture Canada.
“There was a number of associations that tried to (collect tax credits)
on behalf of producers but because an association is not a taxpayer,
they weren’t recognized.”
So for years producer associations lobbied the federal government to
change the tax rules.
Those consultations with the Canada Customs and Revenue Agency and
Agriculture Canada have resulted in a new application process that
gives farmers access to Scientific Research and Experimental
Development Program tax credits.
People in other industries generate $1.5 billion in tax savings a year
by accessing those credits.
Under the new process, associations must confirm with the Canada
Customs and Revenue Agency how much of the levy dollars they collect
are spent on funding research and development projects.
The association then sends a letter to its members indicating what
percent of its levy is applicable for the tax credit. Producers attach
that letter to their income tax form and claim the credit.
If the farm is a business, it qualifies for a 35 percent credit, if not
the credit limit is 20 percent. The potential tax savings for farmers
amounts to between $6 million and $10 million, said Heslop.
The Western Grains Research Foundation administers one of the largest
producer checkoffs in the country.
Producers contribute $3.7 million to western Canadian plant breeding
programs through a checkoff of 20 cents per tonne on wheat and 40 cents
per tonne on barley.
Foundation executive director Lorence Peterson said he is pleased that
farmers are now recognized for that contribution.
“Now farmers are on an equal playing field with other private investors
in research.”
Peterson said the tax credit could encourage more support for the wheat
and barley checkoff.
“Around 95 percent of prairie wheat and barley producers support the
checkoff, but this may persuade some of the others to support the
program. Every dollar helps.”
Heslop said it is likely too late for most farmers to make use of the
program for the current tax year since “we’re right in the middle of
tax season,” but the program should be in full swing for farmers next
year.
