SR&ED Investment Tax Credits for Farm Producers

Canada's farmers may now obtain tax incentives for investments through the SR&ED Program, a federal government program to encourage investment in research and development in all economic sectors.

The Canada Revenue Agency (CRA), in co-operation with Agriculture and Agri-Food Canada (AAFC), has developed a process so that farm organizations can participate in the program. The new process provides for the distribution of investment tax credits to farm producers who contribute to SR&ED through their agricultural organizations.

In the agriculture industry, investments of this kind are often referred to as check-offs, assessments, or levies. They are used by agricultural organizations, in part, to finance research and development work that benefits the individual contributors, as well as the agricultural industry as a whole.

Over the past two years, there have been ongoing consultations between the CRA, AAFC, and agricultural organizations. The goal of the discussions has been to bring about a way to deliver - within the current legislative framework - these tax-based incentives to farm producers.

The process arrived at will see agricultural associations act as agents for farm producers in all matters relating to the SR&ED Program. The associations, almost all of which expressed a willingness to cooperate in the delivery of this initiative, will have to satisfy certain requirements that include amendments to their bylaws/regulations (or, in the interim, the passing of resolutions at their annual general meetings). This will reflect their agent-principal relationship, as well as confirm that the farm producer is participating in the decision-making process for the funding of particular projects.

The CRA has streamlined the application process to provide farm producers with easier access to investment tax credits, and to keep the cost of compliance for both the agricultural organizations and the farm producers to a minimum.

Over the next few years, the CRA will monitor the activity to determine the effectiveness of this initiative in delivering the SR&ED Program to the farm sector.

The initiative also supports the Action Plan for an Agricultural Policy Framework agreed to by ministers of agriculture at their annual meeting in Whitehorse, Yukon in June. The plan calls for greater use of science to help Canada's agricultural sector create economic opportunities with innovative new products, and to strengthen environmental stewardship and food safety.

The SR&ED Program is Canada's largest federal program providing support for industrial R&D in Canada and receives about 11,000 claims for approximately $1.5 billion in tax credits every year.

For more information, visit the CRA's Web site at: www.cra.gc.ca/sred. You can also contact your local tax services office, or call 1-800-959-5525 toll free.