Change in SR+ED rule pares back grain growers’ tax credits

Updated, March 7 — Grain growers planning to claim their checkoff payments for a federal Scientific Research and Experimental Development (SR+ED) tax credit can expect slightly smaller credits going forward.

Starting in the 2013 tax year, changes in federal tax law permit the SR+ED tax credit to be claimed on 80 per cent of eligible research-related expenditures, down from 100 per cent.

In a grain grower’s case, the SR+ED credit can apply to the portion of checkoff dollars invested directly in eligible research work during a given tax year. Approved research facilities include universities and government ag research sites.

In the case of the Western Grains Research Foundation’s 2013 checkoffs on Prairie wheat and barley, 68 per cent of a farmer’s total wheat checkoff and 71 per cent of a farmer’s total barley checkoff qualify for the SR+ED credit for the 2013 tax year.

That’s down from 85 and 86 per cent respectively in 2012 — and the percentages are lower this year due to the legislative changes, the WGRF said in a release last week.

Alberta Barley, which administers a barley checkoff in that province, said 13 per cent of a farmer’s checkoff will be eligible for the SR+ED credit in 2013, down from 15 per cent in 2012 — also due to the legislative change.

In the Alberta Barley example, 15 per cent of the money farmers paid into the barley checkoff went to eligible research. In previous years, 100 per cent of that 15 per cent would have qualified, so a producer who paid $100 in checkoff could claim the SR+ED credit on $15.

However, with the credit capped at 80 per cent, a farmer who paid $100 in checkoff, of which $15 went to SR+ED-eligible research, may now only claim the credit on $13.

The Alberta Canola Producers Commission on Tuesday said Alberta growers can claim SR+ED credit on 19.47 per cent of its canola checkoff. That figure also takes the 80 per cent cap into account, ACPC general manager Ward Toma said.

The Manitoba Canola Growers Association said growers can claim SR+ED credit on 9.06 per cent of their underfunded MCGA checkoff, down from 17.71 per cent in 2012.

The SR+ED tax credit can be used to offset federal taxes owing in the current year; received as a tax refund; carried forward up to 10 years to offset federal taxes owing; or carried back three years to reduce federal taxes paid in those years.

The tax credit is worth 20 per cent of the claimed amount for individual farmers and 35 per cent for farm corporations. Again using the Alberta Barley example, the individual grower who claimed $13 would get a tax credit of $2.60.

Individual producers who haven’t sought refunds of their checkoff money can file a T2038 (IND) form to get the SR+ED credit. Farm corporations would file a T2SCH31 form. –– AGCanada.com Network

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