Farmers who contribute a pulse, wheat and barley checkoff dollars are eligible to earn a federal investment tax credit through the Experimental Development (SR&ED) program. The tax credit is based on checkoff funds spent on research and development that meets specific criteria as set out by Canada Revenue Agency. For the 2010 tax year, 43 per cent of the Saskatchewan pulse checkoff qualifies for the federal SR&ED tax credit. For wheat and barley, 74 per cent of the wheat and 69 per cent of the barley checkoff qualifies. It should be noted that the checkoff on barley in Alberta is collected by the Alberta Barley Commission and will be subject to a different tax credit rate.
The percentages vary between commodity groups, because only checkoff dollars spent directly on research qualify as the “eligible portion.” The tax credit is earned at a rate of 20 per cent for individuals and 35 per cent for corporate producers that are Canadiancontrolled private corporations (CCPC).
A WHEAT EXAMPLE
If a farmer contributed $300 to the wheat checkoff in 2010, the eligible amount would be calculated by taking 74 per cent (the wheat percentage) of the $300 = $222.
If the farmer files taxes as an individual they would take the $222 and would earn 20 per cent of this amount as a tax credit = $44.40.
For producers who file as a corporation, they would earn 35 per cent of the $222 as a tax credit = $77.70
Pulse producers can calculate their total checkoff contribution by referring to their pulse sales receipts, which show the checkoff allocation. Of this total, 43 per cent is eligible to earn an investment tax credit. This resulting checkoff amount is eligible to earn an investment tax credit up to a maximum of 20 per cent for individuals and up to a maximum of 35 per cent for corporate producers that are Canadiancontrolled private corporations. The 43 per cent is comprised of research performed in the following provinces: Saskatchewan 39 per cent, Alberta one per cent, Manitoba one per cent, Ontario one per cent and Quebec one per cent.
To claim the federal tax credit on their tax returns, producers must file a T2038 (IND) for farm proprietorships or a T2SCH31 for farm corporations. Corporations are also eligible for the 15 per cent Saskatchewan R&D tax credit for research performed in Saskatchewan, using Schedule 403 to claim the credit on their tax returns.
All checkoff investment tax credit applied against taxes payable, or refunded, must be reported by the producer as income in the subsequent year.
Formoreinformationontheprocessofclaimingthetax credits,pleaseconsultyouraccountant.Forinformation onthefederalSR&EDinvestmenttaxcredit,visitthe CanadaRevenueAgencywebsiteat http://www.cra-arc.gc.ca/txcrdt/sred-rsde/pblctns/chckff-eng.html