Renunciation of Manitoba Tax Credit for SR&ED (2009)

January 22, 2013 SRED

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At SREDucation, we’re taking the time to document all of the changes that have occurred to the SR&ED program over the years. In our “From the Archives” series, you’ll be able to see how the program has evolved since it’s inception in 1986. For a timeline of these events, check out the SR&ED Tax Credit page on Facebook. Stay current with the program by understanding the historical context.

Renunciation of Manitoba Tax Credit for SR&ED

On Feb. 26, 2009, the Canada Revenue Agency released a document intended to outline the circumstances of an agreement between the agency and Manitoba Finance. The pact was to temporarily let corporations renounce the Manitoba Research and Development Tax Credit as late as 18 months after the tax year-end.

“Some Manitoba claimants have been renouncing their Manitoba Research and Development tax credit at the time of claiming the federal Scientific Research and Experimental Development Investment Tax Credit (SR&ED ITC),” the document stated.

There was a benefit to doing so, from a tax perspective: “Renouncing the Manitoba R&D Tax Credit allows a corporation without taxes payable to maximize its qualified SR&ED expenditures and consequently, its federal SR&ED ITC.”

But there was a problem with timelines, the document continued.

“While the SR&ED ITC may be claimed up to 18 months after a corporation’s tax year end, both the federal and Manitoba Income Tax Acts require that taxpayers renounce the provincial R&D credit no later than six months after the end of their tax years”.

Temporary Reprieve For SR&ED Claimants

To alleviate the confusion, the federal and provincial governments agreed to allow Manitoba claimants to renounce the credit before 18 months had passed, rather than enforcing the six-month period provincially.

But that was going to change, the document warned, affecting the claims of provincial taxpayers.

“For SR&ED claims submitted after March 31, 2009, the renunciation deadline set out in Manitoba’s Income Tax Act will be enforced,” it stated.

Later in the document, it made special emphasis that this is a temporary measure only. “The six month filing deadline for renouncing Manitoba’s credit and for determining government assistance under the federal SR&ED ITC rules applies despite the 18 month filing deadline for filing the federal SR&ED ITC under the federal Income Tax Act and the 18 month filing deadline for filing the Manitoba R&D Tax Credit under the Manitoba Income Tax Act.”

This article is based upon a Government of Canada document issued at the time: Manitoba Research and Development (R&D) Tax Credit: Clarification on Renunciation Deadlines.