Lines 600-618: Distribution of the Sources of Funds
Updated to Reflect New Policies (2022)
*** Some of the policies referenced were updated 2021-08-13. This article has been updated and is accurate as of 2022. ***
The T661 asks for the Distribution of the Sources of Funds for your SR&ED ProjectsBy now, you know you can avoid SR&ED stress by keeping clear, contemporaneous records of your claimed project. This is no different when filling out Lines 600 to 618.
In Section 7, the CRA asks that you estimate “the percentage of sources of funds for SR&ED performed within your organization”.1 To do so, you estimate the “percentage of distribution of the sources of funds” based on the total of expenditures you entered in Line 605 – and ensure that the total of all the percentages together adds up to 100 percent!2
This article will go through the individual lines as they appear on the T661.
600 – Internal
Line 600 asks that you enter any funding from internal sources: this includes “internal company funding, loans, and income tax refunds,” used for your claimed project during the reported year.3
602 / 604 – Parent Companies, Subsidiaries, Affiliates (Domestic / Foreign)
Line 602 and 604 are side-by-side, and require that you enter information regarding money from parent companies, “subsidiaries, and affiliated companies”.4 This amount must be separated into two lines allocated by whether the funding source was Canadian or foreign.
606 – Federal Grants
The percentage of your funding that was federal grants must be entered in at Line 606, as well “as the percentage of the SR&ED portion of any other federal grants received”. Be mindful to not include any “funds or tax credits from federal SR&ED tax incentives”.5
608 – Federal Contracts
In Line 608, enter the “percentage of federal contracts received for SR&ED” and “the percentage of the SR&ED portion” of other federal contracts.6
610 – Provincial Funding
For any provincial/territorial funding or the portions of provincial/territorial contracts or grants that were used for SR&ED, you should enter these as percentages in Line 610. However, be sure to not “include funds or tax credits from provincial SR&ED tax incentives”.7
612 / 614 – SR&ED contract work performed for other companies on their behalf (Domestic / Foreign)
Lines 612 and 614 ask for the percentage of the money you received for performing SR&ED on the behalf of another party in an arms’ length contract situation. “On behalf of” means that “the SR&ED work is contracted out to another party”, but the claimant (the payer) retains ownership of the performed SR&ED work.8 An arm’s length contract is where the two parties are not related to one another and no “control exists between them”.9 Make sure to differentiate the percentage of the money you received from Canadian and foreign sources between the two available lines. 10
616 / 618 – Other funding (e.g., universities, foreign governments) (Domestic / Foreign)
Any other funding should be entered in at Lines 616 and 618: enter the percentages of funds “from universities, other levels of government, private non-profit organizations, individuals, and foreign governments”.11 Once again, you’re expected to specify funding from Canadian and foreign sources.12
The most important thing about filling out Lines 600-618 is that you fill them out. While it may seem onerous, it is important to lay out these details to the CRA so there is no suspicion over your funding and, thus, your eligibility. A successful SR&ED claim is a complete one.