SR&ED and Agriculture: Hidden Tax Credits from Levy and Check-Off
Hidden Tax Credits from Levy and Check-Off Fees
How do I apply?
The Scientific Research and Experimental Development (SR&ED) tax credit is a federal government program administered by the Canada Revenue Agency (CRA) that encourages research and development by providing tax-based incentives for a wide range of industries including agriculture.
Conventionally, businesses may benefit from the SR&ED tax credits if they are engaged in R&D activities that advance knowledge regarding science and technology. However, if you are paying (non-refunded) service fees (i.e. levy or check-off) to an eligible third-party organization, you may be eligible for the SR&ED tax credit for the service fee payments.
How does it work?
The SR&ED tax credit can be earned on the annual portion of the producers’ service fees (levy or check-off) which were paid to an approved research entity for carrying out eligible R&D as determined by CRA.
The SR&ED tax credit is applicable to 80% of the annual portion of the producers’ service fees (levy or check-off) that were invested in eligible R&D at a CRA approved research facility. Farmers can calculate their total R&D contribution by referring to their sales receipts, which show the levy or check-off allocation. Fifteen percent of the applicable R&D expenditure is eligible to earn an SR&ED tax credit for individuals, rising to 35% for corporations that are considered Canadian controlled private corporations by CRA (see example calculations below)..
How to File
Investment tax credits may be claimed by filing form T2038(IND) for farm individuals or T2SCH31 for farm corporations. Growers who contribute to the check-off or levy and do not request a refund of the check-off or levy are eligible to receive SR&ED tax credits.
For the examples below a grower contributed $10,000 in levy contributions and 20% of this was eligible for SR&ED tax credits.
T2038(IND)
$10,000 x 20% = $2,000
$2,000 x 80% = $1,600
Once this number is put into line 67130 it is multiplied by 15%.
$1,600 x 15% = $240
With this example, the total federal refundable credit is $240.
T2SCH31
$10,000 x 20% = $2,000
$2,000 x 80% = $1,600
Once this number is put into line 103 it is put into Part 8 lines 350 and 380. Next it goes to Part 11 line 420 and multiplied by 35%.
$1,600 x 35% = $560
With this example, the total federal refundable credit is $560.
Further information for specific provinces is provided below.
Alberta
Examples of R&D allocation in levy fees for Alberta over the past few years are shown below. Note that Alberta does not currently offer provincial SR&ED tax credits in addition to the federal program.
% R&D in Levy Fees
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| Fed | Fed | Fed | Fed | Fed | Fed | Fed | |
| Wheat | 20% | 20% | 21% | 17% | 31% | 31% | Unavailable |
| Barley | 17% | 21% | 17% | 7% | 13% | 7% | Unavailable |
| Canola | 11.88% | 9.77% | 14.32% | 17.43% | 23.69% | 21.3% | 14.59% |
| Oat | 16.5% | 17.9% | 11.8% | 14.3% | 10.9% | 8.4% | 8.9% |
| Pulse | 18.5% | 21% | 13.7% | 31.4% | 32.5% | 19.5% | 18.1% |
Any amounts without a link were generated from links that are no longer active; however, we have kept the information in this table to preserve it for historical purposes.
Organizations
Alberta Wheat Commission
The mission of the Alberta Wheat Commission (AWC) is:
“To increase the long-term profitability of wheat and Alberta wheat producers through innovative research, market development, policy development, communications and extension.” 1
The check-off for AWC is currently $1.09 per tonne.2
[in 2021] Wheat farmers who pay the Alberta Wheat Commission (AWC) check-off are eligible for a 31 per cent tax credit through the Scientific Research & Experimental Development Fund (SR&ED) program, for their investment in wheat research and development (R&D) projects. For example, farmers who paid $100 in check-off to AWC in 2020 would earn $31 in tax credit.3
Alberta Barley
The mission of Alberta Barley is:
“To advance the interests of Alberta barley farmers through leadership and investment in innovation and development.”4 There is a mandatory, refundable check-off on all barley, including feed, malt, food and other purpose barley, sold in Alberta at the rate of $1.20 per metric tonne.5
[in 2021] Barley farmers who pay the Alberta Barley check-off are eligible for a seven per cent tax credit through the Scientific Research & Experimental Development Fund (SR&ED) program for their investment in barley research and development (R&D) projects. For example, farmers who paid $100 in check-off to Alberta Barley in 2020 would earn $7 in tax credit.6
Alberta Canola Producers Commission
The mission of Alberta Canola Producers Commission (ACPC) is:
“To support the long-term success of canola farmers in Alberta through research, extension, consumer engagement, and advocacy.”7
Canola farmers pay a refundable $1.00 per tonne service charge when they sell their canola to fund the ACPC.8
The tax credit rate for canola producers in Alberta for 2021 is 14.59 percent.9
Alberta Oat Growers Commission
Alberta Oat Growers Commission (AOGC) was established in 2012 and is part of the Prairie Oat Growers Association (POGA). AOGC helps to fund oat research, market development, and education.10 The mission of the POGA is:
“Optimize oats as a competitive crop and increase grower profitability through the grower supported levy which directs and funds research, helps develop new markets for oats and influences policy which directly impacts the Western Canadian oat grower.”11 Farmers who pay 50 cents per tonne levy on their oats are members of the AOGC.12
For 2021, Alberta producers may claim 8.9% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.13
Alberta Pulse Growers Commission
The mission of Alberta Pulse Growers Commission (APGC) is to:
“Lead through innovation and collaboration to add value for Alberta’s pulse farmers.“14 APG collects a refundable levy based on 0.75 per cent of the cash sale on pulse crops sold in the province.14
The SR&ED tax credit can be earned on the portion of the producers’ service fees which were paid to an approved research entity as determined by the Canada Revenue Agency. Each year a percentage of the Alberta Pulse Growers investment into research is calculated for the percent eligible for that tax year.16
Saskatchewan
In addition to federal SR&ED tax credits, Saskatchewan has additional tax credits available through the Saskatchewan Research and Development Tax Credit program. 17
This provincial credit may be claimed by filing form T2SCH403.
For example, if a grower contributed $10,000 in levy contributions and 20% of those were eligible for SR&ED tax credits then the process for line 216 would look like:
$10,000 x 20% = $2,000
Once this number is put into line 216 it is put into line 219. Next, it is multiplied by 10% and put into line 221.
$2,000 x 10% = $200
With this example, the total refundable credit from Saskatchewan is $200.
This is then added to the federal tax credit example from above.
$200 + $560 = $760 total refundable tax credits
% R&D in Levy Fees
Examples of R&D allocation in levy fees for Saskatchewan over the past few years are shown below.
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| Fed/Prov | Fed/Prov | Fed/Prov | Fed / Prov | Fed / Prov | Fed / Prov | Fed / Prov | |
| Wheat | 3.34% / 2.36% | 19.07% / 17.55% | N/A | 21.25% / 18.11% | 28.92% / 20.74% | 38.33% / 23.95% | 67.93% / 48.97% |
| Barley | N/A | N/A | N/A | 7.97% / 17.64% | 15.9% / N/A | 22.7%/ 12.7% | 45.9%/ 23.1% |
| Canola | N/A | N/A | N/A | 32% / 26% | 36% / 23% | Unavailable | 26.2%/ 17.3% |
| Oat | 22.2% / 0% | 24.5% / 0% | 31.1% / 0% | 27.1% / 0% | 30.5% / N/A | 20.8%/ N/A | 19.2%/ N/A |
| Pulse | N/A | N/A | N/A | 40% / 45% | 40% / 45% | 12% / 11% | Not Released |
| Flax | N/A | N/A | N/A | 38.4% / 36.8% | 63.4% / 62% | 50.6% / 45% | Not Released |
| Canaryseed | 26% / 0% | 43% / 0% | 38% / 0% | 17% / 0% | 53% / N/A | 38%/ N/A | Not Released |
| Mustard | 19% / 0% | 26% / 0% | 19% / 0% | 23% / 0% | Not Released | Not Released | Not Released |
Any amounts without a link were generated from links that are no longer active; however, we have kept the information in this table to preserve it for historical purposes.
Organizations
Saskatchewan Wheat Development Commission
The mission of the Saskatchewan Wheat Development Commission (Sask Wheat):
“Sask Wheat will provide leadership in identifying and supporting research, market development, and advocacy to maximize profitable and sustainable wheat production for Saskatchewan farmers..”18 On August 1, 2013, check-off collection became mandatory; the current rate is $1.00 per net tonne and is refundable upon request.18
For the crop year ending July 31, 2021, producers may claim 67.93% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.
In addition, farm corporations may also claim 48.97% of their levy contributions as a qualifying expenditure towards the Saskatchewan Research and Development Tax Credit program.20
Saskatchewan Barley Development Commission
The mission of the Saskatchewan Barley Development Commission (SaskBarley):
“Is to ensure the long-term profitability and sustainability of barley for Saskatchewan producers through research, market development, and extension initiatives..”21
Saskatchewan’s barley check-off collection became mandatory on August 1, 2013. On August 1, 2017, SaskBarley took over the administration of the Western Canadian Deduction (WCD) check-off, which was $0.56 per tonne. The two check-offs have been combined into one as the SaskBarley check-off, which is currently at a rate of $1.06 per net tonne.22
Saskatchewan Canola Development Commission
The mission of the Saskatchewan Canola Development Commission (SaskCanola) is:
“To provide value to canola producers through research investments and communication to growers, consumers, and government.”23 The levy for canola is paid at time of sale and forwarded to SaskCanola. The current rate is $.75 per tonne.24 SaskCanola uses this levy to explore canola markets, research to benefit canola producers, and communication programs.24
For the 2021 tax year, 26.2% of producers’ levy is eligible for the federal SR&ED tax credit.
In addition, farm corporations may also claim 17.3% of their levy contributions as a qualifying expenditure towards the SR&D tax credit program.26
Saskatchewan Oat Development Commission
The mission of the Saskatchewan Oat Development Commission (SaskOats) is:
“Optimize oats as a competitive crop and increase grower profitability through the grower supported levy which directs and funds research, helps develop new markets for oats and influences policy which directly impacts the Saskatchewan oat grower.”27 .
SaskOats is part of the Prairie Oat Growers Association (POGA). SaskOats collects a 50 cent per metric tonne refundable check-off on oats grown in Saskatchewan and sold commercially.28
For 2019, Saskatchewan producers may claim 30.5% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.29
Saskatchewan Pulse Growers
The mission of Saskatchewan Pulse Growers (SPG) is “to provide leadership and create opportunities for profitable growth for Saskatchewan pulses”.30 Members of SPG who contribute to the levy (1% of gross sales) are eligible for SR&ED tax credits based on the amount of levy funds used for SR&ED.31
For the 2018/2019 crop year ending August 31, 2019, 45% of the Saskatchewan pulse levy qualifies for the federal SR&ED tax credit and 40% for the Saskatchewan Provincial SR&ED tax credit..31
Corporations are also eligible for the 10% Saskatchewan R&D tax credit for research performed in Saskatchewan, using Schedule 403 to claim the credit on tax returns.31
Saskatchewan Flax Development Commission
Saskatchewan Flax Development Commission (SaskFlask) invests in research, communication and market facilitation activities to further develop the flax industry.34 There is a mandatory flax check-off of $2.36 per tonne of seed and $0.50 per tonne of straw; this is refundable and supports research, communication, and market facilitation for Saskatchewan’s flax industry.35
For the crop year ending July 31, 2019 the federal SR&ED tax credit for levy-paying flax producers is 63.4%.
For the crop year ending July 31, 2019 the Saskatchewan Provincial SR&ED tax credit for levy-paying flax producers is 62.0%36
Canary Seed Development Commission of Saskatchewan
Canary Seed Development Commission of Saskatchewan (CSDCS) has a mandatory levy of $1.75 per tonne which is refundable.37
For 2019, Canary seed producers may claim 53 per cent of their checkoff contributions as a qualifying SR&ED expenditure on their federal tax return.38
Saskatchewan Mustard Development Commission
The mission of the Saskatchewan Mustard Development Commission (SaskMustard) is:
“to grow the mustard industry for the benefit of producers”39 There is a mandatory, but refundable levy of 0.5 per cent of the gross sales.39 The mustard levy allows SaskMustard to fund research, communications and market development programs; the goal is to improve yields, decrease input costs, increased demand and create an overall better product.39
For 2018, Saskatchewan mustard producers may claim 23% of their checkoff contributions as a qualifying SR&ED expenditure on their federal tax return.42
Manitoba
Manitoba does not currently offer additional SR&ED investment tax incentives in addition to the federal SR&ED investment tax credits.
% R&D in Levy Fees
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| Fed | Fed | Fed | Fed | Fed | Fed | Fed | |
| Wheat/Barley | N/A | N/A | N/A | 11% | 22% | 18.42% | 33.44% |
| Canola | 5.66% | 13.50% | 11.14% | 13.70% | 13.5% | 14.6% | 14.7% |
| Oat | 18.9% | 19.7% | 23.6% | 17.1% | 35.4% | 39.7% | 19.5% |
| Pulse | 37.57% | 32.46% | 48.42% | 40.05% | 73.68% | 34.67% | 23.82% |
| Flax | 44% | 48% | N/A | 32.61% | 12.81% | 33.44% | 33.44% |
| Corn | N/A | N/A | N/A | 25% | 25% | 8.43% | 33.44% |
Any amounts without a link were generated from links that are no longer active; however, we have kept the information in this table to preserve it for historical purposes.
Organizations
Manitoba Crop Alliance
In August 2020, the Manitoba Wheat and Barley Growers Association, Manitoba Corn Growers Association, and Manitoba Flax Growers Association, combined to create the Manitoba Crop Alliance (MCA).
Their mission:
“For every levy dollar we collect, we maximize these resources into meaningful, independent research, valuable knowledge and targeted advocacy.”43
Manitoba Crop Alliance received their designation regulation to collect a mandatory check-off from all sales of wheat (spring & winter), barley, corn, sunflower and flax in Manitoba starting on August 1, 2020. The check-off amounts are unchanged to what was in place with the five previously existing organizations and remains refundable.
| Commodity | Check-Off |
|---|---|
| Corn | ½ of 1% of sales |
| Flax | ½ of 1% of sales for flax and solin seed 1% of sales for flax and solin straw |
| Sunflower | ½ of 1% of sales |
| Spring Wheat | $1.00/tonne |
| Winter Wheat | $0.98/tonne |
| Barley | $1.06/tonne |
Manitoba Crop Alliance About44
For the 2020-2021 tax year, farmer members can calculate their total check-off contribution by referring to their wheat (spring and winter), barley, corn, flax and sunflower sale receipts. Of those totals, 33.44% of the MCA check-off is eligible to earn an investment tax credit. As an individual, farmer members can claim this tax credit up to a maximum of 15% while corporations are able to claim up to 35%. 45 The check-off rate is $1.00/tonne.46
The rate for canola research in Manitoba in 2021 is 14.7%.47
Manitoba Oat Growers Association
The mission of the Manitoba Oat Growers Association (MOGA) is:
“Optimize oats as a competitive crop and increase grower profitability through the grower supported levy which directs and funds research, influences policy, and builds partnerships with the oat industry around the world to better serve the Manitoba oat grower.“48 The Manitoba Oat Growers Association is also a member of the Prairie Oat Growers Association. There is a mandatory levy of $.50 per tonne on all oats grown in Manitoba.49
For 2021, Manitoba producers may claim 19.5% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.50
Manitoba Pulse and Soybean Growers
The mission of Manitoba Pulse and Soybean Growers (MPSG) is:
“To provide research, production knowledge and market development support to Manitoba pulse and soybean farmers.”51 There is a refundable check-off for pulse and soybeans.
For the 2021 tax year, 23.82% of the Manitoba pulse check-off qualifies for the SR&ED tax credit..52
Conclusion
It is important to note that there are hidden SR&ED tax credits in agriculture. Paying a levy and/or check-off is essential for the farming industry as the third party organizations controlling those funds seek to advance the farming of each crop through SR&ED eligible projects. Not only are there tax benefits, but the associated technological and scientific advancements will help farmers in the future as well. Farmers should check with their specific province and organization to which they pay a levy or check-off to see what the current SR&ED tax credit is, as it varies each tax year.
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