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 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

 20152016201720182019
FedFedFedFedFed
Wheat20%20%21%17%31%
Barley17%21%17%7%13%
Canola11.88%9.77%14.32%17.43%23.69%
Oat16.5%17.9%11.8%14.3%10.9%
Pulse18.5%21%13.7%31.4%32.5%

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 2019] Wheat farmers who paid 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.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 sold in Alberta at the rate of $1.20 per metric tonne.5 

[in 2019] Barley farmers who paid the Alberta Barley check-off are eligible for a 13 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 2019 would earn $13 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 for canola farmers.”7  

Canola farmers pay a refundable $1.00 per tonne service charge when they sell their canola to fund the ACPC.7  

The tax credit rate for canola producers in Alberta for 2019 is 23.69 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.10 

For 2019, Alberta producers may claim 10.9% 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 provide leadership, increasing the competitiveness, profitability, and sustainability of pulse production as well as promoting the health and environment benefits of pulses.”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 Alberta Pulse Growers Commission has confirmed that 32.5 per cent of eligible producers’ 2019 check-off payment is eligible for the Scientific Research & Experimental Development (SR&ED) tax credit for their investment in APG-funded research and development projects.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.

 20152016201720182019
Fed/ProvFed/ProvFed/ProvFed / ProvFed / Prov
Wheat3.34% / 2.36%19.07% / 17.55%N/A21.25% / 18.11%28.92% / 20.74%
BarleyN/AN/AN/A7.97% / 17.64%15.9% / N/A
CanolaN/AN/AN/A32% / 26%36% / 23%
Oat22.2% / 0%24.5% / 0%31.1% / 0%27.1% / 0%30.5% / N/A
PulseN/AN/AN/A40% / 45%40% / 45%
FlaxN/AN/AN/A38.4% / 36.8%63.4% / 62%
Canaryseed26% / 0%43% / 0%38% / 0%17% / 0%53% / N/A
Mustard19% / 0%26% / 0%19% / 0%23% / 0%Not Released

Organizations

Saskatchewan Wheat Development Commission 

The mission of the Saskatchewan Wheat Development Commission (Sask Wheat) is:

To provide leadership in identifying and supporting research, market development and advocacy that contributes to 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, 2019, producers may claim 28.92% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.

In addition, farm corporations may also claim 20.74% 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 identify, develop and support research, market development, and extension initiatives that ensure the long-term profitability and
sustainability of barley for Saskatchewan producers.”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 

For the 2019 crop year (August 1, 2018 to July 31, 2019), producers are able to claim 15.9% of their check-off contributions as a qualifying SR&ED expenditure on their federal tax return.23

Saskatchewan Canola Development Commission 

The mission of the Saskatchewan Canola Development Commission (SaskCanola) is:

“To provide value to canola producers through research, policy, and promotion.”24  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 2019, producers may claim 36% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.

In addition, farm corporations may also claim 23% of their levy contributions as a qualifying expenditure towards the Saskatchewan Research and Development Tax Credit program.27

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.”28  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.29 

For 2019, Saskatchewan producers may claim 30.5% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.30 

Saskatchewan Pulse Growers

The mission of Saskatchewan Pulse Growers (SPG) is “to provide leadership and create opportunities for profitable growth for Saskatchewan pulses”.31  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.32 

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..32 

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.32 

Saskatchewan Flax Development Commission 

Saskatchewan Flax Development Commission (SaskFlask) invests in research, communication and market facilitation activities to further develop the flax industry.35  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.36  

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%37 

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.38     

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.39 

Saskatchewan Mustard Development Commission 

The mission of the Saskatchewan Mustard Development Commission (SaskMustard) is:

to grow the mustard industry for the benefit of producers”40 There is a mandatory, but refundable levy of 0.5 per cent of the gross sales.40  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.40  

For 2018, Saskatchewan mustard producers may claim 23% of their checkoff contributions as a qualifying SR&ED expenditure on their federal tax return.43 

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

 20152016201720182019
FedFedFedFedFed
Wheat/BarleyN/AN/AN/A11%22%
Canola5.66%13.50%11.14%13.70%N/A
Oat18.9%19.7%23.6%17.1%35.4%
Pulse37.57%32.46%48.42%40.05%73.68%
Flax44%48%N/A32.61%12.81%
CornN/AN/AN/A20%25%

Organizations

Manitoba Wheat and Barley Growers Association

Manitoba Wheat and Barley Growers Association (MWBGA) mission is:

to strategically invest in research and market development initiatives that advance the profitability and sustainability of wheat and/or barley production for growers.”44  The check-off for wheat is $1.00 per tonne and the check-off for barley is $1.06 per tonne.44  

For the 2018-2019 tax year, 22% of MWBGA’s check-off qualifies for the SR&ED tax credit.46

Manitoba Canola Growers

The mission of the Manitoba Canola Growers (MCG) is:

“Manitoba Canola Growers is committed to maximizing net income for canola farmers through sustainable production.”47 The check-off rate is $1.00/tonne.48  

The rate for canola research in Manitoba in 2018 is 13.7%.49 

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, helps develop new markets for oats and influences policy which directly impacts the Manitoba oat grower.”50  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.51 

For 2019, Manitoba producers may claim 35.4% of their levy contributions as a qualifying SR&ED expenditure on their federal tax return.52 

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.”53 There is a refundable check-off for pulse and soybeans.  

For the 2019 tax year, 73.68% of the Manitoba pulse check-off qualifies for the SR&ED tax credit.54 

Manitoba Flax Growers Association

Manitoba Flax Growers Association (MFGA) mission is:

Investing in flax agronomy, research and market development to benefit Manitoba growers.”55   The check-off rate for flax in Manitoba is 0.5% of gross sales; straw has a rate of 1% of the sale price.56  The check-off is refundable.  

For the crop year ending July 31, 2019 the SR&ED tax credit for Manitoba flax producers paying the check-off is 12.81%57 

Manitoba Corn Growers Association

The main focus of the Manitoba Corn Growers Association (MCGA) is research and market development.58 There is a mandatory corn check-off of ½ of 1% of sales.59 

For the 2019 tax year, 25% of the Manitoba corn check-off qualifies for the SR&ED tax credit.60 

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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Show 60 footnotes

  1. Alberta Wheat Commission. (August 31, 2016.) About Us. Retrieved December 19, 2019. https://albertawheat.com/about/about-us
  2. Alberta Wheat Commission. (August 31, 2016.) Important changes to the check-off. Retrieved December 19, 2019. https://albertawheat.com/about/check-off-information/important-changes-to-the-check-off
  3. Alberta Wheat Commission. (February 10, 2020.) Press Releases. Retrieved February 26, 2020. https://www.albertawheat.com/media/press-releases/wheat-farmers-can-claim-31-per-cent-sr-ed-credit-on-their-2019-taxes
  4. Alberta Barley.  About Us: Vision/Mission Statement. Retrieved December 19, 2019. https://www.albertabarley.com/about-us/visionmission-statement
  5. Alberta Barley. Our Priorities. Retrieved December 19, 2019. https://www.albertabarley.com/our-priorities/financecheck-offs/alberta-barley-check-off/
  6. Alberta Barley.  Blog. Retrieved February 26, 2020. https://www.albertabarley.com/barley-farmers-can-claim-13-per-cent-sred-credit-on-their-2019-taxes/
  7. Alberta Canola Producers Commission. About Alberta Canola. Retrieved December 19, 2019. https://albertacanola.com/about/
  8. Alberta Canola Producers Commission. About Alberta Canola. Retrieved December 19, 2019. https://albertacanola.com/about/
  9. Alberta Canola Producers Commission. News. Retrieved February 26, 2020. https://albertacanola.com/news/tax-credit-for-the-2019-tax-year-open-to-canola-farmers-in-alberta-2/
  10. Prairie Oat Growers Association. The Alberta Oat Growers Commission. Retrieved December 19, 2019. https://poga.ca/partners/about-aogc
  11. Prairie Oat Growers Association. About POGA. Retrieved December 19, 2019. https://poga.ca/poga/about-poga
  12. Prairie Oat Growers Association. The Alberta Oat Growers Commission. Retrieved December 19, 2019. https://poga.ca/partners/about-aogc
  13. Prairie Oat Growers Association. Research Tax Credits. Retrieved February 26, 2020. https://poga.ca/aogc-research-tax-credits
  14. Alberta Pulse Growers Commission. About Us. Retrieved December 19, 2019. https://albertapulse.com/about-us/
  15. Alberta Pulse Growers Commission. About Us. Retrieved December 19, 2019. https://albertapulse.com/about-us/
  16. Alberta Pulse Growers Commission. SR&ED Tax Credit. Retrieved February 26, 2020. https://albertapulse.com/2020/02/qualified-alberta-pulse-growers-eligible-for-32-5-tax-credit-for-investing-in-research/
  17. SaskCanola. Research Tax Credit. Retrieved January 6, 2020. https://www.saskcanola.com/research/taxcredit.php
  18. Saskatchewan Wheat Development Commission. About. Retrieved January 6, 2020. https://saskwheat.ca/mission-vision
  19. Saskatchewan Wheat Development Commission. About. Retrieved January 6, 2020. https://saskwheat.ca/mission-vision
  20. Saskatchewan Wheat Development Commission. SR&ED Investment Tax Credit Info. Retrieved February 26, 2020. https://saskwheat.ca/sred-investment-tax-credit-info
  21. SaskBarley Development Commission. About Us. Retrieved January 6, 2020. http://saskbarleycommission.com/about-sbdc/about-us
  22. SaskBarley Development Commission. Barley Checkoff. Retrieved January 6, 2020. http://saskbarleycommission.com/about-sbdc/barley-check-off
  23. SaskBarley Development Commission. SR&ED. Retrieved February 26, 2020. http://saskbarleycommission.com/research/sred
  24. SaskCanola. About. Retrieved January 6, 2020. https://www.saskcanola.com/about/
  25. SaskCanola. About. Retrieved January 6, 2020. https://www.saskcanola.com/about/
  26. SaskCanola. About. Retrieved January 6, 2020. https://www.saskcanola.com/about/
  27. SaskCanola. Research Tax Credit. Retrieved February 26, 2020. https://www.saskcanola.com/research/taxcredit.php
  28. Prairie Oat Growers Association. SaskOats Strategic Plan 2017 and Beyond. Retrieved January 6, 2020. https://poga.ca/saskoats-strategic-plan
  29. Prairie Oat Growers Association. The Saskatchewan Oat Development Commission. Retrieved January 6, 2020. https://poga.ca/partners/about-saskoats
  30. Prairie Oat Growers Association. Research Tax Credit for Registered Oat Producers in Saskatchewan. Retrieved February 26, 2020. https://poga.ca/saskoats-research-tax-credits
  31. Saskatchewan Pulse Growers. About. Retrieved January 22, 2020. https://saskpulse.com/about/
  32. Saskatchewan Pulse Growers. SR&ED TAX CREDIT. Retrieved January 22, 2020. https://saskpulse.com/sred-tax-credit/
  33. Saskatchewan Pulse Growers. SR&ED TAX CREDIT. Retrieved January 22, 2020. https://saskpulse.com/sred-tax-credit/
  34. Saskatchewan Pulse Growers. SR&ED TAX CREDIT. Retrieved January 22, 2020. https://saskpulse.com/sred-tax-credit/
  35. Saskatchewan Flax Development Commission. About. Retrieved January 22, 2020. https://www.saskflax.com/about/index.php
  36. Saskatchewan Flax Development Commission. About. Retrieved January 22, 2020. https://www.saskflax.com/about/levy.php?page=3
  37. Saskatchewan Flax Development Commission. Research. Retrieved February 26, 2020. https://www.saskflax.com/research/tax.php
  38. Canary Seed Development Commission of Saskatchewan. Retrieved January 22, 2020. https://www.canaryseed.ca/cdcs.html
  39. Canary Seed Development Commission of Saskatchewan. News. Retrieved February 26, 2020. https://www.canaryseed.ca/2020-02-18-tax.html
  40. Saskatchewan Mustard Development Commission. Mustard Levy. Retrieved January 22, 2020. https://saskmustard.com/grower/governance/mustard-levy
  41. Saskatchewan Mustard Development Commission. Mustard Levy. Retrieved January 22, 2020. https://saskmustard.com/grower/governance/mustard-levy
  42. Saskatchewan Mustard Development Commission. Mustard Levy. Retrieved January 22, 2020. https://saskmustard.com/grower/governance/mustard-levy
  43. Saskatchewan Mustard Development Commission. News. Retrieved January 22, 2020. https://saskmustard.com/grower/news/registered-mustard-producers-eligible-for-23-tax-credit/
  44. Manitoba Wheat and Barley Growers Association. About. Retrieved January 22, 2020. https://mbwheatandbarley.ca/about/about-mwbga
  45. Manitoba Wheat and Barley Growers Association. About. Retrieved January 22, 2020. https://mbwheatandbarley.ca/about/about-mwbga
  46. Manitoba Wheat and Barley Growers Association. Scientific Research and Experimental Development (SR&ED) Tax Credit. Retrieved February 26, 2020. https://mbwheatandbarley.ca/2018-19-scientific-research-experimental-development-sred-tax-credit/
  47. Manitoba Canola Growers. About. Retrieved January 23, 2020. https://canolagrowers.com/about-mcga/about/
  48. Manitoba Canola Growers. About. Retrieved January 23, 2020. https://canolagrowers.com/about-mcga/canola-check-off/
  49. Manitoba Canola Growers. Investment Tax Credits Available to Manitoba Canola Growers. Retrieved January 23, 2020. https://canolagrowers.com/2016/03/10/investment-tax-credits-available-to-manitoba-canola-growers/
  50. Prairie Oat Growers Association. MOGA Strategic Plan 2017 and Beyond. Retrieved January 23, 2020. https://poga.ca/strategic-plan-moga
  51. Prairie Oat Growers Association. The Manitoba Oat Growers Association. Retrieved January 23, 2020. https://poga.ca/partners/about-moga
  52. Prairie Oat Growers Association. MOGA Strategic Plan 2017 and BeyondResearch Tax Credit for Registered Oat Producers in Manitoba. Retrieved February 26, 2020. https://poga.ca/moga-research-tax-credits
  53. Manitoba Pulse Soybean Growers. About Us. Retrieved January 23, 2020. https://www.manitobapulse.ca/about
  54. Manitoba Pulse Soybean Growers. Scientific Research and Experimental Development (SR&ED) Tax Credit. Retrieved February 26, 2020. https://www.manitobapulse.ca/about/https://www.manitobapulse.ca/production/programs-credits/scientific-research-and-experimental-development-sred-tax-credit/
  55. Manitoba Flax Growers Association. About Us. Retrieved January 23, 2020. http://mfga.ca/about-us/our-mission-vision/
  56. Manitoba Flax Growers Association. About Us. Retrieved January 23, 2020. http://mfga.ca/about-us/check-off-info/
  57. Manitoba Flax Growers Association. Farmers Resources. Retrieved February 26, 2020. http://mfga.ca/farmers-resources/tax-credits/
  58. Manitoba Corn Growers Association. Agricultural Policy. Retrieved January 23, 2020. https://manitobacorn.ca/public-policy/
  59. Manitoba Corn Growers Association. Buyer Info Retrieved January 23, 2020. https://manitobacorn.ca/buyer-information/
  60. Manitoba Corn Growers Association. 2019 Scientific Research and Experimental Development (SR&ED) Tax Credit. Retrieved March 10, 2020. https://manitobacorn.ca/2019-scientific-research-and-experimental-development-sred-tax-credit/
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