SR&ED Program Updates: January-March 2024
This post outlines Scientific Research and Experimental Development (SR&ED) program updates from January to March of 2024, including administrative, policy, tax law, and court cases. SR&ED Education and Resources was busy in the first quarter of 2024. We kept our readers up to date, including summarizing three legal rulings on the subject of SR&ED, updating readers on the CRAs SR&ED consultations potential impacts and outcomes, examining the potential impacts of Ontario’s 2024 provincial budget on the SR&ED program, discussing some significant improvements to key pages on our SR&ED Education and Resources website, and more.
CRA SR&ED Consultations
In January of 2024 the Government of Canada launched consultations on SR&ED including how to improve support for research and development, and also how to create and retain intellectual property in Canada. This marked the beginning of the long-awaited review of the SR&ED program. We spent the first quarter of 2024 discussing some possible implications and opinions related to the SR&ED consultations with three new articles:
- On February 27, 2024, we published a brief discussion of what led up to the SR&ED program review, the questions being considered in the consultations, and a proposal for an anonymous option in our article “The CRA Launches Consultations on SR&ED – 2024“
- On March 12, 2024, we delved into TMX’s interest in the CRA consultations on SR&ED, their opinions related to advocating for better markets, driving accelerated growth, and supporting small public businesses in our article “TMX Lobbies for Small Public Companies Accessing SR&ED – CRA Consultation March, 2024“
- On March 25, 2024, we analyzed the Canadian Council of Innovators (CCI) response to the CRA Consultations in our article CCI Response to CRA Consultation March, 2024 – “SR&ED is a value statement of where we want to go as a country.”
Ontario 2024 Budget
On March 26, 2024, Ontario’s 2024 provincial budget was released, “Building a Better Ontario: 2024 Ontario Budget”. This budget emphasizes the Ontario government’s plan to invest in key public services and industries to promote job creation and retention and attract investments.
- On March 27, 2024, we analyzed Ontario’s 2024 provincial budget and detailed the changes which may have implications upon the SR&ED program within the province of Ontario in our article “2024 Ontario Budget: Important Implications for SR&ED“.
SR&ED Education and Resources Articles
In the hopes of further illuminating the world of SR&ED during the first quarter of 2024, we published one post discussing a potentially confusing topic in the SR&ED program:
- On February 5, 2024, the Alberta Canola Producers Commission announced that Alberta Canola growers who did not request a refund of their check-off fees qualify for an SR&ED tax credit for the 2023 tax year. We discussed this in our article “2023 SR&ED Tax Credits for Alberta Canola Farmers“
SR&ED Education and Resources Website Updates
We have made some significant improvements to some key pages on our SR&ED Education and Resources website to help you find the information you need faster.
- We have reorganized our SR&ED Research page to provide readers with links to important SR&ED topics such as the History of SR&ED, relevant Government Reports on SR&ED, Academic Research on SR&ED, Public Opinions on SR&ED, and SR&ED statistics.
- We have also updated our History of SR&ED page. To understand where things are going, especially in matters of public policy, it is important to properly comprehend the past. We have updated and divided the timeline into multiple periods, based on significant milestone events which have impacted the SR&ED program from its inception to the present day.
SR&ED Policy and Program Updates
There was no new SR&ED policy or program update in the first quarter of 2024. The SR&ED news and updates page is an important source of information for SR&ED taxpayers as the CRA lists any changes or updates to the SR&ED program by order of date.
Administrative, Policy, and Legislative
In the first quarter of 2024, there were no new SR&ED news or information updates from the CRA.
Judicial Proceedings
In the first quarter of 2024, we summarized three SR&ED court rulings for our readers.
FOOi Inc. v. The King (2023)
Topic: Financial Eligibility – specifically, Filing Deadlines & COVID-19
The Applicant had a fiscal year end of June 30, 2018. Their accounting firm filed their tax electronically on December 5, 2019, without any SR&ED forms filled out. The CRA issued a notice of assessment on December 11, 2019. The Applicant’s accountant filed an amended return with the SR&ED information on December 20, 2019. The accounting firm attempted to follow up with the CRA in early 2020 but due to the COVID-19 pandemic they were unable to reach anyone in the CRA about the return. In December 2020, the Applicant learned that the CRA could not locate their 2018 SR&ED claim. Their accountant sent a letter on their behalf to the CRA on January 21, 2021, explaining that a SR&ED claim had been filed in December of 2019 and no response had been received. The letter did not contain a notice of objection or a request for an extension of time. On March 8, 2021, the Applicant received news from the CRA that their claim was denied as it was filed more than 12 months after the return date was due. On April 9, 2021, the Applicant’s accountant filed a formal Notice of Objection which the CRA notified the Applicant on June 2, 2021, that it could not be accepted as the deadlines had passed. The Judge ruled that although an error was committed by the CRA, the requirement to file a Notice of Objection and an extension request in the prescribed timeline established by the Income Tax Act stands. The case was dismissed without costs.
For more details and analysis, please view our complete analysis of FOOi Inc. v. The King (2023).
Polarsat Inc. v. The King (2023)
Topic: Financial Eligibility – specifically, CCPC Eligibility & Company Control
In this case, the Respondent requested to file an amended Reply to Notice of Appeal for the reassessments of the 2011, 2012, 2013, 2014, and 2015 taxation years of the Appellant, Polarstat Inc. The CRA denied Polarstat’s claims in part as they did not qualify as a Canadian Controlled Private Corporation (CCPC). The CRA argued the General Anti-Avoidance Rule (GAAR) to explain that Polarstat Inc. did not qualify for the enhanced credits (and as a CCPC). The CRA argued that the Appellant was controlled de facto by Polarsat Holdings Inc. (“PSat1”) which, in turn, was held by many non-resident corporations. The Appellant argued that due to their reorganization, they did qualify as a CCPC. The judge ruled that the proposed amendment in regards to the GAAR argument will assist in determining the real questions involved in the case (CCPC eligibility). The judge ruled that determining if a transaction was conducted for bona fide purposes other than to obtain the tax benefit must be determined. The motion passed and the judge granted the Respondent’s motion to file an Amended Reply to the Notice of Assessments.
For more details and analysis, please view our complete analysis of Polarsat Inc. v. The King (2023).
Total Energy Services Inc. v. The King (2024)
Topic: Financial Eligibility – specifically, Carry-forward Amounts & Change of Control
This was an appeal of a notice of reassessment dated August 27, 2015, denying the deduction of non-capital and other losses and deductions for the 2010 and 2011 taxation years on the basis of the application of the General Anti Avoidance Rules (GAAR). The Appellant, Total Energy Services Inc., bought a failing company, Xillix Biotechnologies Corp. to absorb their tax losses and benefits. The Appellant argued that they did not violate the GAAR and were entitled to the non-capital loses and SR&ED expenditures based on the acquisition of the company. The judge dismissed the appeals.
For more details and analysis, please view our complete analysis of Total Energy Services Inc. v. The King (2024).
Summary of SR&ED Updates
SR&ED program updates from January to March of 2024 were busy; we wrote five more informative blog posts, summarized three more legal rulings, and kept our readers up to date regarding topics that may affect the SR&ED program. Check back for more updates as we continue through 2024.