Ontario Interactive Digital Media Tax Credit | Zombie Apocalypse Survival

Using the OIDMTC to create eligible zombie apocalypse education tools.

Expanding on our earlier posts on how the development of zombie-fighting tools and zombie-proof architecture can be SR&ED eligible, this month’s Zombie Apocalypse post focuses on a complimentary tax credit that allows companies to recover up to 40% of development and marketing costs.  In short, this tax credit covers many of the expenses that are not SRED-able.

OIDMTC – Overview

The Ontario Interactive Digital Media Tax Credit (OIDMTC) covers the cost of development and marketing costs as they relate to the creation of products that meet the following criteria:

a) The product must be an interactive digital media product whose primary purpose is to educate, inform or entertain

b) It must achieve its primary purpose by presenting information in at least two of (i) text, (ii) sound and (iii) images

There are also additional minor requirements, which require that the companies (and the development work performed) be located in Ontario.  However, the OIDMTC’s criteria feature relatively broad definitions that cover a wide variety of different products including interactive websites, mobile applications and even video games.

OIDMTC for Zombie Apocalypse Survival

Here’s a practical (and fun/quirky) example:

Let’s say you’ve decided that in addition to the Zombie Proof House and the Sawblade Slingshot, you will also need an educational tool to inform individuals about the impending zombie apocalypse  in order to maximize your chances of survival.

In order to do so, you opt to create a website and iPhone application that individuals can access to learn about a) the different types of zombies, and b) the most effective way of dealing with each type. To be OIDMTC eligible, this product would have to incorporate the following elements:

    1. Images and text – For example, you might have links to web pages explaining the most common zombies, with a written description of their habits and attack patterns.  Short animations of their unique shambling could be simultaneously played on the page, allowing users to identify different zombie types from a distance. Any surviving video of their attack could also be made accessible on the site.
    2. Interactivity – The most important part about the whole product is that it must be interactive, in that the user is able to control or manipulate the information.  Simple multimedia displays, even if it includes text, audio and video, are not eligible.  Each individual using the program should be able to get different information set out of it, depending on their interests. For the zombie apocalypse preparation product, the website could feature an interactive avatar of the zombie, allowing users to select various weapons (i.e. a circular saw blade launcher) and click on a body part to see the expected effect on the zombie.  The user could then control the order in which the information is presented. The individuals would be able to use either the website or iPhone app to browse through pictures and text, controlling the order in which the information is displayed for self-directed, educational purposes.
    3. No direct promotion of other company products – OIDMTC reviewers will not be happy if every 3rd line ends with “…this can all be avoided if you simply purchase my patented Zom-B-Gone spray.”

Marketing and Development Expenditures

The best part of the OIDMTC is that it allows you to claim up to 40% of your marketing and development expenditures. In theory, this means that anything that cannot be claimed for SR&ED can be covered by this program.

Sounds easy, right? Well, yes and no.

Why the OIDMTC is Easy

    1. The qualification criteria are straightforward. The documentation from the Ontario Media Development Corporation (OMDC)–the government entity that administers the program–is well written and accessible.
    2. The team at the OMDC in Toronto are incredibly helpful and work hard to ensure that calls are returned within a day.
    3. Best of all, you can create retroactive claims going back several years.  How far back, you ask? Great question. Considering that the claims can span 37 months of development time, it’s over four years in some cases. (More information to follow in a separate later blog post!) This 37 month span is amazing when compared to the SR&ED program, where you only have 18 months  from your fiscal year end to file a claim.

Why the OIDMTC is Not-So-Easy

    1. The online application portal, which is great for claimants and preparers alike, still requires that a copious amount of documentation be submitted. On average, you will have to submit ~16 different documents of varying lengths.  These include marketing & business plans, financial statements, screenshots, product descriptions, etc. You will have to locate (or even recreate) these documents if you’ve lost or thrown them away.
    2. Breaking up the yearly costs to comply with their changes to the tax rates–(March 24, 2006, March 26, 2008, March 27, 2009)–can be time consuming. Particularly if you’re a decent employer and provided a raise between the years, calculating the per diem rate can be a pain.
    3. While the team in Toronto is great, they’ve been bombarded with many poorly-written applications that they have to sort through. Consequently, their current processing time is around 10 months. This unfortunately means that it could be up to 4 years from when the costs are incurred to when you receive the refund.

OIDMTC – Bottom Line

The OIDMTC is a fantastic program for innovative companies that helps cover many of the expenses not eligible for the SR&ED incentive program. And while it is certainly possible to apply for the OIDMTC on your own, it will undoubtedly take up a great deal of time and resources. Additionally, this tax credit currently isn’t as well supported as SR&ED–there are not nearly as many people who can assist with the application process. Consulting with or even hiring a professional will drastically reduce the risk of having your application denied.


Want to learn more about SR&ED?
Contact us directly or start a discussion on our LinkedIn group.
Better yet, sign up for the Comprehensive Guide to SR&ED.

 

This article is presented only for informational purposes and does not constitute legal advice. You should retain legal counsel if you require legal advice regarding your individual situation.


Elizabeth Lance

Elizabeth is known as the "SR&ED Maven" in the industry. With a love of documentation and the nuances of language, she is often engaged by multi-million dollar companies to help improve documentation and workflow processes. Her favourite sentence (which she hears regularly) is "Accepted as Filed". Find out more about her on LinkedIn.

18 Comments

Stephanie · August 23, 2011 at 4:16 pm

Thank you so much for posting this! Labour and marketing are HUGE expenses for start-ups, its great to know I can get some of it back.

I noticed you mentioned this credit is for non-SRED eligible costs. Does this mean I can only apply to either SRED or OIDMTC or is it possible that I qualify for both?

    Trevor Kempthorne · August 25, 2011 at 4:12 pm

    Excellent question Stephanie! The short answer is yes. Though both programs highlight different aspects of a product’s development (SR&ED on the nitty-gritty technical details, OIDMTC on the user presentation), it is possible to apply a single product to both. Careful record keeping needs to be maintained though, and you will have to declare any OIDMTC assistance on the SR&ED claim for that year.

    In the end though, applying for one does not disqualify you for the other in any way.

Nathan · August 23, 2011 at 11:55 pm

First of all, I would definitely download that iPhone App. It still amazes me how you are able to use incredibly entertaining ideas, such as the Zombie Apocalypse and find a way to get SR&ED money from it.

I also didn’t realize that the OIDMTC allowed you to re-coup up to 40% of your development and marketing expenses. That is incredible! I was just wondering if there is a limit to the amount you can actually claim for this tax credit in any given year?

Thanks for the great information.

    Alie Lavoie · August 24, 2011 at 2:32 pm

    I have the same question, actually. Does OIDMTC put a cap on the claim amount per claimant? It’s (presumably) not a bottomless pit, so they must have to.

    And I’d download the iPhone app too. Zombie apocalypse preparation… on the go!

    Trevor Kempthorne · August 25, 2011 at 4:24 pm

    That’s an interesting question Nathan and it comes with a rather surprising answer. The legislation specifically states that there is no limit on the labour expenditures that can be claimed for each project, nor is there a cap per project or per year. These tax dollars are going directly back into the economy with the program.

    The only restriction is that marketing and distribution costs are capped at $100,000 for each project. The rates also change if a large company (>$20,000,000) applies.

    Glad you like the site!

      Nathan · August 25, 2011 at 11:51 pm

      Thanks for the answer, Trevor. I am very surprised that there is no limit for the labour expenditures that can be claimed.

      I guess it does make sense since it is going back into the Canadian economy

      Thanks again for all the useful information.

      Sita · August 26, 2011 at 10:13 am

      Good information !

Daniel · August 25, 2011 at 3:51 pm

“Up to 4 years from when the costs are incurred to when you receive the refund.” That’s a long wait. I guess that partly reflects the popularity of this credit? Does that mean claimants have a lower chance of being accepted (due to competition with other applications)? And how does the long turnaround time affect how consultants structure their fees?

    Trevor Kempthorne · December 2, 2011 at 11:33 am

    Hi Daniel, well the 4 years is an extreme example because you only claim the project once and can expense all labour costs going back 3 years from the finish date.
    The program is currently fully funded by the government, and is limited only by the processing time. To this date, if you meet the requirements and have good accounting processes, you won’t be denied the tax credit. It will just take a little while to get to.

    With regards to consulting fees, it varies. The application procedure takes a while with so many documents. Contingency (i.e. success) based fees are common, though a refundable retainer fee is often involved to account for the time lag.

James · September 20, 2011 at 2:37 pm

Much appreciated for the information and share!

    Trevor Kempthorne · September 28, 2011 at 2:28 pm

    Glad you liked it James. If you have any further questions just ask!

pvc manufacturers · November 23, 2011 at 1:29 pm

It’s hard to find knowledgeable people on this topic however you sound like you know what you’re talking about! Thanks

    Trevor Kempthorne · December 2, 2011 at 11:35 am

    Why thank you 🙂 We’ve been working with tax credits (both SR&ED and the OIDMTC) for several years now and I’m glad you can see it is showing. If you have any further questions just let us know!

Kymberly Besancon · November 27, 2011 at 12:40 am

Your website was tweeted by a friend yesterday evening. Figured I’d take a look. Best decision ever.

    Trevor Kempthorne · December 2, 2011 at 11:40 am

    Awesome! That’s the main goal of the website here. There’s all these amazing programs for the small business entrepreneurs in Canada but there’s very little knowledge going around. Consultants and other groups can definitely help, but it shouldn’t stop anyone from educating themselves and learning about the program.

whitney newey · November 29, 2011 at 6:41 am

I found your posting to be insightful! Thank you.

towing hitch · December 5, 2011 at 7:05 pm

Thank you for all of the effort on this blog

it marketing · December 6, 2011 at 2:56 am

very good post, i certainly love this website, keep on it

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