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:
- 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.
- 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.
- 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
- 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.
- The team at the OMDC in Toronto are incredibly helpful and work hard to ensure that calls are returned within a day.
- 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
- 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.
- 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.
- 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.
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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.