Saskatoon, Saskatchewan
March 20, 2003

Canadian prairie producers are reminded that their 2002 investment in research through the Western Grains Research Foundation (WGRF) Check-off funds is eligible for a tax credit.

"The Scientific Research and Experimental Development (SR&ED) tax credit can be earned on the portion of producer check-off contributions that is used for research and development," says Lorence Peterson, WGRF Executive Director. "By keeping administrative costs low, WGRF has maximized the Fund money allocated to research, which creates a direct benefit for producers."

Specifically, 94 percent of the Wheat Check-off and 92 percent of the Barley Check-off contributions that are deducted from Canadian Wheat Board final payments to producers are eligible for the 2002 tax credit calculation, he says. Individual producers then qualify for a 20 percent tax credit and corporate
producers qualify for a 35 percent tax credit.

The Wheat and Barley Check-off Funds have made a significant impact on breeding programs in Western Canada, says Peterson. The Funds are based on check-offs of $0.20/tonne for wheat and $0.40/tonne for barley, deducted from Canadian Wheat Board final payments to producers (the exception is barley in Alberta, which is covered by a provincial check-off administered by the Alberta Barley Commission). Through the Funds, Western Canadian wheat and barley producers have become major investors in breeding research, doubling breeding activity for both wheat and barley at Check-off funded programs.

The SR&ED tax credit has long been available to research investors in other industries, but has only recently been extended to farmers, says Peterson. A number of farmer-funded research organizations, including WGRF, worked with the federal government to establish tax credit eligibility for check-offs that fund research.

"Extending the tax credit to farmers who participate in research check-offs is recognition that farmers have become major investors in research," he says. "The Wheat and Barley Check-off Funds are a good example. Producer contributions to research amount to approximately $4 million annually."

Producers should keep a few key points in mind when calculating their tax credit, says Peterson, namely the differences between different check-offs and the distinction between individuals and incorporated farm businesses.

While some check-off funds are used for non-research purposes, producers can only earn the tax credit on the portion of a check-off that is specifically allocated to research and development.

Producers can use their investment tax credit in four different ways. First, it can be used to pay off federal tax owed in the current year. Second, if no tax is owed, a portion may be refunded - for individuals, 40 percent is refundable, for corporations 100 percent is refundable. Third, the credit may be carried forward for up to 10 years to offset federal tax. Fourth, it can be carried back up to three years to reduce federal tax payable in those years.

The SR&ED tax credit first became available to farmers in 2001 and producers still have time to make claims for the 2001 tax year.

Individuals have 17.5 months from the end of their fiscal year to apply retroactively for the 2001 tax credit, while Canadian controlled privately held corporations have 18 months from the end of their fiscal year. The 2001 form can be downloaded from the WGRF Web site at www.westerngrains.com.

For 2001, eligibility for the tax credit on the Check-off was 41 percent for wheat and 61 percent for barley. The lower level of eligibility in the 2001 tax year was a result of Agriculture and Agri-Food Canada (AAFC) not being recognized by the Canada Customs and Revenue Agency as a eligible research agency for the tax credit until November 18, 2001. As a result, only funding allocated to AAFC research institutions after that date was eligible.

The 2002 SR&ED tax credit application form can be downloaded directly from the Canada Customs and Revenue Agency Web site at www.ccra.gc.ca/sred. Individual producers need form T2038 and Canadian controlled private corporations need form T2SCH31. Producers can also check the Western Grains Web site at www.westerngrains.com for more information about the credit.