Canadian farmers should keep in mind this tax season they can earn a tax credit on the dollars they have invested in research through the Wheat and Barley Check-off Funds, administered by Western Grains Research Foundation (WGRF).

This is a result of the federal government extending the Scientific Research and Experimental Development (SR&ED) tax credit to producers several years ago, says Lanette Kuchenski, WGRF Executive Director. The extension was granted following consultations over several years between Canada Customs and Revenue Agency (CCRA), Agriculture and Agri-Food Canada, Western Grains Research Foundation (WGRF) and other farm associations.

"The SR&ED tax credit is a major recognition of the investment farmers are making in research," says Kuchenski. "It can also mean substantial dollars to producers, who are now funding research through various organizations. For example, through the WGRF Wheat and Barley Check-off Funds alone, producers invest over $3.5 million annually into wheat and barley breeding programs. The tax credit means a modest but very significant portion of that funding can essentially be returned to producers."

The SR&ED qualifying amount depends on the organization producers are dealing with, since only the portion of investment going directly to research qualifies. This amount is specified annually by the organization and, based on this amount, the tax credit can then be earned at a rate of 20 percent for individuals and 35 percent for corporate producers that are Canadian controlled private corporations (CCPC).

In the case of WGRF, for the 2004 tax year, 83 percent of the Wheat Check-off contributions and 80 percent of the Barley Check-off contributions are eligible for the tax credit calculation. "Producers can get information on how to claim the tax credit for 2004 on the WGRF Web site, www.westerngrains.com," says Kuchenski.

Farmers have four options for using their tax credit, she says. "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. Individuals have 17.5 months from the end of their fiscal year to apply retroactively for the previous year's tax credit, while Canadian controlled privately held corporations have 18 months from the end of their fiscal year.

The 2003 and 2004 SR&ED tax credit application forms 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 visit the Western Grains Web site at www.westerngrains.com for more information about the tax credit.