Scope of this Article
This article summarizes the SR&ED changes proposed in the 2012 provincial budgets for Alberta, British Columbia and Saskatchewan. None of these proposals become law until passed by their respective legislatures.
SR&ED Changes Proposed in the 2012 Alberta Budget
Current Alberta legislation requires that SR&ED benefits received from the Federal government be deducted from the qualified expenditures for the purposes of computing Alberta SR&ED in the subsequent year. The net effect of this framework is a “double-grind” procedure that erodes the net SR&ED benefits received by companies through a multi-year, iterative, calculation. Under the current law, the ultimate, combined, Federal and Provincial ITC benefit to a CCPC is 39.4% while non-CCPC corporations benefit at a rate of 26.5%
In their 2012 Alberta budget proposal, the Progressive Conservative government has proposed to eliminate the double-grind aspect of the Alberta SR&ED program. This will result in ITC rates of 41.5% for CCPCs and 28% for non-CCPC corporations. The change will also bring a welcome reduction in complexity to users and administrators of the Alberta program.
SR&ED Changes Proposed in the 2012 Saskatchewan Budget
Saskatchewan currently offers a 15% refundable SR&ED benefit on qualifying expenditures to all corporations. In their 2012-2013 budget proposal, the Saskatchewan government has proposed to exclude non-CCPCs from receiving refundable benefits and to limit refundable benefits CCPCs to an annual maximum of $3 million in qualifying expenditures. CCPCs with qualifying expenditures in excess of $3 million annually will receive the balance of their ITCs as non-refundable tax credits which can be carried forward up to 10 years (or back 3). The changes are to be effective for expenditures incurred on or after April 1, 2012.
British Columbia SR&ED Program Anticipated to Extend Past August 2014
The British Columbia SR&ED program, as currently enacted, expires on August 31, 2014. The 2012/13 -2014/15 budget assumes that the BC SR&ED program (with a 10% ITC rate) will be continued in its current form past this date but stops short of extending the program’s mandate.
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.