Vol. 145, No. 5 — March 2, 2011
SOR/2011-32 February 10, 2011
INCOME TAX ACT
ARCHIVED — Regulations Amending the Income Tax Regulations (2009 Livestock Deferral)
P.C. 2011-205 February 10, 2011
His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 (see footnote a) of the Income Tax Act (see footnote b), hereby makes the annexed Regulations Amending the Income Tax Regulations (2009 Livestock Deferral).
REGULATIONS AMENDING THE INCOME TAX REGULATIONS (2009 LIVESTOCK DEFERRAL)
1. Subparagraphs 7305(m)(i) to (iii) of the Income Tax Regulations (see footnote 1) are replaced by the following:
(i) in Manitoba, the Rural Municipalities of Albert, Archie. Arthur, Birtle, Brenda, Cameron, Clanwilliam, Edward, Ellice, Harrison, Hillsburg, Miniota, Minitonas, Park, Pipestone, Rossburn, Russell, Shellmouth-Boulton, Shell River, Shoal Lake, Sifton, Silver Creek, Strathclair, Swan River, Wallace, Winchester and Woodworth and Census Division No. 20, Unorganized, South Part, as developed by Statistics Canada for the 2006 Census,
(ii) in British Columbia, the Census Subdivisions Bulkley-Nechako B and E, Cariboo D, E, G, H and J to L, Central Kootenay A to E, G, H, J and K, Central Okanagan, Central Okanagan J, Columbia-Shuswap C to F, Kootenay Boundary B to E, North Okanagan B and D to F, Okanagan-Similkameen A to H, Peace River C to E, Spallumcheen, Squamish-Lillooet A to C and Thompson-Nicola A (Wells Gray Country), B (Thompson Headwaters), E (Bonaparte Plateau), I (Blue Sky Country), J (Copper Desert Country), L, M, N, O (Lower North Thompson) and P (Rivers and the Peaks), as these subdivisions were developed by Statistics Canada for the 2006 Census,
(iii) in Saskatchewan, the Rural Municipalities of Aberdeen, Antelope Park, Antler, Argyle, Arlington, Auvergne, Battle River, Beaver River, Benson, Biggar, Blucher, Bone Creek, Britannia, Brock, Browning, Buchanan, Buffalo, Calder, Cana, Canaan, Chaplin, Chesterfield, Churchbridge, Clayton, Clinworth, Coalfields, Corman Park, Cote, Coteau, Coulee, Cut Knife, Deer Forks, Dundurn, Eagle Creek, Elcapo, Eldon, Emerald, Enfield, Enniskillen, Estevan, Excelsior, Eye Hill, Fertile Belt, Fertile Valley, Foam Lake, Fox Valley, Frenchman Butte, Frontier, Garry, Glen Bain, Glen McPherson, Glenside, Good Lake, Grandview, Grant, Grass Lake, Grassy Creek, Gravelbourg, Grayson, Happyland, Harris, Hazel Dell, Hazelwood, Heart’s Hill, Hillsdale, Insinger, Invermay, Keys, Kindersley, King George, Kingsley, Lacadena, Lac Pelletier, Lawtonia, Langenburg, Livingston, Lone Tree, Loon Lake, Loreburn, Manitou Lake, Mankota, Maple Bush, Mariposa, Marriott, Martin, Maryfield, Mayfield, McLeod, Meadow Lake, Meota, Mervin, Milden, Milton, Miry Creek, Monet, Montrose, Moose Creek, Moose Mountain, Moosomin, Morse, Mountain View, Mount Pleasant, Newcombe, North Battleford, Oakdale, Orkney, Parkdale, Paynton, Perdue, Pinto Creek, Pittville, Pleasant Valley, Prairiedale, Preeceville, Progress, Reciprocity, Reford, Reno, Riverside, Rocanville, Rosedale, Rosemount, Round Valley, Rudy, Saltcoats, Saskatchewan Landing, Senlac, Shamrock, Silverwood, Sliding Hills, Snipe Lake, Spy Hill, St. Andrews, St. Philips, Stanley, Storthoaks, Swift Current, Tecumseh, Tramping Lake, Turtle River, Val Marie, Vanscoy, Victory, Wallace, Walpole, Waverley, Wawken, Webb, Whiska Creek, White Valley, Willowdale, Wilton, Winslow, Wise Creek and Wood River, and
(iv) in Alberta, the Cities of Calgary and Edmonton, the Counties of Athabasca, Barrhead, Beaver, Birch Hills, Brazeau, Camrose, Clear Hills, Clearwater, Flagstaff, Grande Prairie, Kneehill, Lac La Biche, Lacombe, Lac Ste. Anne, Lamont, Leduc, Minburn, Mountain View, Northern Sunrise, Paintearth, Parkland, Ponoka, Red Deer, Rocky View, Saddle Hills, Smoky Lake, St. Paul, Starland, Stettler, Strathcona, Sturgeon, Thorhild, Two Hills, Vermilion River, Westlock, Wetaskiwin, Wheatland, Woodlands and Yellowhead, Improvement District No. 13, the Municipal Districts of Acadia, Big Lakes, Bonnyville, Fairview, Greenview, Lesser Slave River, Northern Lights, Opportunity, Peace, Provost, Smoky River, Spirit River and Wainwright, Special Areas No. 2, 3 and 4 and the Town of Drumheller.
2. Paragraph 7305.02(1)(b) of the Regulations is replaced by the following:
(b) in respect of the 2009 calendar year, in Manitoba, the rural municipalities of Alexander, Alonsa, Armstrong, Bifrost, Brokenead, Coldwell, Eriksdale, Fisher, Gimli, Grahamdale, Lac du Bonnet, Lawrence, Mossey River, Reynolds, Rockwood, St. Andrews, St. Clements, St. Laurent, Siglunes, Whitemouth and Woodlands, and Census Division No. 18, Unorganized, East and West Parts and No. 19, Unorganized, as developed by Statistics Canada for the 2006 Census.
(This statement is not part of the Regulations.)
Issue and objectives
Typically, the recommended list for prescription as drought and flood/excess moisture regions for a given year is not finalized until March of the following year, because complete information regarding regions that have been significantly affected by drought or flood/excess moisture in a given year is not available until the end of that year.
An initial list of prescribed drought and flood/excess moisture regions for 2009 was contained in the Economic Recovery Act (stimulus), S.C. 2009, c. 51 (the “Act”), which received Royal Assent on December 15, 2009. However, subsequent to the passage and assent of the Act, and with complete information regarding regions affected by drought or flood/excess moisture conditions in 2009, it was determined that additional regions in Alberta, British Columbia, Manitoba and Saskatchewan should be prescribed. Therefore, it is necessary to prescribe these additional regions under sections 7305 and 7305.02 of the Income Tax Regulations (the “Regulations”) as qualifying drought or flood/excess moisture regions.
Description and rationale
In circumstances where drought or flood/excess moisture conditions significantly affect forage yields, farmers may be forced to sell breeding livestock because of the prohibitive costs of maintaining the herd. Normally, a farmer would replace breeding livestock if there were a forced sale, and the cost of the replacement cattle would offset the income inclusion from the forced sale. Farmers are unlikely to replace livestock while drought or flood/excess moisture conditions persist. The Income Tax Act permits farmers who dispose of breeding livestock, due to drought or flood/excess moisture conditions existing in a prescribed region in a given year, to exclude a portion of the sale proceeds from their taxable income until the following year, or the year following a consecutive series of years where drought or flood/excess moisture conditions persist, as the case may be. In this way, the full proceeds of disposition will be available to fund the acquisition of replacement cattle.
Each year Agriculture and Agri-Food Canada determines which regions may qualify as prescribed regions on the basis that the region has experienced drought or flood/excess moisture conditions. The Regulations Amending the Income Tax Regulations(2009 Livestock Deferral) enact amendments to sections 7305 and 7305.02 of the Regulations, prescribing additional regions that are eligible because of drought or flood/excess moisture in 2009.
The exact amounts of income deferred by farmers living in drought or flood/excess moisture regions is difficult to quantify as these amounts are not reported separately in farmers’ income statements. However, using Statistics Canada data on farming income, it is possible to estimate that the net benefits provided to farmers through the measure are unlikely to reach or exceed $1 million in total for the year for the government. These benefits represent the time value of a one-year deferral of the tax liability associated with the unreported taxable income. While these benefits may vary from year-to-year depending on the severity of the drought conditions and the number of affected regions, they are unlikely to reach or exceed $1 million annually.
This measure has a positive impact on the economy because it provides stability to the farming industry when it is affected by adverse, unpredictable weather conditions. This measure will not increase the administrative burden of any stakeholders as the administrative requirements already exist. A strategic environmental assessment concluded that these amendments would have minimal environmental effects.
The list of prescribed regions was developed through consultations held by the Department of Agriculture and Agri-Food with various parties, including provincial agriculture and municipal affairs departments, municipalities, farm associations and crop insurers.
Canadians in general were given opportunities to comment on these amendments following an announcement by the Department of Agriculture and Agri-Food regarding the additional regions to be recommended for prescription for 2009. The announcement consisted of a news release issued on December 24, 2009, and an update to the Department of Agriculture and Agri-Food’s Web site on March 5, 2010. Information on these announcements is available through Agriculture and Agri-Food Canada’s Web site at www.agr.gc.ca.
Implementation, enforcement and service standards
The drought and flood/excess moisture regions deferral must be reported in the farmer’s income tax return. As such, the person claiming the deferral will be subject to the compliance mechanisms available to the Minister of National Revenue. These mechanisms allow the Minister of National Revenue to assess and reassess tax payable, conduct audits and seize relevant records and documents.
Tax Policy Officer
Tax Legislation Division
Department of Finance
140 O’Connor Street
S.C. 2007, c. 35, s. 62
R.S., c. 1 (5th Supp.)
C.R.C., c. 945