Regulations Amending the Income Tax Regulations (2017 Livestock Deferral): SOR/2019-247
Canada Gazette, Part II, Volume 153, Number 14
SOR/2019-247 June 25, 2019
INCOME TAX ACT
P.C. 2019-911 June 22, 2019
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 221 footnote a of the Income Tax Act footnote b, makes the annexed Regulations Amending the Income Tax Regulations (2017 Livestock Deferral).
Regulations Amending the Income Tax Regulations (2017 Livestock Deferral)
1 Subsection 7305.01(1) of the Income Tax Regulations footnote 1 is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):
- (d) in respect of the 2017 calendar year, the Consolidated Census Subdivisions, based on the 2016 Statistics Canada Census, of
- (i) in Quebec, Albertville, Amqui, Auclair, Baie-des-Sables, Biencourt, Cacouna, Causapscal, Dégelis, Esprit-Saint, Kamouraska, La Malbaie, Lac-à-la-Croix, Lac-Alfred, Lac-des-Aigles, Lac-des-Eaux-Mortes, Lac-Huron, Lac-Matapédia, Lejeune, Les Bergeronnes, L’Isle-Verte, Notre-Dame-des-Neiges, Pohénégamook, Rimouski, Rivière-du-Loup, Routhierville, Ruisseau-Ferguson, Sacré-Cœur, Saint-Alexandre-de-Kamouraska, Saint-André, Saint-Antonin, Saint-Arsène, Saint-Bruno-de-Kamouraska, Saint-Clément, Saint-Cléophas, Saint-Cyprien, Sainte-Angèle-de-Mérici, Sainte-Flavie, Sainte-Jeanne-d’Arc, Saint-Éloi, Sainte-Luce, Saint-Elzéar-de-Témiscouata, Saint-Épiphane, Saint-Eusèbe, Saint-Fabien, Saint-Gabriel-de-Rimouski, Saint-Germain, Saint-Guy, Saint-Hubert-de-Rivière-du-Loup, Saint-Jean-de-Dieu, Saint-Léon-le-Grand, Saint-Mathieu-de-Rioux, Saint-Octave-de-Métis, Saint-Pascal, Saint-Simon, Saint-Ulric, Sayabec, Témiscouata-sur-le-Lac and Val-Brillant,
- (ii) in British Columbia, Alberni-Calyoquot A, B, D and F, Cariboo A to L, Central Kootenay A to E, G, H, J and K, Central Okanagan, Central Okanagan J, Columbia-Shuswap A and C to F, Comox Valley A, Comox Valley C (Puntledge-Black Creek), East Kootenay A to C and E to G, Fraser Valley B and D to G, Fraser-Fort George C to E, Kootenay Boundary B/Lower Columbia-Old-Glory, Kootenay Boundary D/Rural Grand Forks, Kootenay Boundary E/West Boundary, North Okanagan B and D to F, Okanagan-Similkameen A to H, Spallumcheen, SquamishLillooet B and C, Strathcona D (Oyster Bay-Buttle Lake), Thompson-Nicola A (Wells Gray Country), Thompson-Nicola B (Thompson Headwaters), Thompson-Nicola E (Bonaparte Plateau), Thompson-Nicola I (Blue Sky Country), Thompson-Nicola J (Copper Desert Country), ThompsonNicola L (Grasslands), Thompson-Nicola M (Beautiful Nicola Valley-North), Thompson-Nicola N (Beautiful Nicola Valley-South), ThompsonNicola O (Lower North Thompson) and Thompson-Nicola P (Rivers and the Peaks),
- (iii) in Saskatchewan, Aberdeen No. 373, Abernethy No. 186, Antelope Park No. 322, Arlington No. 79, Arm River No. 252, Auvergne No. 76, Baildon No. 131, Bayne No. 371, Bengough No. 40, Benson No. 35, Big Arm No. 251, Big Quill No. 308, Big Stick No. 141, Birch Hills No. 460, Blucher No. 343, Bone Creek No. 108, Bratt’s Lake No. 129, Brock No. 64, Brokenshell No. 68, Browning No. 34, Buckland No. 491, Caledonia No. 99, Cambria No. 6, Canaan No. 225, Carmichael No. 109, Caron No. 162, Chaplin No. 164, Chester No. 125, Chesterfield No. 261, Clinworth No. 230, Coalfields No. 4, Colonsay No. 342, Connaught No. 457, Corman Park No. 344, Coteau No. 255, Coulee No. 136, Craik No. 222, Cupar No. 218, Cymri No. 36, Deer Forks No. 232, Dufferin No. 190, Dundurn No. 314, Edenwold No. 158, Elcapo No. 154, Elfros No. 307, Elmsthorpe No. 100, Emerald No. 277, Enfield No. 194, Enterprise No. 142, Estevan No. 5, Excel No. 71, Excelsior No. 166, Eyebrow No. 193, Fertile Valley No. 285, Fillmore No. 96, Fish Creek No. 402, Flett’s Springs No. 429, Foam Lake No. 276, Fox Valley No. 171, Francis No. 127, Frontier No. 19, Garden River No. 490, Garry No. 245, Glen Bain No. 105, Glen McPherson No. 46, Golden West No. 95, Grant No. 372, Grassy Creek No. 78, Gravelbourg No. 104, Griffin No. 66, Gull Lake No. 139, Happy Valley No. 10, Happyland No. 231, Harris No. 316, Hart Butte No. 11, Hazelwood No. 94, Hillsborough No. 132, Hoodoo No. 401, Humboldt No. 370, Huron No. 223, Indian Head No. 156, Insinger No. 275, Invergordon No. 430, Ituna Bon Accord No. 246, Kellross No. 247, Key West No. 70, Kindersley No. 290, King George No. 256, Kingsley No. 124, Kinistino No. 459, Lac Pelletier No. 107, Lacadena No. 228, Lajord No. 128, Lake Alma No. 8, Lake Johnston No. 102, Lake Lenore No. 399, Lake of the Rivers No. 72, Lakeside No. 338, Lakeview No. 337, Last Mountain Valley No. 250, Laurier No. 38, Lawtonia No. 135, Leroy No. 339, Lipton No. 217, Lomond No. 37, Lone Tree No. 18, Longlaketon No. 219, Loreburn No. 254, Lost River No. 313, Lumsden No. 189, Mankota No. 45, Maple Bush No. 224, Maple Creek No. 111, Marquis No. 191, Marriott No. 317, McCraney No. 282, McKillop No. 220, McLeod No. 185, Milden No. 286, Milton No. 292, Miry Creek No. 229, Monet No. 257, Montmartre No. 126, Montrose No. 315, Moose Jaw No. 161, Morris No. 312, Morse No. 165, Mount Hope No. 279, Mountain View No. 318, Newcombe No. 260, Nipawin No. 487, North Qu’Appelle No. 187, Norton No. 69, Oakdale No. 320, Old Post No. 43, Paddockwood No. 520, Pense No. 160, Perdue No. 346, Piapot No. 110, Pinto Creek No. 75, Pittville No. 169, Pleasant Valley No. 288, Pleasantdale No. 398, Poplar Valley No. 12, Prairie Rose No. 309, Prairiedale No. 321, Prince Albert No. 461, Redburn No. 130, Reno No. 51, Riverside No. 168, Rodgers No. 133, Rosedale No. 283, Rudy No. 284, Sarnia No. 221, Saskatchewan Landing No. 167, Saskatoon, Scott No. 98, Shamrock No. 134, Sherwood No. 159, Snipe Lake No. 259, Souris Valley No. 7, South Qu’Appelle No. 157, Spalding No. 368, St. Andrews No. 287, St. Louis No. 431, St. Peter No. 369, Stanley No. 215, Star City No. 428, Stonehenge No. 73, Surprise Valley No. 9, Sutton No. 103, Swift Current No. 137, Tecumseh No. 65, Terrell No. 101, The Gap No. 39, Three Lakes No. 400, Torch River No. 488, Touchwood No. 248, Tullymet No. 216, Usborne No. 310, Val Marie No. 17, Vanscoy No. 345, Victory No. 226, Viscount No. 341, Waverley No. 44, Webb No. 138, Wellington No. 97, Weyburn No. 67, Wheatlands No. 163, Whiska Creek No. 106, White Valley No. 49, Willner No. 253, Willow Bunch No. 42, Willow Creek No. 458, Winslow No. 319, Wise Creek No. 77, Wolseley No. 155, Wolverine No. 340, Wood Creek No. 281, Wood River No. 74 and Wreford No. 280, and
- (iv) in Alberta, the City of Calgary, the Counties of Cardston, Clearwater, Cypress, Kneehill, Lacombe, Lethbridge, Mountain View, Newell, Red Deer, Rocky View, Starland, Vulcan and Wheatlands, Forty Mile County No. 8, Paintearth County No. 18, Stettler County No. 6, Warner County No. 5, the Municipal Districts of Bighorn No. 8, Foothills No. 31, Pincher Creek No. 9, Ranchland No. 66, Taber and Willow Creek No. 26 and Special Areas No. 2, 3 and 4.
2 Section 1 applies to the 2017 and subsequent taxation years.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
In circumstances where drought or excess moisture conditions significantly affect forage yields, farmers may be forced to sell breeding livestock (breeding animals and breeding bees) because of the prohibitive costs of maintaining the livestock. The income earned from the sale would be an inclusion in income and subsequently taxed. If new livestock is purchased in the same year, the cost of the purchase would be deducted from income as an expense. However, the sale and re-purchase of livestock does not usually happen in the same year because drought or excess moisture conditions can persist for a longer period of time.
Therefore, the Income Tax Act (the “Act”) permits farmers who dispose of breeding livestock because of drought or excess moisture conditions existing in a prescribed region in a 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 excess moisture conditions persist, as the case may be. In this way, the proceeds of the sale will be available to fund the acquisition of replacement livestock.
The tax deferral is targeted at breeding livestock because its sale is akin to disposing of long-term productive assets. Livestock that qualifies for the deferral includes, for example
- cattle, goats, horses and sheep that are over 12 months of age and are kept for breeding; and
- bees that are kept for breeding.
The Act defines breeding animals and breeding bees, and provides the formula to calculate the deferral amounts.
Each year, Agriculture and Agri-Food Canada recommends to the Minister of Finance that certain regions qualify as prescribed regions on the basis that they have experienced drought or excess moisture conditions. Qualifying regions for a year are then prescribed under the Income Tax Regulations (the “Regulations”) to access the tax relief and must be updated regularly.
The objective of this amendment is to implement Agriculture and Agri-Food Canada’s advice as to which regions should be prescribed regions on the basis that they have experienced drought or excess moisture conditions.
On February 6, 2018, the Government of Canada announced a final list of designated regions for which tax deferrals have been authorized for 2017.
The Regulations Amending the Income Tax Regulations (2017 Livestock Deferrals) prescribe the drought and excess moisture regions that are eligible for the tax relief in respect of 2017, as previously announced.
The list of prescribed regions was developed through consultations held by Agriculture and Agri-Food Canada with various parties, including provincial agriculture and municipal affairs departments, municipalities, farm associations, and crop insurers.
Following the public announcements made by Agriculture and Agri-Food Canada on the prescribed regions for 2017, no comments or concerns have been raised by the public or stakeholders in response to these announcements. Additional information on these announcements is available through Agriculture and Agri-Food Canada’s website at www.agr.gc.ca.
These amendments to the Regulations would not change existing administrative requirements, nor are they expected to impose new administrative costs on business. Therefore, the “One-for-One” Rule does not apply.
Small business lens
These amendments to the Regulations are not expected to impose new administrative or compliance costs on business. Therefore, the small business lens does not apply.
The amendments are consequential to announcements by the Minister of Agriculture and Agri-Food, concerning his advice to the Minister of Finance that certain regions of Canada be prescribed as drought or excess moisture regions for 2017.
The exact amounts of income deferred by farmers living in drought or excess moisture regions is difficult to quantify as the amount deferred is not reported in a separate field in the farmers’ income tax return which can be tracked for costing purposes. However, using Statistics Canada data on farming income, it is possible to estimate that the net benefits provided to farmers through the measure, or inversely the cost for the federal government, are unlikely to reach or exceed $1 million in total annually. 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 or excess moisture 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 livestock farming industry when it is affected by adverse, unpredictable weather conditions.
In accordance with The Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan was conducted to determine whether this amendment would have an environmental impact. The results of the preliminary scan demonstrated that there would be no environmental impact associated with this amendment.
Implementation, enforcement and service standards
Farmers claim the drought and excess moisture regions deferral in reporting their income in their income tax return. As such, farmers 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 Legislation Division
Department of Finance
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