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Bill C-45:
What You Need to Know

Written by:
Gerry Fung, Director of Business Development

Changes to the SR&ED program outlined in the March federal budget are forthcoming – the federal government recently tabled a bill (Bill C-45) which addressed several corporate tax measures. Many of the SR&ED revisions will be in full effect by 2014, so companies conducting research and development may want to consider accelerating certain expenditures to ensure that they are incurred before 2014.

Adjustments to the SR&ED program initiated in the federal budget and addressed by Bill C-45 include:

• Reduction of the Federal SR&ED investment tax credit rate for large or foreign-owned companies to 15% from 20% (effective January 2014).
• Reduction of the prescribed proxy amount, used to claim overhead expenditures, from 65% to 55% of the salaries and wages of employees engaged in SR&ED activities. The prescribed proxy amount will be 60% of direct labour costs in 2013, and 55% of direct labour costs in 2014.
• Reduction of arms length subcontract expenses from 100% to 80% of eligible contract costs.
• Removal of capital from the base of eligible expenditures incurred in 2014 (and subsequent years).

In addition to SR&ED, other corporate tax measures are addressed by Bill C-45. Notable modifications include:

• Expansion of the eligibility for the accelerated capital cost allowance for clean energy generation equipment to include a broader range of bioenergy equipment.
• Expansion of the Atlantic Investment Tax Credit (AITC) to include electricity generation and clean energy generation equipment as qualified property when used primarily in an eligible activity; phase out for AITC activities related to the oil & gas and mining sectors.
• Phase-out of the Corporate Mineral Exploration and Development Tax Credit.

Your NorthBridge advisor can assist your company to assess the effect of any changes that Bill C-45 introduces, and to take full advantage of all government incentive programs. We will also keep you up to date of the progress of any forthcoming proposals and new programs as they pertain to your business, and help you to secure a competitive advantage.

Gerry is a Professional Engineer who has been involved in the SR&ED program since 2003. He has also gained significant business experience managing the operations of a retail consumer products distributor and e-commerce direct-sales.

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