Agriculture Minister Lawrence MacAulay on Monday announced an initial list of designated regions for the provision for the 2023 tax year, including major chunks of Alberta and British Columbia and much of western Saskatchewan and south-central Manitoba.

The list so far includes 96 municipalities and other jurisdictions in Saskatchewan, 62 in B.C., 56 in Alberta and 19 in Manitoba.

A preliminary list of prescribed drought and flood regions for a given tax year is usually ready in the early fall of that year, the government said, so making these designations earlier “helps provide assurance for producers as they make difficult herd management decisions.”

As usual, the government said it will continue to monitor conditions across the country and will add other regions throughout the year “if they meet the criteria.” The full list for a given tax year is usually set out in December, when forage yield data for the year are finalized.

Criteria for the deferral include forage yields of less than 50 per cent of the long-term average, whether caused by drought or excess moisture. Eligible regions are identified based on weather, climate and production data, in consultation with industry and provinces.

In areas designated for deferral in a given tax year, eligible producers who had to cull breeding herds by at least 15 per cent may defer part of the income from those sales until their next non-designated tax year.

If the herd is cut by at least 15 per cent — but by less than 30 per cent — then 30 per cent of income from net sales can be deferred.

Where a producer reduces a breeding herd by 30 per cent or more, 90 per cent of income from net sales can be deferred.

Thus, in the 2024 tax year — or in the next tax year in which the designation is lifted off a specific municipality — the deferred taxable income from those sales can be at least partially offset by the cost of reacquiring breeding animals, which works out to a reduced tax burden connected to the original sale.

The government said Monday it “recognizes the significant challenges livestock producers in Western Canada are facing due to exceptionally dry conditions. Compounded by subsequent years of drought, pastures and forage production are significantly impacted, leading to low feed supplies for livestock.”

“My heart goes out to farmers and ranchers who are affected by these extreme weather conditions,” MacAulay said in Monday’s release. Along with the deferral provision, he said, “we have also enhanced support available under (business risk management) programs and we will continue to work closely with provinces to get producers the additional support they need as quickly as possible.”

For example, the government said, it’s “worked quickly” with the B.C., Alberta and Saskatchewan governments on joint AgriRecovery assessments and work is “urgently progressing” to finalize the AgriRecovery process, as well as to sort out any additional supports required to cover producers’ “extraordinary costs.”

As for other supports already in place, the federal government said Monday it has already cleared requests from B.C. and Alberta for late participation in AgriStability, as well as requests from B.C. and Saskatchewan to increase the interim payment rate under AgriStability to 75 per cent, up from 50.

MacAulay also noted one-year adjustments to federal-provincial AgriInsurance programs to make more drought-damaged crops available for feed in Alberta, Saskatchewan and B.C. — Glacier FarmMedia Network

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PSAC president Chris Aylward said he was “setting a clock on this round of bargaining” and that a strike would be called if there is no deal by 9 p.m. ET on Tuesday.

The strike would affect federal services and could delay tax refunds since about 35,000 workers at the revenue agency would walk out in the middle of tax filing season. Passport renewals ahead of summer travel could also be delayed.

“Despite some progress at the bargaining table, our members are frustrated that while negotiations drag on, they continue to fall behind,” Aylward told reporters. “We’ve always said from day one, we need wages for our members that will keep up with inflation.”

PSAC has been in collective bargaining for a new contract since 2021. Tax agency workers initially sought a pay bump of more than 30 per cent over three years, and others are asking for 13.5 per cent over three years. Inflation peaked at 8.1 per cent last year.

Aylward said the offers received so far had fallen short. Prime Minister Justin Trudeau said he was hopeful a deal would be reached to avert a strike.

“There have been constructive advances and offers and we’re very hopeful that we’re going to be able to resolve this, but it’s at the bargaining table that these things happen and we will continue to do that be there in good faith and work on trying to resolve this for all Canadians,” Trudeau told reporters.

The strike would also affect 65 per cent of employees at the Canadian Grain Commission, including most inspectors of outbound grain at ports, according to the commission. Canada is a major wheat and canola exporter.

The commission is working on contingency plans with grain companies to ensure that “critical grain exports can continue,” during a strike, spokesperson Remi Gosselin said.

— Reporting for Reuters by Steve Scherer in Ottawa; additional reporting by Rod Nickel in Winnipeg.

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Federal Agriculture Minister Marie-Claude Bibeau on Tuesday released the initial list of designated regions in Alberta, Manitoba and Saskatchewan where livestock tax deferral has been authorized for 2022.

Those include most of southern Alberta up to around Stettler and Olds; nearby rural municipalities in western Saskatchewan; most of agricultural Manitoba; and some parts of west-central Saskatchewan southwest of Saskatoon (full list and map below).

Regions eligible so far were identified based on weather, climate and production data in consultation with industry and affected provinces, the federal agriculture department said Tuesday. Criteria include forage shortfalls of 50 per cent or more, whether caused by drought or excess moisture.

In areas designated for the deferral in a given tax year, eligible producers who had to cull breeding herds by at least 15 per cent may defer part of the income from those sales until their next non-designated tax year.

If the herd was cut by at least 15 per cent — but by less than 30 per cent — then 30 per cent of income from net sales can be deferred.

Where a producer reduced a breeding herd by 30 per cent or more, 90 per cent of income from net sales can be deferred.

Thus, in the 2023 tax year — or in the next tax year in which the designation is lifted off a specific municipality — the deferred taxable income from those sales can be at least partially offset by the cost of reacquiring breeding animals.

The ag department said Tuesday it would keep monitoring conditions across Canada to see if more designations are needed.

Some farm and ranch organizations had already been calling for deferral designations for the 2022 tax year to be made as soon as possible.

“Many areas of western Saskatchewan are still dealing with unprecedented drought, which is leading to herds of cattle being sold,” Scott Owens, a farmer in the western RM of Eldon and vice-president with the Agricultural Producers Association of Saskatchewan (APAS), said in such a statement in early June.

“If they haven’t already, many producers are running out of feed, and the pastures have not recovered from a lack of moisture last year and during the winter.”

By mid-November 2021, drought designations for the deferral for the 2021 tax year had reached all of Saskatchewan and northwestern Ontario, all of agricultural Alberta and Manitoba, and much of agricultural British Columbia. — Glacier FarmMedia Network

Initial list of designations, 2022

Alberta: Calgary, Taber; counties of Cardston, Cypress, Foothills, Forty Mile, Kneehill, Lethbridge, Newell, Paintearth, Pincher Creek, Rocky View, Starland, Stettler, Vulcan, Warner and Wheatland; the municipal district of Willow Creek; and “special areas” 2, 3 and 4.

Saskatchewan RMs: Antelope Park, Biggar, Buffalo, Chesterfield, Deer Forks, Enterprise, Eye Hill, Fertile Valley, Frontier, Grandview, Grass Lake, Happyland, Harris, Heart’s Hill, Kindersley, Maple Creek, Mariposa, Marriott, Milden, Milton, Monet, Montrose, Mountain View, Newcombe, Oakdale, Perdue, Pleasant Valley, Prairiedale, Progress, Reford, Reno, Rosemount, Round Valley, Snipe Lak, St. Andrews, Tramping Lake, Vanscoy and Winslow.

Manitoba: municipalities of Alonsa, Argyle, Armstrong, Bifrost-Riverton, Boissevain-Morton, Brenda-Waskada, Brokenhead, Cartier, Cartwright-Roblin, Clanwilliam-Erickson, Coldwell, Dauphin, De Salaberry, Deloraine-Winchester, Dufferin, Elton, Emerson-Franklin, Fisher, Gimli, Glenboro-South Cypress, Glenella-Lansdowne, Grahamdale, Grassland, Grey, Hanover, Harrison Park, Headingley, Killarney-Turtle Mountain, Lakeshore, Lorne, Louise, Macdonald, McCreary, Minto-Odanah, Montcalm, Morris, Norfolk-Treherne, North Cypress-Langford, North Norfolk, Oakland-Wawanesa, Oakview, Pembina, Portage la Prairie, Prairie Lakes, Rhineland, Ritchot, Riverdale, Rockwood, Roland, Rosedale, Rosser, Souris-Glenwood, Springfield, St. Andrews, St. Clements, St. François Xavier, St. Laurent, Stanley, Ste. Rose, Tache, Thompson, Victoria, West Interlake, West St. Paul, WestLake-Gladstone, Whitehead, Woodlands and Yellowhead; city of Winnipeg; Division No. 17, Unorganized; and Division No. 18, Unorganized (east part and west part).

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Finance Minister Chrystia Freeland on Thursday laid out a federal budget with about $452.3 billion in total expenses against $408.4 billion in expected revenues from taxes and other sources, for a projected total 2022-23 deficit (after net actuarial losses) of $52.8 billion, down from $113.8 billion in 2021-22.

Canadians, she said, “know that fighting COVID and the COVID recession came at a high price” but “our ability to spend is not infinite. The time for extraordinary COVID support is over.”

Freeland’s budget projects increases in both federal revenue and expenses over the following four fiscal years, gradually narrowing its projected annual budget deficit to $8.4 billion by 2026-27.

This year, with federal-provincial discussions still underway on the Next Policy Framework — the new five-year ag policy funding agreement due to replace the current Canadian Agricultural Partnership in April 2023 — new ag-specific programming in the 2022 budget instead comes mainly from the announcements made last week.

With that new framework deal still pending, “we don’t have any indication of commitments to increase funding for most of our essential programming,” Ian Boxall, president of the Agricultural Producers Association of Saskatchewan, said Thursday in a separate release. “In other areas, we have to wait and see if there is going to be more progress on agricultural priorities.”

The program pledges from last week’s Emissions Reduction Plan affirmed in Thursday’s budget include:

• $329.4 million over six years to triple the size of the Agricultural Clean Technology Program;
• $469.5 million over six years to expand the Agricultural Climate Solutions program’s On-Farm Climate Action Fund;
• $150 million for a “resilient agricultural landscape” program, to support carbon sequestration and adaptation and to address other “environmental co-benefits,” with details still to be discussed with provinces and territories; and
• $100 million over six years to federal granting councils to support post-secondary research in developing technologies and crop varieties that “will allow for net-zero emission agriculture.”

Potato probe

One ag sector, the Prince Edward Island potato industry, can expect a bit of indirect additional funding in 2022-23, over and above previous support programs announced during the recent closure of the U.S. border to P.E.I. table stock potatoes.

The budget calls for $16 million over two years for the Atlantic Canada Opportunities Agency toward “long-term investments and (to) assist in stabilizing the Prince Edward Island potato sector and supply chain.”

It also adds $12 million over two years for the Canadian Food Inspection Agency to “accelerate the investigation into the latest detection of potato wart (in P.E.I.) to help prevent its spread and to allow for full trade to resume with the United States as soon as possible” — a reference to the continuing U.S. ban on P.E.I. seed potatoes.

CUSMA compensation

Meanwhile, supply-managed producers in Canada’s dairy, poultry and egg sectors who have been waiting on details of compensation for “incremental” market access concessions made under the Canada-U.S.-Mexico Agreement (CUSMA) — the successor deal to NAFTA — will have to wait longer.

Those sectors in recent years have received federal compensation for concessions granted under the Canada-E.U. (CETA) and Trans-Pacific Partnership (CPTPP) trade deals.

Thursday’s budget, however, pledges instead to announce “full and fair compensation for the supply managed sector related to the new NAFTA” in the government’s 2022 fall economic and fiscal update.

Dairy Farmers of Canada, in a separate statement Thursday, thanked the government for the “clarity” it provided by giving a timetable for a compensation announcement. However, DFC added, “in tabling Budget 2022 without details, the government missed an opportunity to provide predictability to the industry.”

‘Surplus stripping’

Thursday’s budget also pledges a new round of consultations on federal income tax law to address changes made by Bill C-208, a 2021 private member’s bill from Manitoba MP Larry Maguire meant to standardize the tax treatment for sales of farms and other small businesses.

C-208, which took effect with the new tax year on Jan. 1, 2022, was passed in response to a rule in the Income Tax Act meant to prevent people from converting dividends into lower-taxed capital gains using certain “self-dealing transactions” referred to as “surplus stripping.”

C-208, according to Thursday’s budget, set up an exception to that rule “in order to facilitate intergenerational business transfers. However, the exception may unintentionally permit surplus stripping without requiring that a genuine intergenerational business transfer takes place.”

The consultations announced Thursday are to look at how existing rules could be strengthened to “protect the integrity of the tax system while continuing to facilitate genuine intergenerational business transfers.”

The government said it’s “committed to bringing forward legislation as necessary to address this specific issue,” noting such legislation could be included in a bill to be tabled in the fall after consultations wrap up.

Supply chain support

Among other new spending expected to benefit the broader ag sector, Freeland’s budget calls for the creation of a new Canada Growth Fund, to be initially capitalized at $15 billion over the next five years, to help attract private investment toward several policy goals, including “the restructuring of critical supply chains in areas important to Canada’s future prosperity.”

For Transport Canada, the budget also calls for $450 million over five years to support supply chain projects through the National Trade Corridors Fund, “which will help ease the movement of goods across Canada’s transportation networks.” That fund, in place since 2017, is due to be renamed “to reflect the government’s focus on supply chains.”

The transport department will also get $136.3 million over five years to develop “industry-driven solutions to use data to make our supply chains more efficient” and $16.9 million over five years “to continue making Canada’s supply chains more competitive by cutting needless red tape, including working to ensure that regulations across various modes of cargo transportation (e.g., ship, rail) work effectively together.”

“The budget does have some interesting initiatives and we’ll wait to see how they apply to the agricultural sector,” APAS’ Boxall said Thursday. “One of those initiatives is infrastructure funding for road and rail to the Port of Vancouver, and there is also funding to improve supply chains for essential industries, and we need governments to recognize our needs for better access and pricing for inputs.”

Foreign labour

The budget also lays out funding for several measures meant to help improve protections for temporary foreign workers (TFWs) coming to Canada to work in agriculture and other sectors. Those include:

• $48.2 million over three years to set up a new foreign labour program specifically for agriculture and fish processing, “tailored to the unique needs of these employers and workers;”
• $29.3 million over three years to set up a “Trusted Employer” model that reduces red tape for repeat TFW employers who “meet the highest standards for working and living conditions, protections, and wages in high-demand fields;”
• $14.6 million in 2022-23 for “improvements to the quality of employer inspections and (to) hold employers accountable for the treatment of workers;” and
• $64.6 million over three years for increased capacity to “process employer applications within established service standards.”

On the plan for a new foreign labour program targeting ag processing, Canadian Cattlemen’s Association president Reg Schellenberg said Thursday in a separate release that “one of the largest factors limiting our ability to grow Canada’s beef industry and our contributions to Canada’s economy is access to labour… We have long been advocates to create agriculture-specific solutions to address challenges related to labour and we are pleased to see this continue to advance.”

Also, among other emission reduction programs seeing a funding boost, the existing federal Nature Smart Climate Solutions Fund — which supports projects that “conserve, restore and enhance wetlands, peatlands and grasslands to capture and store carbon” — will now get $780 million over five years, starting in 2022, up from the $631 million over 10 years announced in 2021. — Glacier FarmMedia Network

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However, while Bill C-208 is now in federal tax law, further amendments are en route to plug legal loopholes the bill may have opened.

Finance Minister Chrystia Freeland on Monday issued a statement that “seeks to bring clarity” in the wake of a June 30 finance department statement, which in turn had followed passage through Parliament — and, on June 29, royal assent — for C-208.

C-208, a private member’s bill spearheaded by western Manitoba Conservative MP Larry Maguire, was meant to amend the Income Tax Act to exclude sales of farms and other small businesses to adult children or grandchildren from current federal anti-avoidance rules.

In its June 30 statement, the finance department had said the government would “introduce legislation to clarify that these amendments would apply at the beginning of the next taxation year, starting on Jan. 1, 2022.”

But Freeland, in her new statement Monday, said instead that the changes contained in C-208 “now apply in law” within the Income Tax Act.

“We fully support genuine intergenerational share transfers and regret recent uncertainty that we have caused,” she said Monday. “Bill C-208 was voted on by Parliament and received royal assent. The law is the law.”

That said, she added that the minority Liberal government plans to draft further amendments and put them forward for consultations. The additional amendments to the Income Tax Act would “honour the spirit” of C-208, while “safeguarding against any unintended tax avoidance loopholes that may have been created.”

The further amendments, she said, will be “to make sure that (C-208) facilitates genuine intergenerational transfers and is not used for artificial tax planning purposes.”

After consultations, the government’s amendments would be introduced in a separate bill and would apply either upon the date of publication of that bill’s final draft or on Nov. 1 this year, whichever comes later.

‘Surplus stripping’

Maguire had brought forward C-208 as a remedy in cases where a person sold a small business or farm to a child or grandchild and the difference between the sale price and the original purchase price was deemed a dividend under pre-C-208 tax law.

If a business instead was sold to a non-family member, he said, the sale under pre-C-208 tax law was deemed a capital gain — and taxed at a lower rate.

In excluding intergenerational sales of farms and small businesses, Freeland said Monday, C-208 may “inadvertently permit” business owners the opportunity for “surplus stripping.”

That term refers to cases in which dividends are converted to capital gains to take advantage of a lower tax rate “without any genuine transfer of the business actually taking place.”

The pre-C-208 anti-avoidance rule was meant to prevent business owners from just removing earnings from their corporations by using a sale to a “linked” corporation — such as that of a close family member — as a basis to do so.

The government’s further amendments, when passed, would set up a requirement to transfer both “legal and factual control of the corporation carrying on the business” from the parent to the child or grandchild.

The further amendments would also lay out the level of ownership in the corporation carrying on the business that a parent can maintain for a “reasonable” time after the transfer.

They would also clarify the requirements and timeline for a parent to transition their involvement in the business to the next generation, as well as the level of involvement of the child or grandchild in the business after the transfer, Freeland said. — Glacier FarmMedia Network

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Bill C-208, a private member’s bill spearheaded by western Manitoba Conservative MP Larry Maguire with amendments to the federal Income Tax Act, cleared the House of Commons in mid-May and Senate in late June. On June 29, it got royal assent.

However, the federal finance department on June 30 pointed out that C-208 as passed “does not include an application date.”

The Liberal-led government said June 30 it’s “committed to facilitating genuine intergenerational share transfers, while preventing tax avoidance that undermines the equity of Canada’s tax system.”

Thus, the government said, it proposes to introduce separate legislation to “clarify” that C-208’s amendments apply at the beginning of the next tax year, starting Jan. 1, 2022.

C-208’s tax law amendments are meant to exclude the sales of farms and other small businesses to adult children or grandchildren from current anti-avoidance rules.

Under pre-C-208 tax law, Maguire said in May, “when a person sells their small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend.”

But if the business instead goes to a non-family member, the sale is deemed a capital gain, which is taxed at a lower rate and allows sellers to use their lifetime capital gains exemption, he said.

During debate on C-208 last fall, the Liberals cautioned that Maguire’s bill, as Ontario MP Tony Van Bynen put it, “seeks to amend two of the Income Tax Act’s most important and complex anti-avoidance rules.”

Those rules, he said, are meant to apply when an individual sells shares of a corporation to another corporation that is linked to the same individual — for example, through a family member.

When shares of a Canadian corporation are sold to such a “linked” corporation, the pre-C-208 rules deem that in certain circumstances, the seller has received a taxable dividend from the linked corporation, rather than a capital gain.

The rule, he said, is meant to ensure taxpayers “cannot use linked corporations to, in effect, remove earnings from their corporations, using a sale as a basis to do so.”

But the Conservatives at the time noted C-208 requires that a family member buying such shares of a farm or small business must not sell them for at least 60 months for any reason, other than “by reason of death.”

To curb tax evasion, they said, C-208’s provisions would not apply to such a buyer who sells before that five-year period ends.

‘Intentions clear’

The Canadian Federation of Agriculture, in a separate statement Friday, took the finance department’s June 30 announcement to mean the government “will likely be making amendments in order to close potential tax loopholes.”

The CFA said its “primary concern” is that C-208’s changes to the treatment of intergenerational farm transfers “must be made clearly accessible as quickly as possible, as Parliament made its intentions clear through the passage of the bill.”

“In our talks with the accounting community, this delay, and the uncertainty around exactly what the amendments will be, will force many farmers who were looking to transfer their farm to a family member to delay their retirement plans until 2022,” CFA president Mary Robinson said Friday.

“If they transfer to a family member under the current rules, it can potentially cost them hundreds of thousands of dollars more in taxes compared to if this bill was fulfilled.”

C-208, Robinson said, would help “preserve the identity and financial stability of the Canadian family farm.”

The Western Canadian Wheat Growers, meanwhile, said they were “dismayed” to hear of the delay. “Canadians need to understand that this current government is not looking out for the best interest of Canadian family farms,” president Gunter Jochum said Monday in a release.

Federal Conservative leader Erin O’Toole also criticized the Trudeau government in a separate statement Friday for “refusing to implement a tax reduction for small business that was passed in Parliament.” –– Glacier FarmMedia Network

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Brandon-Souris MP Larry Maguire’s Bill C-208, which was introduced for first reading in February last year, passed third reading in the Commons on Wednesday.

C-208 proposes to amend the federal Income Tax Act to exclude sales of farms and other small businesses to adult children or grandchildren from current anti-avoidance rules.

The bill passed 199-128 on third reading, with opposition mostly from members of the Liberal caucus, Maguire said. The Senate next sits on May 25.

Today, Maguire said, “when a person sells their small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend.”

But if the business instead goes to a non-family member, the sale is deemed a capital gain, which is taxed at a lower rate and allows sellers to use their lifetime capital gains exemption, he said.

“I think we can all agree that it is completely unfair for the tax rate to be significantly higher when the farmer sells his operation to his son rather than to a third party who, in many cases, is a complete stranger,” Maguire said at second reading in November last year.

The bill also picked up endorsement from Bloc Quebecois and NDP MPs. British Columbia MP Peter Julian spoke in favour of the bill in November, saying that to end “a very perverse aspect of our tax system and facilitating, in a sense, small businesses under $1 million to be passed from one generation to the next without penalties being incurred, makes a big difference for family-owned business.”

C-208 also picked up endorsements from the Keystone Agricultural Producers, Insurance Brokers Association of Canada, Canadian Federation of Agriculture, Grain Growers of Canada, Canadian Canola Growers Association and Canadian Federation of Independent Business, Maguire noted.

Agricultural Producers Association of Saskatchewan (APAS) on Thursday also hailed the bill’s passage in the Commons. APAS president Todd Lewis described it as “an opportunity to address this longstanding inequity that has negatively impacted the transition plans of family farms in Canada.”

‘Avoidance opportunities’

However, during debate on the bill in November, Ontario Liberal MP Tony Van Bynen cautioned that Maguire’s bill “seeks to amend two of the Income Tax Act’s most important and complex anti-avoidance rules.”

Those rules, he said, are meant to apply when an individual sells shares of a corporation to another corporation that is linked to an individual, such as a family member.

When shares of a Canadian corporation are sold to such a “linked” corporation, the rules deem that in certain circumstances, the seller has received a taxable dividend from the linked corporation, rather than a capital gain, Van Bynen said.

The rule, he said, is meant to ensure taxpayers “cannot use linked corporations to, in effect, remove earnings from their corporations, using a sale as a basis to do so.”

Quebec Conservative MP Richard Lehoux, in response, said Maguire’s bill “provides that the family member purchasing the business must keep their shares for at least five years to avoid the penalty.”

That requirement, he said, “will thwart attempts to exploit the system” for purposes of fraud or tax evasion.

Van Bynen said there’s already “nothing in the (Income Tax Act) stopping a parent from selling the shares of a family business directly to their child or grandchild on a tax-free basis using the lifetime capital gains exemption, which currently shelters up to $1 million in capital gains on qualified farm and fishing properties.”

The issues to be addressed by C-208, he said, arise only in “multi-tier corporate structures, where one corporation owns a second corporation” and the proposed changes to “could open the door to new tax-avoidance opportunities.”

C-208’s amendments, he said, would also affect section 55 of the act, which currently “generally applies to corporations that seek to inappropriately reduce capital gains by paying excessive tax-free dividends between corporations, which the act considers to be a capital gain.” — Glacier FarmMedia Network

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The federal government on Monday released its list and map of prescribed drought regions where tax deferral on sales of breeding livestock has been authorized for the 2020 tax year.

In regions officially designated for drought, flood or excess moisture, the tax deferral provision allows eligible producers who reduced their breeding herds by at least 15 per cent to defer part of their 2020 income from sales until their next non-designated tax year.

To defer income, a producer’s breeding herd must have been reduced by at least 15 per cent. If the herd was cut by at least 15 per cent, but less than 30 per cent, then 30 per cent of income from net sales can be deferred. Where a producer reduced a breeding herd by 30 per cent or more, 90 per cent of income from net sales can be deferred.

In the 2021 tax year — or the next tax year in which the designation is lifted for a specific region — the income from those sales can be at least partially offset by the cost of reacquiring breeding animals, “thus reducing the potential tax burden,” the government said.

Along with all of New Brunswick and Prince Edward Island, the drought-designated regions include 82 census subdivisions in southeastern Quebec’s Gaspesie and Bas-Saint-Laurent regions, plus the Cumberland census subdivisions A, B, C and D and Colchester subdivision A in northwestern Nova Scotia.

In those regions last year, “low moisture levels resulted in significant forage shortages for livestock producers,” the government said, and reducing breeding herds so as to manage feed supplies was one available option.

The Canadian Cattlemen’s Association said Tuesday it appreciates the designations, but noted that with the 2020 individual tax year payment deadline of April 30, 2021 already passed, “eligible producers may need to take additional steps to utilize the deferral.”

For example, the CCA said, producers who’ve yet to file a self-employed farming income 2020 tax return have until June 15 this year to account for the deferral provisions.

If an eligible producer want to defer such income but already filed a return for 2020, the CCA recommends producers talk to a tax professional about filing a 2020 tax return adjustment.

In its statement, the CCA also said its position is still that “considerable amendments to the provision are needed to make it a more functional risk management tool for cattle producers.”

For example, the association said, the provision could be set up so producers could use it “through individual election rather than a geographic determination.”

That way, the provision doesn’t run the risk of “delayed announcements” or excluding access for affected producers who fall outside a designated area’s exact boundary lines. The CCA said it would also like to see all classes of cattle eligible under the deferral provision.

The CCA noted the House of Commons’ standing committee on agriculture and agri-food, in a report last fall on business risk management programs, recommended the federal government work with farm groups on a “comprehensive review” of the deferral provision. — Glacier FarmMedia Network

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The federal government on Tuesday released the “final list” of designated regions where income tax deferral on sales of breeding livestock has been authorized for 2019.

In a prescribed region, any producer who sells off part of a breeding herd due to drought or flooding may defer the income on a portion of sale proceeds to the following year. Eligible producers would request the tax deferral when filing their income tax returns.

In 2019, the government said, low moisture levels led to “significant” forage shortages in six provinces. The final lists of prescribed jurisdictions for each of the affected six provinces are now available online.

Eligible regions for 2019 now include municipalities, counties and districts covering much of agricultural Alberta, Saskatchewan and Manitoba, much of agricultural northern British Columbia, part of Vancouver Island, parts of Quebec’s Gaspesie and Bas-Saint-Laurent regions and southwestern parts of northwestern Ontario.

Weather and production data and input from the industry and provinces go into identifying areas eligible for the deferral. The general criteria is a forage shortfall of at least 50 per cent.

If at least 15 per cent of a breeding herd in a prescribed area is sold off, 30 per cent of income from net sales can be deferred. If the herd is cut by 30 per cent or more, 90 per cent of that income can be deferred.

Income from such sales is deferred to the next tax year when it may be at least partially offset by the cost of restocking the herd, “thus reducing the potential tax burden,” the government said.

If a region ends up on the prescribed list for two or more consecutive years, a producer in that region may defer sales income to the first year in which the region is no longer prescribed. — Glacier FarmMedia Network

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Major changes, however, will have to wait. A full review of federal business risk management (BRM) will be completed in April, with the findings discussed when the federal, provincial and territorial ministers meet again in July.

The one-day meeting in Ottawa Tuesday resulted in a decision by the ministers to change the way private insurance is treated under the AgriStability program for the 2020 year. Private insurance will be allowed to complement the ag income stabilization program, being used as a “top-up” according to Bibeau, if producers choose to use it.

The federal government said it will also pilot a project that will use tax return information for those applying to AgriStability, in hopes it will make it easier for farmers to apply to a program many have long described as complicated.

Bibeau didn’t entirely reject the idea of changing reference price margins under AgriStability, saying she wants to first see a review of all the BRM programs. Farm groups are calling for the margins to be returned to 85 per cent from the current 70 per cent.

“Changing the limit to AgriStability would impact both the federal and provincial and territorial governments,” she said. “And we thought that it would be more appropriate to start by doing a review of the programs and making sure that when we’re ready to put more money on the table, we would do it towards the right program.”

The cost of increasing the limit back to 85 per cent is estimated to be around $300 million.

Agriculture ministers want to move fast on addressing the issue, she said, and raising the reference price margin is “always an option, but we were not ready at this stage to go forward with such a significant increase.”

For now, provinces and federal officials will evaluate the impacts of changes to the reference margin limit and changes to eligible expenses under AgriStability.

Agriculture ministers from the Prairie provinces also had a chance to discuss the issue of carbon pricing with Bibeau. There are continuous complaints from producers and Prairie governments that the cost of carbon is having a significant and costly impact on farmers drying their crops this year.

“I asked them to provide data, and help me gather more information on the situation, if I want to evaluate properly the impact on the sector,” she said, adding later that “we recognize that the agriculture sector may face other types of challenges.”

Bibeau said she is open to evaluating more carbon pricing relief for producers, but reiterated she needs more data in order to make a strong case to her colleagues at the federal cabinet table.

Already the federal government has announced it will review the impact of carbon pricing on the agriculture sector early in 2020.

The ministers also discussed trade challenges facing the agriculture industry, and the risks posed by African swine fever, which hasn’t yet reached the Americas but has hit the hog sector in several countries in Asia, Europe and Africa.

‘Disillusioned’

Among farm groups reacting to the announcements coming out of Tuesday’s meeting, Alberta’s wheat and barley commissions said Wednesday they “were hopeful that more progress would have been made in improvements to AgriStability.

“The deficiencies of AgriStability have been thoroughly studied (and) are well known and action is needed,” they said in a release.

Grain Farmers of Ontario, in a separate release Wednesday, said it was “disillusioned by the lack of action for non-supply-managed farmers” coming out of the meeting.

“Supply-managed farmers have not even experienced the hurt and they have already received a cheque from the federal government,” GFO chair Markus Haerle said. “Our farmer-members are incurring sustained losses and the only promise they have is more meetings.”

“Is this truly the best that the federal government can do? Having another report from government bureaucrats and testing pilot programs in select jurisdictions is a lump of coal in every grain farmer’s Christmas stocking,” Gunter Jochum, president of the Western Canadian Wheat Growers, said Wednesday in that group’s release.

— D.C. Fraser reports for Glacier FarmMedia from Ottawa. Includes files from GFM Network staff.

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