G6 Consulting Inc Canada's R&D Tax Credit Experts

There have been lots of changes with Alberta SRED recently.

Alberta’s 10% refundable SRED tax credit was cancelled for FYE’s after December 31, 2019.  We talked about this change in our blog post here:  https://www.g6consulting.ca/alberta-shuts-down-its-sred-program/  Given that a lot of companies have December YE’s and they don’t follow SRED news closely, this cancellation is going to be a nasty surprise for a lot of companies filing their December 2020 SRED claims in the next couple of months.   Along with CEWS clawback surprises, which all Canadian companies are coming to grips with: https://www.g6consulting.ca/cews-sred/

Just to get everybody in AB caught up.  When you file a SRED claim in Alberta for any FYE in 2020, you will receive federal SRED credits only.  Nothing in Alberta SRED credits.

Here is where the plot thickens.  In early 2021, Alberta has announced a new, non-harmonized SRED program called the Alberta Innovation Employment Grant.  This grant is a refundable 8% grant for all companies based in Alberta on up to $4 million in SRED expenditures.  The AIEG does not discriminate based on CCPCs vs public/foreign corporations as many provinces do.  The restriction for the AIEG is capital based only.  The AIEG is ground down for companies where their total taxable capital deployed is between $10M and $40M.  Total taxable capital is the sum of all associated companies’ taxable capital.  Companies with total taxable capital above $40M receive no AIEG.

We are not done.  Alberta appears to be competing with Quebec regarding making its SRED program as complicated and non-harmonized as possible.  The AIEG is phased in for 2021 based on the month when a given SRED expenditure occurred, not based on fiscal year end.  What does this mean in plain English?  Well, if you have a December 31 YE, things are sort of straightforward.  You get your AB SRED TCs in 2019, no AB SRED credits in 2020 and then full AIEG credits in 2021.

Things are much less straightforward if you have a non-December 31 YE.  You received your FY 19 AB SRED TCs as normal.  You have probably already received the bad news about no AB provincial SRED credits for your 2020 FY.  For 2021, your AIEG get phased in only for SRED expenditures which occur in 2021.  This is arbitrary, unnecessary, unfair etc. but this is how the program works.  Based on the Alberta SRED company’s year end, they will lose from 12 months of credits, for a Dec 31 YE company to 23 months of credits for a Jan 31 YE company.  Do not shoot me, I am just the messenger. 

Let’s end on a high point.  There is a bonus rider in the AIEG legislation.  Companies can earn 12% bonus AIEG refundable credits (for a total of 20% AIEG on expenditures above the average of their previous 2 years average SRED expenditures. Holy that is a bit confusing!  I think we need an example right about now, stat!  Let’s say a Dec 31 AB company had SRED expenditures (T661, line 559) in 2019 and 2020 of $100,000 each year.  For 2021, the company had $300,000 of L559 SRED expenditures.  They would earn 12% bonus AIEG on the $200K of SRED expenditures above the 2 years previous average expenditure amount.

Here is a final point about the bonus 12% AIEG.  As it is currently written, the 2-year average SRED expenditure currently considers unclaimed previous years.  So, if the AB company claiming in 2021 is a first time SRED filer, or they have not filed SRED for 3 or more years, that company will earn 20% AIEG credits for all their Alberta SRED.  That is as the legislation is currently written.  We will see.

Additional references.

Here’s the Alberta government’s Guide to Claiming the Alberta Innovation Employment Grant:

https://www.alberta.ca/assets/documents/tra-guide-claiming-the-innovation-employment-grant.pdf

And here is the Alberta (non-harmonized) Schedule 29 form for claiming the AIEG:

https://www.alberta.ca/assets/documents/tra-form-corporate-tax-return-at29.pdf