Guidance on the income tax measures to support journalism CRA Webpage 23 December 2019

Input of Advisory Board

2.4. An Independent Advisory Board (the Board) will provide independent recommendations to the Minister of National Revenue regarding the eligibility of organizations to be designated as QCJOs [qualified Canadian journalism organizations]. The Board’s recommendation to the Minister will focus mainly on elements of the legislation dealing with original news content and journalistic processes and principles, whereas the CRA will consider the other criteria that must be met to be designated as a QCJO. A copy of the Board’s recommendation will be provided to the applicant organization with the decision regarding designation. …

Appeal of adverse designation decision

2.6. An organization that does not meet the criteria for QCJO designation will also receive a letter from the CRA confirming the decision. … If the original decision does not change, the organization may apply for judicial review of the decision to the Federal Court of Canada.

Overview of original news content

2.23. Original news content should be primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes. For clarity:

1. General interest means news content that is aimed at a general audience, as opposed to specialists of a specific field. Content should be diverse and may include a variety of content such as local news, national news, international news, social issues (such as health, education, faith and ethics), business and economy, sports, culture, science and technology, and the environment.
2. Democratic institutions include legislative bodies, municipal councils, courts of justice, and school boards.
3. Democratic processes include elections and proceedings in legislative assemblies, such as the House of Commons.

Journalistic principles

2.25. The term original news content includes the content for which research, writing, editing and formatting are conducted by and for the organization. Original news content includes news, features, investigations, profiles, interviews, and analyses or commentaries, based on journalistic processes and principles, intended for a general audience.

2.26. Journalistic processes and principles include:

1. a commitment to researching and verifying information before publication;
2. a consistent practice of providing rebuttal opportunity for those being criticized and presenting alternate perspectives, interpretations and analyses;
3. an honest representation of sources; and
4. a practice of correcting errors.

but do not include:

5. solicitation, design or production of advertising;
6. advertorials, sponsored content, branded content (any content where a third party, advertising client or business partner, participates in the development of the concept or directs or gives final approval to a large portion of the content);
7. stories produced primarily for industrial, corporate or institutional purposes; or
8. editing content that is entirely or principally accumulated or produced by algorithms or by aggregation software.

Exclusions

2.27. The reproduction of material produced by another organization would not be considered original news content of the organization and will factor into the determination of whether an organization is primarily engaged in the production of original news content.

2.28. Activities or publications that focus primarily on the following would not be considered the production of original news content:

1. industry-specific publications, trade journals, travel magazines, sports or entertainment news;
2. the rewriting, translation, reproduction or aggregation of news from external sources (including articles from news agencies, a current or previous issue of the same publication or any other publication);
3. advertisements, listings, catalogues, directories, guides, financial reports, schedules, calendars, timetables, comic books, cartoons, puzzles, games and horoscopes;
4. internal publications of companies, private or public bodies, or associations; and
5. publication of content that is illegal in Canada.

Meaning of “regularly employs”/freelance exclusion

2.31. For clarity, “regularly employs” refers to the employment of journalists that is regular and continuous, either full-time or part-time, even if the position is temporarily unoccupied. For example, if an organization regularly employs two arm’s length journalists but one leaves, resulting in a temporary period where there is only one such journalist before a replacement is hired, that would not, in and of itself, disqualify the organization.

2.32. Freelance journalists are generally not considered to be employees of an organization, but would be self-employed contractors.

Overview of requirement

3.7. A qualifying journalism organization (as defined in subsection 125.6(1) of the Act), at any time, means a QCJO [qualified Canadian journalism organization] that meets all the following conditions:

1. is primarily engaged in the production of original written news content (generally, "primarily" means more than 50%);
   
   1. as noted above, original news content includes the content for which research, writing, editing and formatting are conducted by and for the organization; and
   2. for the purposes of meeting the conditions to be a qualifying journalism organization, the original news content must be in writing. For example, image, video, or audio, without accompanying text, will not be considered “written content”;
2. it does not carry on a broadcasting undertaking as defined in subsection 2(1) of the Broadcasting Act;
3. it does not receive an amount from the Aid to Publishers component of the Canada Periodical Fund in the taxation year in which it seeks to claim the credit; and
4. it must meet one of the following conditions in the definition of Canadian newspaper, in subparagraph 19(5)(e)(iii) of the Act, if it is a corporation having share capital:
   
   1. if it is a public corporation, a class of shares of its capital stock is listed on a designated stock exchange in Canada, and the corporation is not controlled by non-Canadian citizens or subjects; or
   2. if it is any other type of corporation,
      • at least 75% of shares having full voting rights under all circumstances and, shares having a fair market value in total of at least 75% of the fair market value of all of the issued shares are beneficially owned by Canadian citizens or by public corporations described in (1).
      • special rules apply when the shares are held, or deemed to be held by another corporation (i.e., other than a public corporation a class of shares of its capital stock of which is listed on a designated stock exchange in Canada) or by a partnership in order to determine who shall be deemed to own those shares of the corporation and in what proportion.

Cap per employee but not in aggregate

3.9. The Canadian journalism labour tax credit is a 25% refundable tax credit on the total qualifying labour expenditure incurred in respect of each eligible newsroom employee of a qualifying journalism organization. Qualifying labour expenditures are subject to an annual cap of $55,000 (prorated by the number of days in the organization’s taxation year), per eligible newsroom employee. Thus, the maximum credit available is $13,750 per eligible newsroom employee per year, for qualifying labour expenditure incurred for a period beginning on or after January 1, 2019. Refer to Examples 2 to 4.

3.10. While there is a limit on the maximum tax credit that a qualifying journalism organization can claim per eligible newsroom employee annually, there is no limit on the number of eligible newsroom employees employed by the organization in respect of whom this credit may be claimed. ...

Meaning of salary or wages

3.13. Generally, salary or wages of an eligible newsroom employee means the income from an office or employment and includes amounts paid to an employee such as vacation pay, statutory holiday pay, sick leave pay, and certain taxable benefits (e.g., a corporation’s contribution to its employees’ registered retirement savings plan, group insurance plan).

Treatment of tax credits as assistance

3.19. Generally, assistance includes amounts such as a refund, reimbursement, contribution, or allowance, whether as a grant, subsidy, forgivable loan, deduction from tax, or any other form of inducement. For example, provincial tax credits earned on the same qualifying labour expenditure would generally be considered assistance. Refer to Example 5.

3.20. While the Canadian journalism labour tax credit of a qualifying journalism organization is considered to be assistance that the organization received from a government immediately before the end of the year, it is not considered to be government assistance in the calculation of the qualifying labour expenditure for the purposes of determining the Canadian journalism labour tax credit itself. This means that the Canadian journalism labour tax credit will not be included in “B” in the formula for calculating the qualifying labour expenditure for a qualifying journalism organization. See Examples 2 to 5 where the Canadian journalism labour tax credit was not included in the calculation in the line “Less: Assistance received in respect of (A)”.

Reasonable expectation test to 40 weeks

3.15. An eligible newsroom employee (as defined in subsection 125.6(1) of the Act), in respect of a qualifying journalism organization in a taxation year, means an individual who:

1. is employed by the organization in the taxation year;
2. works, on average, a minimum of 26 hours per week throughout the portion of the taxation year in which the individual is employed by the organization;
3. at any time in the taxation year, has been, or is reasonably expected to be, employed by the organization for a minimum period of 40 consecutive weeks that includes that time;
4. spends at least 75% of their time engaged in the production of news content, including researching, collecting information, verifying facts, photographing, writing, editing, designing and otherwise preparing content (including employees who may be editors, photographers or graphic designers); and
5. meets any conditions that may be prescribed (currently there are no prescribed conditions).

3.16. Also, an employee who is hired near the end of a taxation year, or who ceased to be employed before the 40-week period expires, could qualify as an eligible newsroom employee in respect of the taxation year provided that there was a reasonable expectation that they would work for more than 40 consecutive weeks.

Satisfaction of conditions for portion of year

3.14. An organization that is a qualifying journalism organization at any time in the taxation year generally will be eligible to claim the Canadian journalism labour tax credit for that taxation year in respect of the organization’s qualifying labour expenditures. However, if an organization fails to satisfy one or more of the four conditions, then salary or wages payable to an eligible newsroom employee are only included in respect of the portion of the taxation year throughout which the organization is a qualifying journalism organization. Refer to Example 3. The exception to this being the situation when the organization receives an amount from the Aid to Publishers component of the Canada Periodical Fund at any time in the taxation year. In this scenario, the organization will not be a qualifying journalism organization at any time in the taxation year in which it receives the funds. Therefore in that scenario, the organization’s qualifying labour expenditure will be nil. Refer to Example 1.

s. 125.6(2) credit treated as s. 12(1)(x) inclusion

3.21. The amount of the Canadian journalism labour tax credit for a taxation year is considered to be assistance received by a qualifying journalism organization from a government, immediately before the end of the year (other than for the purpose of determining the Canadian journalism labour tax credit itself), and must be included in the income of the qualifying journalism organization for that year, as set out in paragraph 12(1)(x) of the Act. However, the organization may elect under subsection 12(2.2) of the Act to reduce the amount of the salary or wages incurred in the year by all or part of the government assistance received in the year in respect of the expense.

Adjustment of return to reflect credit

3.37. Further, the Canadian journalism labour tax credit results in an adjustment under paragraph 12(1)(x) of the Act to include the amount of the credit in the taxpayer’s income. Where the organization has filed its return of income but did not claim the labour tax credit at the time of filing the return, an amendment to the return is required to report the income and claim the credit. The organization may amend its return of income within the normal reassessment period (within three years from the date of the original notice of assessment, or of an original notification that no tax was payable for the year and, within four years for a mutual fund trust or a corporation that is not a Canadian-controlled private corporation) to claim the Canadian journalism labour tax credit.

Whether standalone digital news subscription

4.4. A qualifying subscription expense is the amount paid in the year by an individual to a QCJO for a "digital news subscription". In the case of combined digital and newsprint subscriptions, or if the digital news subscription provides access to content other than content of QCJOs, only the cost of a comparable stand-alone digital news subscription offered by the QCJO is an eligible expense. If there is no comparable stand-alone digital news subscription available, then only one half of the amount paid is an eligible expense. Amounts paid to an organization will be eligible only if, at the time they are paid, the organization is a QCJO.

Supporting documentation

4.6. The QCJO that received the payments for a qualifying subscription expense should provide its subscribers with a receipt showing information about the services provided. The receipt should include:

• the subscriber’s full name;
• the date and amount of the total payment;
• the purpose of the payment;
• the qualifying subscription expense amount;
• the QCJO’s name, address and QCJO designation number; and
• an authorized signature (unless the receipt is electronically produced).

Purposes exclusively related to journalism

5.11. An RJO must be constituted for purposes exclusively related to journalism. This means that it must have stated purposes in its incorporation or trust documents and they must all relate to journalism. The RJO must also be operated to further those purposes. An organization with a mix of journalism related purposes and other non-journalism related purposes will not qualify. To fulfill the exclusivity requirement, an RJO must use its resources (financial, personnel and property) to further its journalism purposes. To determine if an organization is constituted and operated for purposes exclusively related to journalism its activities will be examined to see whether they further its purposes.

5.12. RJOs must focus on producing original news content. Complementary content normally associated with producing and publishing news content could also be acceptable, however this content must remain subordinate to producing and publishing news content. Complementary content includes items such as financial reports, listings, guides, directories, calendars, comic strips, cartoons, puzzles, games and horoscopes. Activities that fall outside of these categories may not be related to journalism, and will be considered by the CRA on a case-by-case basis.

Related business limitation

5.13. An RJO may also carry on business activities that are related to its purposes. Carrying on a business usually means the continuous or regular operation of a commercial activity with the intention to earn a profit. A business activity will not be considered related simply because it generates profits that the organization can use to fund its programs. The organization must be able to demonstrate the link between the business activity and its purposes. The sale of news content, advertising and subscriptions are examples of business activities that would be considered to be related to journalism. There may be other business activities related to journalism. The CRA will consider these activities on a case-by-case basis. RJOs may not carry on business activities that are not related to journalism.

S. 253.1(2) exception

5.14. An RJO can hold an interest in a partnership and it will not be considered to be carrying on a business activity if it meets all of the following conditions:

• the RJO’s liability as a member of a partnership is limited under any law governing the arrangement in respect of the partnership;
• the RJO and all non-arm’s length entities collectively hold 20% or less of the interests in the limited partnership; and
• the RJO deals at arm’s length with each general partner of the limited partnership.

5.15. An RJO that acquires and holds a partnership interest beyond these limits would be considered to be carrying on the business of the partnership. In this circumstance, the business would need to be related to the RJO’s purposes in order to meet the registration requirements under the Act.

Related business exception must be complied with if not within s. 253,1(2)

5.14. An RJO can hold an interest in a partnership and it will not be considered to be carrying on a business activity if it meets all of the following conditions:

• the RJO’s liability as a member of a partnership is limited under any law governing the arrangement in respect of the partnership;
• the RJO and all non-arm’s length entities collectively hold 20% or less of the interests in the limited partnership; and
• the RJO deals at arm’s length with each general partner of the limited partnership.

5.15. An RJO that acquires and holds a partnership interest beyond these limits would be considered to be carrying on the business of the partnership. In this circumstance, the business would need to be related to the RJO’s purposes in order to meet the registration requirements under the Act.

Gift must be exceptional

5.20. An RJO may not accept gifts from any one source that represents more than 20% of its total revenues (including donations) for a taxation year, unless the gift is made by bequest or made within 12 months after the organization is first registered. Gifts from a source that represents more than 20% of the RJO’s total revenue may also be approved on a case-by-case basis. Generally speaking, the CRA will consider such a gift to be acceptable, where it is exceptional and is not an ongoing source of revenue. The RJO would also need to demonstrate that it will not be controlled by the source that made the gift.

5.21. A source includes any one person, such as an individual, corporation or trust. It can also be a group of persons that do not deal with each other at arm’s length.

Reasonable compensation permitted

5.22. An RJO must have purposes exclusively related to journalism, so it must use its resources to further its purposes. As such, an RJO cannot distribute its profits. Also, it cannot allow its income to be payable, or otherwise available for the personal benefit of any proprietor, member or shareholder, director, trustee, settlor or like individual at any time, including during dissolution or winding up. An RJO’s governing document should include a statement to this effect to address this limitation.

5.23. An RJO can compensate a proprietor, member or shareholder, director, trustee, settlor or like individual for services they provide for the benefit of the RJO, as long as the compensation is fair and reasonable. Any paid services they provide should be necessary in order for the RJO to carry on its journalism activities. Compensation that does not meet these conditions could be viewed as a personal benefit and the organization would not qualify for registration as an RJO. An RJO may also reimburse expenditures these persons incur on behalf of the organization.

CRA monitoring of compliance

5.24. To maintain its registration, an RJO must continue to meet the eligibility criteria set out in this guidance along with its other obligations as a qualified donee under the Act. These obligations include:

• filing an annual information return, within 6 months after its fiscal year end;
• keeping proper books and records that demonstrate that it continues to meet the requirements under the Act, and providing these to the CRA on request;
• ensuring that any official donation receipts it issues meet the requirements of the Act; and
• ensuring that it does not serve as a conduit by accepting a gift with the condition that it make a gift to another person or entity.

5.25. The CRA monitors the operations of qualified donees to determine whether they comply with their obligations under the Act. If an RJO is audited and found to be non-compliant, the CRA will generally give the RJO a chance to correct its non-compliance through education or a compliance agreement before imposing penalties or revoking registration. Where an RJO receives a notice from the CRA proposing to revoke its registration, the RJO may file an objection with the CRA Appeals Branch. If it disagrees with the Appeals Branch’s decision, the RJO can appeal the decision to the Federal Court of Appeal. For more information, go to Compliance for other qualified donees.