Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Are AGR-1 slips required to be issued for payments made under the Commodity Diversification Risk Protection (CDRP) program initiated by the Province of PEI?
Position: Yes.
Reasons: CDRP Program payments would meet the definition of "farm support payments" as defined in subsection 234(1) of the Income Tax Regulations. Any payments out of the CDRP Plan are to be included in the income of the recipient producer and the premium payments made by the producers are deductible.
See 9901327, 9922767, 9433605, 9402685, 9337035, 952038, 951541, 921720, 9324497, 9621505, 961277, 9601815, 9600495, 9529485, 9714745, 963606.
Note that paragraphs 12(1)(p) and 20(1)(ff) of the Income Tax Act are not applicable as these provisions only apply to payments under the Western Grain Stabilization Act or a refund of premium in respect of the gross revenue insurance program established under the Farm Income Protection Act.
February 9, 2000
Charlottetown Tax Services Office HEADQUARTERS
Audit Division G. Moore
952-1506
Attention: Patricia Moran-Kelly
2000-000437
Commodity Diversification Risk Protection Program
We are writing in reply to your correspondence of January 19, 2000, in which you asked for our opinion concerning whether AGR-1 information slips are required to be issued in respect of payments under the Commodity Diversification Risk Protection ("CDRP") Program.
With respect to the CDRP Program, the Program became effective in May 1998 and the first payments were disbursed after January 1, 1999. The CDRP Program is administered by the Department of Agriculture and Forestry of the Province of Prince Edward Island and application has been made to have this Program included under the Crop Insurance Program.
Further to the telephone conversation of February 8, 2000, between Gwen Moore of the Income Tax Rulings Directorate and XXXXXXXXXX, the purpose of the CDRP Program is to get farmers in that province to diversify their crops into broccoli and cauliflower. The CDRP Program resembles a normal crop insurance program. The farmers pay a premium rate of 8% of the maximum insured value. The Department of Agriculture and Forestry will contribute premiums equal to those paid by the farmers. The maximum insured value is the guarantee multiplied by the unit price. If a farmer does not meet a certain yield guarantee for his or her crops, the production shortfall is reimbursed by the CDRP Program.
To be eligible for insurance under this plan, the crop must be transplanted in the field between May 1 and July 10 for broccoli and May 15 and July 31 for cauliflower. Only approved varieties qualify for coverage under the program. Production to count is measured in pounds of leafless head and includes all quantity and grades of product accepted by the processor. The probable yield will be set for 1999 at 8,000 pounds of head of broccoli per acre for approved broccoli varieties, 12,000 pounds of leafless head per acre for the Freemont cauliflower variety and 10,800 pounds of leafless head per acre for other approved cauliflower varieties. The guarantee will be 70% of the probable yield times the number of eligible acres. Any shortfall in total production guarantee as a result of crop being destroyed within 30 days of transplanting will be compensated at two-thirds of the unit price per pound of shortfall. Any additional shortfall in total production will be compensated at the unit price per pound which is $0.17 per pound of leafless head for broccoli and $0.15 per pound of leafless head of cauliflower. Maximum eligible acres per applicant is limited to 15 acres of broccoli and 15 acres of cauliflower for growers with less than 3 years of experience. Growers who plant more than the eligible acres will receive protection in proportion to the eligible acres. The CRDP Program will compensate the producer for shortfalls in production due to adverse weather conditions, insect damage, or lack of quality which makes the crop unacceptable to the processor.
Whether an AGR-1 slip is required to be filed in respect of a particular payment depends on whether the payment qualifies as a "farm support payment". A farm support payment is defined in subsection 234(2) of the Income Tax Regulations as including:
a) a payment that is computed with respect to an area of farm land;
b) a payment that is made in respect of a unit of farm commodity grown or disposed of or a farm animal raised or disposed of; and
c) a rebate of, or compensation for, all or a portion of
(i) a cost or capital cost incurred in respect of farming, and
(ii) unsowed or unplanted land or crops, or destroyed crops, farm animals or other farm output.
In our view, AGR-1 slips are required to be filed for all payments made under the CRDP Program. Accordingly, it will be necessary to report the payments on AGR-1 slips. We would mention that payments under the CRDP Program would have to be reported by the recipient farmer either as income or as a reduction in expenses or other costs, depending on the circumstances, and the premium payments made by the farmers are deductible.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (819)994-2898. The severed copy will be sent to you for delivery to the client.
J. Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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