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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether AGR-1slips must be issued for payments under PEI's Organic Certificate Assistance Program and Organic On-Farm Research Program pursuant to section 234 of the Income Tax Regulations.
Position: Yes.
Reasons: Payments under these programs constitute "farm support payments" as defined in subsection 234(2) of the Regulations.
May 6, 2002
Business Audit HEADQUARTERS
Charlottetown TSO J. Gibbons, CGA
(613) 957-2135
Attention: John E. Oatway
2002-013078
Prince Edward Island's Organic Certificate Assistance Program
("Program I") and Organic On-Farm Research Program (Program II)
We are replying to your memorandum dated March 18, 2002, concerning the above-noted agricultural programs of the Department of Agriculture and Forestry ("DAF") of Prince Edward Island. Officials of DAF wish to know if AGR-1slips must be issued for payments under the programs pursuant to section 234 of the Income Tax Regulations (the "Regulations"). Based on the information provided by DAF, we understand the main features of the programs to be as follows:
Program I
Certified organic growers and conventional growers in transition to organic growers may be reimbursed for a portion of the costs of inspection and organic certification. Organic certification verifies compliance with the standards of an accredited certification organization. These standards include good organic production and handling practices, and an audit trail that ensures the integrity of products from the farm to the consumer.
Program II
Farmers may receive funding for approved projects that are related to research in organic cereal production and organic horticulture production. The projects must have applicability to other farms, and techniques and equipment should be easily adapted to other farms. Proposed projects must be approved by a panel consisting of three farmers and two DAF officials.
Subsection 234(1) on the Regulations generally requires all payers of "farm support payments" to complete AGR-1 slips in respect of such payments. A farm support payment is defined in subsection 234(2) of the Regulations to include, among other things, a rebate of, or compensation for, all or a portion of (i) a cost or capital cost incurred in respect of farming, or (ii) unsowed or unplanted land or crops, or destroyed crops, farm animals or other farm output.
In our view, payments under Programs I and II constitute farm support payments, and thus AGR-1 slips must be prepared for them. It is also our view that payments under these two programs would have to be reported by the recipients either as income or as a reduction in expenses or other costs, depending on the circumstances.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. 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 electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898, who will send the severed copy to you for delivery to the client.
John Oulton, CA
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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