5 November 1999 Internal T.I. 9922767 - GOVERNMENT ASSISTANCE

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: Whether AGR-1 information slips need to be issued in respect of two farm programs (Matinee Racetrack Assistance Program and Agriculture and Environment Resource Conservation Program)

Position: Yes

Reasons: They are farm support payments described in Regulation 234(2)

		November 5, 1999

	Charlottetown Tax Services Office  	HEADQUARTERS
	Client Services Directorate	M. Eisner
	Patricia Moran-Kelly	(613) 957-2138
		992276

Farm Support Payments

This is in reply to your memorandum dated August 9, 1999, in which you requested our comments on whether AGR-1 information slips need to be issued, in respect of payments made under two agricultural programs of the Province of Prince Edward Island which are described below.

P.E.I. Matinee Racetrack Assistance Program ("Program A")

The purposes of Program A are to enhance the number of standardbred race horses participating in feature events at matinee race tracks and to promote grassroots participation at community tracks.

Under Program A, transportation assistance of $50 per horse will be provided to P.E.I. residents who own horses and travel a certain distance to participate in designated feature events. The payments will be made by the P.E.I. Department of Agriculture and Forestry.

Our Comments

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 Program A. Accordingly, it will be necessary to report the payments on AGR-1 slips.

As a further comment, it is our view that, for income tax purposes, the assistance would have to be treated as income or a reduction of expenses.

Agriculture and Environmental Resource Conservation Program ("Program B")

The purpose of Program B is to assist P.E.I. farmers to produce high quality food products from sustainable on-farm production systems. The Program will also assist farmers and owners of agricultural land to comply with legislation impacting on their operation.

Assistance will be provided from the P.E.I. Government for the cost of carrying out sustainable on-farm practices indentified in an environmental farm plan that has been completed. The farmer's share of the costs should be a cash contribution although there will be an allowance for in-kind contributions if approved by the project advisor. Some of the practices are eligible for government funding up to a maximum per acre basis while others are eligible for a percentage of costs. Invoices must be provided by an applicant with respect to a reimbursement of costs.

The practices which are eligible include structural soil erosion control practices, strip cropping, pesticide storage, petroleum storage, manure storage, milk house waste management systems, riparian zone tree planting and management, hedgerow planting, fencing cattle out of streams and alternate watering systems, livestock stream crossings, dead stock composting facility, berms and diversions and containment for intensive livestock operations to prevent livestock waste from entering a waterway, and residue management (30% cover) plus winter cover (either established cover or crop mulching at 1.5 tons per acre). Innovative applied research and demonstration projects are also eligible.

Our Comments

As is the case with Program A, it is our view that AGR-1 slips are required to be filed for all payments made under Program B as a result of the definition of farm support payment in subsection 234(2) of the Income Tax Regulations.

If you require further technical assistance, we would be pleased to provide our views.

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 Department'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 (613) 957-0682. The severed copy will be sent to you for delivery to the client.

John Oulton
Section Chief
Business, Property & Employment Section III
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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