(December 10, 2020)
Introducing the Innovation Employment Grant (IEG) – Alberta’s New SR&ED Funding for Corporations
On January 1, 2021, the Alberta Government’s new Innovation Employment Grant (IEG) Program is set to launch. Although as of early December 2020 the IEG program was still under development and there were many specifics that we did not yet know for certain about it, on December 9, 2020 Bill 35: Tax Statues (Creating Jobs and Driving Innovation) Amendment Act, 2020 received royal assent. Based on Bill 35 and other government releases here is a summary of the IEG as we know it:
- The IEG is touted as the replacement for the Alberta SR&ED Tax Credit and is intended to promote provincial investment and diversification by rewarding R&D spending in Alberta regardless of the industry.
- The program should improve/renew Alberta’s competitiveness on the national stage when companies are trying to determine where to locate their R&D centers.
- Only qualified corporations are eligible. To be ‘qualified’ a corporation must be taxable and have a permanent establishment in Alberta and carry out the qualifying R&D activities within the province. It appears partnerships, sole proprietorships, and individuals will not be eligible.
- The IEG will focus on small and medium-sized corporations and will reward incremental levels of innovation investment in Alberta. For a given year eligible expenditures up to base level 2-year running average spending amount will earn an 8% grant. Excess expenditures above the 2-year average base level will earn an accelerated 20% grant amount. As such, benefits will favour start-up companies or other companies that are significantly growing their innovation spending year over year. For larger companies, the benefit will be phased out between $10M and $50M in taxable capital.
- Eligible IEG expenditures will be those Alberta costs that qualify for the federal SR&ED program. This should mean that salaries, materials, contract & 3rd-party payments for R&D (at 80%), and overhead costs related to eligible Alberta SR&ED projects will qualify.
- Only eligible expenditures incurred after December 31, 2020 will qualify for the grant.
- The IEG grant can be earned on a maximum eligible $4M in costs annually.
- The IEG will be used to reduce corporate Alberta income tax and any other provincial amount owning and the remainder will be refundable.
- The program will be delivered through the Alberta corporate tax system. Unfortunately, this could mean that like the AB SR&ED Program additional delays in pay-outs will remain after the federal SR&ED is processed.
- For each period, the deadline to file a claim for the IEG will be 15 months after the corporate tax filing due date.
As new announcements happen or as more information is released, we will post updates. For now, if you have any questions please contact us.