Private Member's Bill Aims to Ease Tax Burden on Family Farm Transfers

A private member’s bill tabled in the House of Commons last week aims to reduce the tax burden of intergenerational transfers of farms that are incorporated.

“My bill would end a blatantly unfair situation that puts business people, farmers, and fishing vessel operators at a disadvantage when they want to pass their business on to a child rather than a stranger,” Quebec MP and NDP finance critic Guy Caron told his colleagues.

The discrepancy comes down to proceeds from the sale of a farm being considered dividends versus capital gains, for which the lifetime capital gains exemption can be applied.

“The difference is a big one. For a million-dollar business, the difference can be around $200,000 from a taxation perspective. For a $10-million farm, we are talking $2.2 million less if the owner sells it to a stranger rather than a family member,” continued Caron. “We have to do something about this.”

With the average age of farmers climbing and over $50 billion in farm assets expected to change hands over the next 10 years, the Canadian Federation of Agriculture, the Canadian Federation of Independent Business and l’Union des producteurs agricoles du Québec (UPA) are all welcoming Bill C-274 with its proposed amendments to the Income Tax Act.

“I think everybody recognizes a lot of farm assets are going to be transferred in the next 15 to 20 years, and (we should do) anything that can be done that recognizes farms are different than they were 30 years ago, and also reduces the tax liability so the money can go to ensure farms that are transferred remain as viable as possible,” says CFA president Ron Bonnett in the interview below.

Bonnett says amendments should be made to broaden the definition of a family member to reflect larger farms involving more family, and the specific rules that discourage farm transfers within families should be removed.

“Many small business owners are telling us that tax rules discourage them from passing on their firm to their children and encourage selling to a stranger,” noted CFIB president Dan Kelly. “Mr. Caron’s bill addresses this unfairness and will help small business owners ensure their firm remains locally owned, creating and protecting local jobs. CFIB commends Mr. Caron and the NDP for their leadership on this important policy.”

While private member’s bills rarely pass, Bonnett says he hopes the proposal will raise awareness about the issue.

“If it raises the issue to the point where the other parties get onside, we could possibly anticipate the legislation going ahead, or some changes being made in a future budget that would address the concerns as well,” he says.

The bill will likely be up for debate in the House of Commons this fall.

Related: MYFB — Ep. 6: Incorporating the Farm for Today’s Benefit and for the Long Term

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